Box V.1. ICT developments in the maritime industry

With more than one third of world trade either originating in or destined for the ESCAP region and with most countries having easy access to ocean routes, the performance of the maritime sector is of vital importance. Regional member countries operate more than 40 per cent of the world's fleet and the region is home to 11 of the world's top 20 container shipping operators. Half of the world's 24 busiest container ports are in Asia.

The transport sector of the ESCAP region is going through a container revolution that began in the late 1970s. Cargo ships that used to stay in port for three weeks to load and discharge are now being replaced by container vessels with port stays measured in hours. This has put considerable pressure on transport operators to ensure the speedy transfer of essential information and documentation to avoid delaying cargo movements and tightly scheduled shipping services. Also, with containerization has come the development of multimodal transport, which has facilitated the international movement of goods door-to-door by sea, land and air within countries and across national borders. Containerization, which has already had an enormous impact on the physical aspects of maritime cargo movements between ports, is now penetrating deep into hinterland areas. At the same time, multimodal transport, with its single liability contract, is changing the institutional process of transport. Shipping authorities and companies are faced with a whole range of new challenges and opportunities facilitated by parallel developments in ICT.

The shipping industry has to operate in a highly globalized, regulated and complex trading environment. With the top 10 Asian container ports handling more than 50 million containers annually, and each container sometimes carrying 50 or more separate consignments, the documentation required is enormous. The maritime industry already relies heavily on EDI to communicate order and logistics information electronically. Unfortunately, while the development of EDI has already increased efficiency in the transport sector by speeding up the transfer of information, the progress in creating an international paperless environment has been quite disappointing. As a result, the maritime industry is gradually turning to the World Wide Web for certain business functions in order to take advantage of the Internet's simplicity and universal access.

The development of the Internet provides an easy means of gathering, organizing and disseminating information at a global level on maritime-related products, services, regulatory requirements, experience and research. Already, shipping lines and ports around the world are creating "homepages" on the Internet to provide information on their services and charges which can be accessed by the global market 24 hours a day. Sea Land Service Inc., one of the world's largest container shipping companies, started accepting orders on its Web site in 1998. In 1999, it will introduce a system in the United States that will let truckers avoid long lines at distribution centres by going to a Sea Land Web site to reserve a time to pick up their cargo.^a

An important factor encouraging the use of ICT is the process of deregulation in the shipping sector and newly formulated legal obligations to publish information widely. For example, in the United States, the Ocean Shipping Reform Act of 1998 requires shipping companies to maintain an automated tariff system showing all of their rates, terms and charges. These tariffs are to be made available electronically to any person through appropriate access from remote locations.^b It is anticipated that the Internet will be the vehicle of choice. With prices for transporting cargo around the world posted on the Web, shipping and logistics companies are already considering how to tie that information to other systems in order to provide functions such as clearing customs, but the absence of a common document format on the Web is keeping manufacturers and service providers from moving more quickly.

A new initiative to overcome these critical problems will be launched in Asia in 1999. A system known as Bolero is being designed to harness the accessibility and relative simplicity of the Internet under a joint venture comprising the Through Transport Club, and the interbank clearing network (SWIFT). The connectivity offered by the Internet, coupled with standardized procedures proposed within the Bolero system, will facilitate easy international access and exchange of messages between carriers, freight forwarders, suppliers, export agencies, banks, customs authorities and buyers. To overcome the problems related to electronic signatures, a Bolero rule book will be issued to provide a contractual framework for users which, in countries using common law modalities, will ensure acceptability of digital signatures.

Unfortunately, many developing countries in the region have been slow to exploit even the more evident benefits and cost savings of using ICT applications. To assist regional ports and shipping companies to gain access to the global markets that the Internet can offer, ESCAP has recently taken the initiative to implement a project known as MARINET (Maritime Information Network). Easily navigated and comprehensive maritime Web site templates have been developed for ports and shipping companies. They provide an attractive, common format for the display of commercial and technical information on the Internet. Included in the Web site are pages for the display of tariff rates, capacities, schedules/services, contact points and performance information. For the more advanced port and shipping companies, the templates already provide the possibility of interactive responses to cargo-tracking enquiries made by shippers and freight forwarding operators. All this information would normally have to be despatched in hard copy by mail, so enormous savings in time and cost can be made. Through this simple approach, ports and shipping companies in the ESCAP region will be able to make available to the whole world details of their services and costs through their own Web pages.

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^a See "Launch for e-commerce", Information Week Online, 23 November 1998 http://www.informationweek.com/710/10iueco.htm (26 January 1999).

