Tech Progress Helps Developing Countries Reduce Poverty

from the World Bank

* Poor countries' tech progress is twice as fast as richer ones, Bank report says.
* Technology gap between rich and poor countries still wide.
* Technology ‘at the heart’ of further poverty reduction.

January 9, 2008— Developing countries, including poorer ones, have enjoyed rapid technological progress since the early 1990s and have used those gains to help pull millions of people out of poverty, a new World Bank report says.

The share of people living in poverty fell from 29 percent in 1990 to 18 percent in 2004, as a result of technological progress.

In fact, low-income countries have progressed technologically twice as fast as high-income ones since the early 1990s, although the rich-poor technology gap remains large and that "is likely to remain the case for the vast majority of developing countries," says Global Economic Prospects 2008: Technology Diffusion in the Developing World.

Newer technologies, like mobile phones, computers and the Internet, are spreading faster than did older ones, like the electrical grid and telephone land lines.

"One of the surprising results we observed was the rapidity with which newer technologies, have been disseminated and diffused in developing countries," says Andrew Burns, World Bank economist and main author of the report. "The reason is that they require relatively few highly qualified people and are relatively easy to maintain, compared, say, to a fixed telephone system."

Mobile phones and other newer technologies are mostly driven by ample private investment - unlike older technologies, which are generally dependent on governments, whose ability to borrow or otherwise spend may be constrained.

Although mobile phones have had a "transformational impact" on Sub-Saharan, South Asian and other low-income regions, new technologies are not a "silver bullet" to eliminate hunger, Burns stresses.

While technological progress is "at the heart" of economic growth and poverty reduction, poor nations need to continue improving their basic infrastructure, like roads, as well as health and education, all of which can be aided, not superseded by technological progress and its diffusion.

Making new technologies more accessible

Also, developing countries could make even more dramatic poverty-fighting gains by putting technology into the hands of more of its citizens and helping it spread more widely.

"Although technology spreads rapidly among elites living in major cities [in developing countries], it takes much longer for it to find its way to the rest of the population or from top-performing companies to the average firm," the report says.

Trade, foreign direct investment, and contact with migrants living abroad, as well as the development community - in short, globalization - are the drivers of technological progress in developing countries, GEP 2008 says. But the spread of technology depends on:

* Governance and the business climate
* Basic technological literacy
* Financing of innovative firms
* Proactive government policies

The World Bank's is indirectly involved in helping developing nations advance and spread technology.

"The Bank and the projects it supports are enablers of the basic regulatory environment and business climate and technological literacy," Burns says. "The Bank's main contribution is in strengthening those elements rather than directly disseminating technology itself, although it does do this as well."

How Technology Fights Poverty

After mobile phones were made available to fishermen in Kerala in India, they were able to call several markets and agree on selling prices before landing their fish. Within a few weeks the fluctuation in fish prices subsided, increasing the fishermen's profit by 9% and reducing consumer prices by 4%.

To do business with Shoprite of South Africa when it opened supermarkets in Zambia, local farmers' cooperatives used new marketing and production techniques to improve the quality of their products and services. Shoprite now buys 90% to 95% of its fresh produce from Zambian farmers. In one cooperative, farmers' cash income increased from between $2 and $3 a month to between $50 and $70, and local access to health care and education services improved.