^b See "Ocean Shipping Reform Act of 1998 overhauls transportation system for U.S. exports and imports", MLB White Papers (October 1998) http://www.mlb.com/wp102198.htm (26 January 1999).

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Box V.2. Use of EDI for customs purposes in selected countries of the ESCAP region

The material below summarizes the status of use of EDI for exports and imports and other functions undertaken by customs authorities in a selection of developing countries in the region.

China has an EDI duty system in use by Shanghai Customs and the Department of Communications, using a Swedish electronic gateway system to link a number of ports and shippers. EDI applications are relatively advanced in Shanghai, Tianjin, Qingdao and Ningbo, with UN/EDIFACT messages in place. There are two existing UN/EDIFACT applications developed by customs staff; the first is an EDI cargo clearance system and the other an EDI system for express consignments. Other systems are planned to support import and export controls. The government has announced that 44 EDI service centres or nodes will be constructed throughout China. In addition, a comprehensive customs Intranet and Extranet will be created by the implementation of more than 40 regional EDI clearing centres for China customs.

Hong Kong, China has systems for import/export declarations, air cargo manifests and textile licences in place. An international consortium has created CargoNet, an electronic gateway into Hong Kong, China, based upon Web technology for all trade documentation. The system is able to handle some 250 million messages a year across the full trade spectrum. Customs has implemented two UN/EDIFACT applications; the first is a system to process licence applications for textile exports, the second a system to collect import/export declarations via EDI. Two more EDI systems are scheduled for implementation in early 2000, namely dutiable commodities permits and manifests for air, sea and rail. Customs recently launched its Internet homepage providing users with customs information, as well as with a mailbox for enquiries.

Indonesia has customs EDI in Jakarta (port and airport), Surabaya, Bandung and Semarang, using UN/EDIFACT to capture data about imports. There is also an EDI interface with the banks to provide payment notices. A client software module has been developed and provided for importers to generate and process the EDIFACT messages. A similar system is being planned for exports. Customs has a World Wide Web page which is used to provide information for the public.

In Malaysia, EDI is used by the Port Klang Authority (responsible for all ports). Malaysia (Dagang *Net) has completed re-mapping of the export system into UN/EDIFACT D95B, including code values, and this has been successfully tested. Implementation will begin once a legal framework is put in place.

Papua New Guinea uses the ASYCUDA system to capture declarations and manifest data. An older version is not yet capable of handling EDI. There were plans to implement ASYCUDA ++ late in 1998.

In the Philippines, a customs EDI gateway system and other services (such as translation, data validation, etc.) using ASYCUDA ++ is being implemented. Systems are in place for air and sea imports, but only partial systems for air and sea exports. Work is proceeding on systems for taxes and drawbacks, excise, data warehousing and internal administration, as well as airport passenger facilities. Implementation of full EDI is planned over the next three years. The air express company DHL signed a memorandum of understanding with the Bureau of Customs in August 1998 as a basis for participation in ACOS, the automated customs operations system which uses EDI to process import manifest information and trigger the billing and releasing process.

In the Republic of Korea, EDI systems are being used to capture data on imports, exports and drawbacks. There are some 30,000 registered EDI users in the Republic of Korea including trading firms, shipping lines, banks, transportation sectors, customs brokers, retail and wholesale, and warehousing, steel and medical institutions.

Singapore, since implementing TradeNet in January 1989 (a Web-based version of which is now available), has put in place a number of electronic systems to facilitate trade: ACCESS, an advanced clearance for courier and express shipment system for pre-clearance for express consignments; ACES, an air cargo EDI system for the submission of manifest reconciliation status; StoreLink, a system linking warehouse operators to customs; TRS, a trade registration system; GlobaLink, a system which provides international markets with business and trade-related information on Singapore; and ELVIS, an electronic textile verification system.

Thailand has implemented a UN/EDIFACT system to capture export declarations and an import UN/EDIFACT system is to be implemented by the end of 1998. Export systems are in place for air and sea. Systems also exist for compensation, budgets, human resources and inventory management. Passenger processing and express consignment systems are planned for the future. The customs authority has a Web homepage to provide information for the public, as well as for some customs transactions.

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Source: The information for this box was taken from the paper by John M. Simon, "APEC customs initiatives on electronic commerce", presented at the Expert Group Meeting of Trade Promotion Policy Experts, Bangkok, 2 and 3 December 1998.

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Box V.3. The development of Internet character sets in local languages

The development of the Thai character set (TIS620)

The development of the coded character set for the Thai language and the registration of the character set with the Internet Assigned Number Authority in 1998 has enabled Web browsers to display the Thai language properly. TIS620 is the standard Thai character set used in Thailand. The standard was issued by the Thai Industrial Standards Institute, the Thai national standards body, in 1986 and reissued in 1990. It has been in wide use among the Thai population since then.

Development of the Tamil character set (TSCII)

ISCII, India's national encoding standard has been in existence for more than a decade now, but has been used little in the computing world. One of the reasons for this is the predominantly English-speaking business community in India. However, all major Indian languages have many software packages catering to the data processing market. It is estimated that in Tamil itself at least 50 different encodings exist. A document created in one software cannot therefore be used in another. The disadvantages can be glaring on the Internet. For example, at least 10 newspapers/periodicals are already on-line, but each time a site is visited, one needs to download the font of that site to view it. This also creates added difficulties when communicating via e-mail.

Despite these limitations, there has been considerable progress and e-mails are being exchanged in Tamil using Tamil-based mailing lists (http://www.tamil.net/list/). These use fonts with proprietary encoding. To eliminate this confusion, a global conference arranged by the National University of Singapore was organized in early 1997, with high-level participation from the Tamil Nadu government. Two working groups were formed. The first was the Internet working group for standardizing a character-encoding scheme, and the second was the keyboard standardization committee formed by the Tamil Nadu government for discussing possible standardization of encoding and keyboard layouts. The government of Tamil Nadu released its recommendations, which can be found at: http://www.cir.nus.edu.sg/tamilweb/tamilnet97/doc-draft/keyboard-layout.html. In August 1998, the Internet working group, after deliberating for a year and a half through a mailing list, released an encoding standard named TSCII. After a few months of existence there are already 10 fonts, a couple of keyboard drivers for Windows and Mac, two Windows word-processing tools, and a Tcl/Tk-based editor (usable under Unix/Win/Mac), all freely downloadable from the Web. Links for these tools, mailings list archives and the standards document can be found at the TSCII Web site http://www.tamil.net/tscii.

The standard was also submitted to the Tamil Nadu government's Technical Committee for Information Technology for possible adoption. TSCII is being promoted as an interim standard for Tamil computing until Unicode-based tools are widely available. It is designed in such a way that it is usable in most of the existing English software packages without any special hardware, and very little software (only for keyboard input). The keyboard drivers are available free of charge. Since Tamil has relatively few glyphs, it was possible to design a reasonable, bilingual, 8-bit encoding. It is not certain if this will work for other Indian languages. However, such efforts can go a long way towards developing local language computing and content creation on the Web.

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Box V.4. Electronic government information technology policy and standards in Malaysia

The Multimedia Supercorridor (MSC) was created to accelerate Malaysia's entry into the information age. Catalysing MSC are seven flagship applications: electronic government, multi-purpose cards, smart schools, telemedicine, R and D cluster, worldwide manufacturing Web and borderless marketing. Electronic government is one of the seven applications that is perceived to present an opportunity for the civil service, businesses and citizens working together and exploiting the potential of electronic commerce and multimedia technology for the benefit of all citizens.

Common standards and interoperability

Creativity and collaboration among all parties were considered essential to ensure success in realizing the vision embodied in MSC. Collaboration requires compatibility between different systems and processes, whether of government, business or citizens. In order to create the required platform, a minimum set of required standards, or common elements, needed to be defined. This was spelled out in the document entitled "Electronic government information technology policy and standards" to be used specifically in the implementation of electronic government. It outlines the minimum level of commonality designed to provide appropriate levels of interworking and interoperability between governments systems and processes, without placing undue constraints on integrating existing legacy systems and new technological solutions.

The "standards" document

The "standards" document establishes the definition and concept of ICT systems based upon widely accepted non-proprietary standards for the Government of Malaysia. It further establishes policies to implement an infrastructure that can support electronic government information technology policy and a common set of technologies that will allow personal computers, network devices and clients to work with servers over any network. These policies are expected to protect the government's investment by allowing mainframes, clients/servers, Internet and Intranets, as well as distributed software, to work together. The document also provides a framework to protect the government from being locked into specific technologies or from adopting a dead-end solution. Firms and citizens will no doubt find the adoption of these standards to be of great advantage in communicating seamlessly with government systems and with each other. The policies to be adopted emphasize a network-centric approach to computing, which leverages both Internet/Intranet and component-based technology. Focus is also directed towards the integration of different platforms into a seamless architecture.

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Source: The information in this box was taken from a paper by Anuar Maarof, "Interoperability and standards in the multimedia supercorridor", presented at the Expert Group Meeting of Trade Promotion Policy Experts, Bangkok, 2 and 3 December 1998.

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Box V.5. The legal policy framework for electronic commerce in Singapore

The Electronic Commerce Hotbed Policy Committee was formed in early 1997 by the Government of Singapore with a charter to commission policy research studies and to propose solutions on policy matters related to electronic commerce. It consisted of members from the National Computer Board and other relevant government agencies, with the National University of Singapore and Nanyang Technological University providing research and advisory support. The Policy Committee appointed a study group on legal, regulatory and enforcement issues arising from electronic commerce. The results of the study were publicly announced on 13 April 1998 and led to the adoption of the Electronic Transactions Act, 1998 and the Computer Misuse (Amendment) Act, 1998.

The key recommendations of the study group were:

(1) That a commercial code should be enacted along the lines of the UNCITRAL Model Law on Electronic Commerce to govern electronic transactions (electronic transactions bill).

(2) That legislation should be enacted to provide for the recognition of digital signatures and for a public key infrastructure with certification authorities.

(3) That legislation should be enacted to clarify the liability of service providers for third-party content.

(4) That legislative support should be provided for acceptance of electronic filing by government agencies and statutory boards.

(5) That penalties should be increased and distinctions made between various levels of computer crimes in the computer misuse act (amendment) bill.

(6) That law enforcement agencies should be provided with powers of investigation and gathering evidence in relation to computer data.

(7) That the Rules of Court should be amended to enhance the court's jurisdiction in relation to cross-boundary electronic commerce (proposed amendment to Order 11 of the Rules of Court).

(8) That the intellectual property laws should be reviewed to deal with difficulties caused by the application of traditional legal principles to new technology.

Most of the proposals were given legislative effect in an electronic transactions bill drafted by the study group. The Electronic Transactions Act, which came into force on 10 July 1998, provides the legal framework to address issues posed by electronic transactions in general and electronic commerce in particular. It covers authentication of the identity of the originator of electronic records and messages; the legal recognition of electronic signatures; the retention of records by electronic means; the integrity of electronic records transmitted over networks; the legal responsibility of service providers; the formation and validity of electronic contracts; the legislative framework for certification authorities and digital signatures; cross-certification of foreign digital signatures; government use of electronic records and signatures, in particular, the acceptance of electronic filing by government departments and statutory boards; and miscellaneous enforcement and investigation powers tailored for electronic transactions.

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Source: The information in this box was taken from a paper by Charles Lim Aeng Cheng, "A legal policy framework for electronic commerce: the Singapore model", presented at the Expert Group Meeting of Trade Promotion Policy Experts, Bangkok, 2 and 3 December 1998.

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Box V.6. Promoting electronic commerce in Thailand

The Department of Business Economics, Ministry of Commerce, is the lead agency in Thailand to coordinate with other government agencies and private sector associations on matters relating to international trade. The Department also represents Thailand in international trade negotiations, including those on trade facilitation and electronic commerce, in various multilateral and regional forums such as WTO, APEC, ASEAN, ASEM and BIMSTEC. On the domestic front, the Department has taken initiatives in creating awareness and has been a driving force in promoting both trade facilitation measures and the use of electronic commerce.

To date, electronic commerce has not been widely used in Thailand. Even though the number of Thai Internet users is estimated to have risen from 9,500 in 1994 to 550,000 in 1997, this is considered low compared with high-technology countries. Thailand has yet to develop a solid foundation for electronic commerce based on necessary elements such as access to a global electronic network, extensive telecommunications and ICT infrastructure, and qualified human resources. In order to address various policy issues relating to the implementation of electronic commerce, several subcommittees have been established. A subcommittee on electronic commerce chaired by the Deputy Prime Minister and Minister of Commerce was set up to encourage the implementation of electronic commerce and to make recommendations to the government on Thailand's position in electronic commerce negotiations in international forums. In June 1998, this subcommittee set up an advisory body chaired by the Director-General of the Department of Business Economics to conduct a pilot project on electronic commerce for Thai exports. In addition, another subcommittee to coordinate policies and the implementation of electronic commerce among relevant agencies was set up in July 1998.

The objectives of the pilot project were to promote trade (both business-to-business and business-to-consumer) via the Internet, stimulate exports and enhance trade opportunities for SMEs through electronic commerce. Feedback from the pilot project on problems will be used to improve the application in Thailand, as well as to amend Thailand's positions in international trade negotiations. This pilot project is being carried out with the support of various government agencies, Internet service providers, commercial banks and traders. Seven working groups have been formed to tackle specific problems: public relations, telecommunication services and training; marketing; consumer protection; customs and taxation; shipping and insurance; payment and security; and law and digital signature. The groups are working together to select 100 exporters with good business records to participate in the project. Each exporter will be given a free homepage on the Ministry of Commerce's Web site to promote and export his or her products. The project will run for one year from October 1998.

Several agencies are active in promoting electronic commerce. The Department of Export Promotion (www.exporter.moc.go.th; www.thaitradefair.com) and the Board of Investment (www.boi.go.th) have their own Web sites to publicize trade and investment information. The National Electronics and Computer Technology Centre has drafted laws relating to electronic commerce and information technology, namely the Internet Promotion Act, Computer Security Law, Computer Privacy Law, Data Protection Law, Electronic Data Interchange Law, Electronic Funds Transfer Law and Digital Signature Law. In addition, the Ministry of Justice (Arbitration Office) has been designated by the cabinet to draft an electronic commerce law based on the UNCITRAL Model Law.

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Source:The information in this box was taken from a paper by Srirat Rastapara, "Initiatives in creating awareness and introducing trade facilitation and electronic commerce in Thailand", presented at the Seminar on Enhancing Integration of New Members into the ASEAN Process through Economic Cooperation and Trade Facilitation", Bangkok, 28 and 29 September 1998.

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Annex

The village phones programme of the grameen bank, Bangladesh

In 1976, the Grameen Bank started to provide credit for and encourage savings by the poorest, landless families in rural Bangladesh. Today, after two decades of operation, its microcredit programme reaches 2.4 million very poor rural families in 38,000 villages, or just over half the villages in the country and roughly 13 per cent of the rural population. While this microcredit programme is now recognized as an effective weapon in the fight against poverty, microcredit alone is not sufficient to sustain the economic advancement of the rural poor, and in the late 1980s the Bank initiated complementary non-banking activities. By this time, an extensive network of borrowers had been established, consisting of groups of five members each clustered into 600,000 village centres and intensively supervised by Grameen Bank branch staff. This structure provided the basis for the diversification of activities into crop production, irrigation and acquaculture. In 1989, the Grameen Krishi (agriculture) Foundation and Grameen Fisheries Foundation were established. Non-banking activities later expanded into, inter alia, the promotion of hand-loom weaving, renewable energy, the marketing of rural products and the provision of telephone services. Each new initiative was incorporated into an existing organization or spun off into a new one. This became the Grameen family of organizations.

Thus, Grameen Telecom, one of the Grameen organizations incorporated as a non-profit-making company, is dedicated to bringing the information revolution to rural people in Bangladesh. Through Grameen Telecom, an opportunity has been created to demonstrate that universal access to rural telecommunication services in low income countries can be profitable without any subsidy. The conditions for this include involving the poor as entrepreneurial partners and being able to offer them appropriate configurations of mass-produced digital wireless technology at suitable terms for connectivity, financing, and technical and business support. The experience also demonstrates that owning and operating a modern communications service for poor rural people can be more profitable than, for instance, owning and operating a rickshaw, a hand loom or a sewing machine.

Origins of the programme

According to market research, there is a great potential for increasing telecommunications in Bangladesh as 6-8 million people are considered to be able to afford a telephone. The penetration rate of telephones in Bangladesh is only 0.4 per cent (one telephone for every 250 persons), which is one of the lowest rates in the ESCAP region. In addition, there is an almost total lack of rural telecommunications; 90 per cent of the existing network is dedicated to urban subscribers. Meeting the estimated demand for telephones by extending the government-owned fixed-line network throughout the country would take a long time and the government has very limited resources to devote to this task. Therefore, in the early 1990s, the government decided to invite the private sector to introduce mobile telephones into the country.

Out of this perception of a lack of telecommunication facilities in general and rural telephone systems in particular, a joint-venture company called GrameenPhone was created. A 51 per cent share is owned by Telenor A.S., the largest fixed-line telephone company of Norway and this company is also responsible for the management of GrameenPhone. Grameen Telecom owns 35 per cent of GrameenPhone. The other shareholders are Marubeni Corporation of Japan (9.5 per cent) and Gonophone of the United States (4.5 per cent). After a detailed evaluation process lasting more than a year, the Government of Bangladesh awarded GrameenPhone a nationwide digital cellular telephone licence in November 1996. (Two similar licences were awarded at the same time to other international consortia.) GrameenPhone is responsible for setting up a network involving a total investment of $150 million by the year 2000, and the network started operations on a limited scale in March 1997. The village phones programme appeared at the same time under the initiative of Grameen Telecom.

The village phones programme does not constitute an independent network. Grameen Telecom is a rural telecommunications service provider and it has an agreement with GrameenPhone to buy airtime in bulk and retail the time to village phones, after securing a small service charge. According to the existing business plan of GrameenPhone, around 10 per cent of total connections will belong to village phones, while 90 per cent will be for mobile phones by direct subscription that can be used anywhere within the country, and also outside if roaming facilities are separately secured. Village phones are different only because their primary function is to serve as payphones for specific villages. They consist of an ordinary mobile cellular phone, with separate billing. GrameenPhone does not bear any cost of collection from village phones, or deal with uncollected items; it gets paid in bulk by Grameen Telecom.

There are four private mobile phone operators in the country, but only GrameenPhone is setting up its own nationwide network. Other private operators depend on the public microwave long-distance telephone system. No private operator has been allowed an international gateway. Two other private telephone operators provide rural telephones by enhancing the coverage of the existing public network, which involves capital investment and the risk that returns from low-density demand for rural telephony may not be adequate. They therefore tend to concentrate their business in selected rural markets or growth centres and agro-towns.

The village phones programme is quite different from other ventures, particularly as its financial viability is ensured from the beginning. First, it is a very small part of a GSM mobile phone network, with a maximum of 10 per cent at full development. Second, the investment costs of such a system are much less than those for a fixed-line system. Third, such GSM networks are usually designed with excess capacity. This implies that subsidized village phones will utilize airtime which would otherwise not be used and so the programme does deny access to fully paid direct subscribers of GrameenPhone. Lastly, management costs of village phones are considerably reduced as Grameen Bank branch staff select operators, and deal with financing, bill collection and other operational work.

Objectives of the programme

Apart from being a shareholder of GrameenPhone, Grameen Telecom is primarily working with the vision of one cellular phone in each village of Bangladesh. Although there is a significant communication gap between cities and villages, rural Bangladesh is the source of food, fibre and other agricultural produce, and its artisans supply numerous non-food goods and services for urban consumption through millions of small and micro-enterprises. A phone in a village has far-reaching implications; it implies that more information of all sorts can flow in and out of the village easily and quickly. Thus, for example, with timely demand and price information, farmers' incomes will increase. Similarly, villagers can be better informed of prices of products that they buy from city-based traders. As a consequence, both prices received and prices paid by villagers should be to their benefit. A large number of workers migrate from the villages to the cities to seek employment and over 3 million Bangladeshis work abroad. Many of these migrants send money to their families in the villages. With access to a mobile phone in the vicinity, the cost in time and money of obtaining information on fund transfers will be lower and there will be less short-term borrowing at high cost as money will only be a phone call away. Village phones could save costs as villagers do not have to travel to towns to place telephone calls, meet relations or attend business meetings. Students in rural schools can be introduced to the information age in their village neighbourhood. Even when physical transport linkages are disrupted as a result of natural calamities, mobile phones will still work and provide vital communication links to help people to cope with emergencies.

At existing levels of income, there are villages where not one single family can afford to own an individual telephone. However, for the village as a whole, one village telephone is both financially feasible and could ensure access to telephone services for all villagers. The village phone programme is a solution to ensure universal access to the telephone in spite of poverty and low income. It has been estimated that with 40,000 village phones well spread out, each and every villager of the country would have access to a telephone within a walking distance of 10 to 15 minutes.

Thus, the objective is to finance the village phones programme by providing selected members of Grameen Bank with credit. They can purchase a phone under a lease-financing programme and then provide telephone services for all who wish to make calls in their village and enable them to receive incoming calls as well. The programme is likely to become the largest wireless payphone project in the world within a few years. Apart from village phone services for the poor, there are many potential sources of demand for telephone service in rural areas not directly involved with Grameen Bank activities, including health centres, schools, colleges, local businessmen and farmers. They can be direct subscribers to mobile phones provided by Grameen Telecom.

The village phones programme started in a small area on the outskirts of Dhaka and in the adjoining rural areas. It is now being expanded towards the south- east and work is proceeding to cover south-west Bangladesh under the network. Then, north-east districts will be included and lastly the north-west region. The fibre optic network of Bangladesh Railway along its track system, supplemented by microwave links set up by GrameenPhone, will complete the backbone transmission arrangement. The connections for mobile cellular phones will be ensured through more than 400 base transceiver stations. The main exchange and these base stations will complete the nationwide independent network by 2000. With the help of this GrameenPhone network, Grameen Telecom is planning to provide telephone services for 100 million rural inhabitants in 68,000 villages of Bangladesh through 40,000 village phone operators, who are members of Grameen Bank.

Operational modalities

The village phones programme, like all other activities of Grameen Bank, is self-financing. Grameen Bank extends lease financing to the member selected to become the village phone operator. It is estimated that, over the next three years, $15 million will be required for the financing of village phones. This constitutes a marginal addition to the total lease programme of Grameen Bank. The administrative overheads of Grameen Telecom and Grameen Bank for the programme are met from a small service charge of 6.5 per cent on the monthly village phone bill and the amount collected is shared in the ratio of two to three by the two companies. As there is no intention of generating any profit, the service charge will be kept as low as possible while overhead costs are minimized as existing Bank staff carry out some administrative functions. On the other hand, village phone operators are able to increase their income. The distribution of the call charge paid by users of village phones is as follows:

Paid to network operator, GrameenPhone

43.5 per cent

Value-added tax paid to the government

6.5 per cent

Service charge of Grameen companies

6.5 per cent

Return to the village phone operator

43.5 per cent

The operators pay almost 50 per cent less to GrameenPhone than do other subscribers to the company. This is a heavily discounted price so that village phone operators are ensured a reasonable income. At the same time, GrameenPhone is not incurring any loss since the opportunity cost of the village phones programme is small; without village phones, the portion of its network going through the countryside would have spare capacity.

Cooperation between Grameen Bank and Grameen Telecom forms the basis of selection, ownership, management and maintenance of village phones. First, Grameen Telecom technical staff identify villages where adequate cellular phone signals are available and inform the concerned branch manager of Grameen Bank. Only villages with electricity are selected since, otherwise, recharging of mobile phone batteries, required daily, would be a problem. Also, the selected villages should be covered by Grameen Bank's regular programme. The branch manager then selects the borrower member to become the village phone operator for that particular village. Most village phone operators are women and the selection is made on the basis of certain practical guidelines. For example, the village phone operator should be a regular borrower from the Bank, and her repayment record must be excellent. She must have a regular source of income so that the expected earnings from the phone will constitute an additional but a minor share of her total income. This condition is necessary as this is a technology-based, completely new source of income for the rural poor and the demand for telephone use is not fully known. As the telephone cannot be handled by an illiterate person, the operator or an immediate member of her family (son, daughter or husband) must be literate enough to read numbers, follow instructions and calculate charges for airtime use. The location of the operator is also important; her house should be located in a central place in the village, easily accessible to neighbours.

The cost of the telephone is financed by Grameen Bank through a two-year loan, repaid in 100 weekly instalments of less than $5. Repayment follows the Bank principles of microcredit in all respects. At weekly meetings of the group, the operator pays the instalment for the loan and deposits her weekly collection from telephone users to her account. The monthly telephone bill is deducted from her account by the bank manager and the balance retained in her savings account. The branch manager collects payments of all the phones in the village and sends them to the Bank headquarters, which in turn sends on to Grameen Telecom the bulk amount for the airtime bill and its share of the overhead charge.

The repair and maintenance of the phones are the responsibility of Grameen Telecom. The operators remain in close touch with the technical staff through the phone for the purposes of signalling repairs and any complaint or enquiry relating to telephone use. Although there is no toll-free number, Grameen Telecom tries to maintain adequate contact with village phones. This is taken as part of its management work and the cost is met from the overhead charge. Such charges now amount to around $40 annually per village phone, and so do not yet meet the entire support costs of the programme. However, with the increase in the number of phones, as well as growth in airtime use, overhead charges should become adequate to meet these costs. It is estimated that 5,000 village phones (about 12 per cent of the target) and a 20 per cent increase in billing would be sufficient to guarantee this financing.

Impact of the utilization of village phones

Village phones have been a unique experience in many respects. So far, only around 200 villages enjoy such a facility. Some results of the programme that have been reported to date are recapitulated briefly below.

Strengthening community services. Operators of village phones are becoming more aware of their role in providing a service for the community. In cases of emergency, for example during recent floods, the village phones programme worked as a practical community information centre. Fellow villagers were allowed to call abroad on credit, and death messages were carried free of charge. Bangladeshis working abroad could call for information about their village. Also, villagers with access to telephones increasingly call their local council chiefs, Member of Parliament, police and other government functionaries with questions or complaints, thereby exercising their democratic rights.

Economic benefits. An independent study by the North/South Centre for Development Research, University of Bonn, Germany, carried out in 1998 made several interesting findings from a sample study of 50 village phones in two districts. A telephone was no longer considered a luxury item and did not serve the interest of rich farmers alone, since over a third of the calls were made by the village poor, and the same proportion of calls were for the purpose of seeking information on employment or on prices of goods. This implies that village phones serve an economic need and could favourably influence prices received and paid by farmers through improved information flows. In fact, the study found that the farm gate price of eggs increased by 20 per cent after farmers could gather retail prices at urban markets on a regular basis by telephone and then negotiate a better deal from traders. At the same time, marketing costs for traders have gone down; they visit the village only when they know (obviously after a telephone call) that adequate supplies are available to purchase.

Effect on the income of the village phone operator. Experience to date suggests that benefits to village phone operators are quite significant. Operating a phone is a good source of additional income, estimated at around $500 per annum. It is probable that telephone use will grow over time; it has doubled during the last 12 months in terms of the monthly bills paid for village phones when there was no change in airtime tariff. Thus, a 7 to 8 per cent growth in the net income of village phone operators can easily be expected in the long run.

Impact on health. The same study found that 17 per cent of all local calls were health-related. Under a child and maternity health care programme, UNFPA is planning to provide rural health clinics, village midwives etc., with mobile phones so that villagers can reach them through their village phone. It is expected that such telephones will lower maternal mortality rates.

Effects on modernization. An exposure to modern technology is helping the rural poor to give up their fear of new technologies. One obvious benefit that village phones give is the incentive to be literate; social workers will no longer have to induce people in villages to learn to read and write as this will happen naturally with exposure to technology. Village phones should be the gateway to the information age; the next step forward envisaged is the promotion of fax machines, e-mail and electronic fund transfers, all of which call for progressively higher levels of literacy. In addition, incentives for computer literacy in remote villages could lead to information-related employment and enterprise creation.

Impact on social conditions. It has already been observed that the status of phone operators in a village has been enhanced. As almost all village phone operators will be women, they become leaders in the promotion of a new technology. Such a pioneering role for women is something unprecedented in these tradition-bound villages. As Grameen Bank members are poor (often the poorest of the poor), the village phones programme will encourage more affluent villagers to approach poor village phone women operators to avail themselves of telephone services. This should assist in promoting greater social mobility.

Problems facing expansion of the programme and proposed solutions

So far, 200 village phones have been installed in villages close to Dhaka. The programme is being expanded in rural areas south of Dhaka where cell-to-cell signals are adequate. The Grameen Telecom target of 40,000 village phones will depend on GrameenPhone completing its plan to provide network coverage of the whole country by 2002.

Most of the villages where village phones have been supplied are located at the outer edge of the cell range for mobile phones; at present, all base transceiver stations are city-based. As a result, signals fluctuate, causing dropped calls, loss of revenue and customer dissatisfaction. To address this problem, external high-gain antennae have been tested and are being introduced. Fixed wireless terminals may be another solution for extended coverage with good quality reception. However, this would double the current cost of mobile cell phones. When the price of these terminals falls, this solution may be feasible. Masthead amplifiers used in base transceiver stations close to villages may be a solution from the network side.

Power for recharging batteries is another problem. Only 20 per cent of the 68,000 villages of Bangladesh have access to electricity. There are villages with network coverage but without electricity, and the number of such villages will increase as the programme moves farther away from Dhaka. Solar panels with batteries have been tested as an alternative source of power. However, any solution will increase the start-up cost for the village phone operator and affect the viability of the programme.

Future plans

In the future, Grameen Telecom plans to introduce an information system covering prices, weather and other data relevant to the rural economy. The phone link would enable immediate access to such information. The network could also be utilized to set up electronic fund transfer mechanisms. ATMs will be able to transfer funds in all villages covered by Grameen Bank (38,000 at present) for very little cost. Thus, time-consuming and much more expensive money orders will no longer be necessary. A rickshaw-puller in Dhaka will be able to transfer part of his earnings on a daily basis to his wife in a remote village. The mobile phones will thus reduce the need for short-term high-cost borrowing, while increasing the purchasing power of the villagers.

Experience suggests that, in the villages, demand for telephone services is high and growing rapidly. Very soon, one telephone will not be enough and it will be possible to introduce fax machines and computers, including the Internet. To cope with this modern ICT equipment, the plan is to set up Grameen Telecom centres, at least 10,000 of them, all over rural Bangladesh. These centres would be small-scale telecommunications service enterprises. These, in turn, could lead to a significant growth of small-scale information enterprises offering data processing and management, computer training, software services, etc.

With the village phones programme, rural/urban distinctions can be reduced and poverty alleviation efforts strengthened. However, the growth of telecommunications service-based enterprises should not be stand-alone events. They are part of the logical development of a process which began with the microcredit operations of Grameen Bank. Thus, it would be not feasible for other countries to pick up only the rural telephony idea for replication when the rest of the basic institutional infrastructure is lacking.
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Source: The information in this annex was provided by Shahed Latif, Managing Director, Grameen Telecom, Bangladesh.

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