Synthesis Documents

When Should the ICT Sector be a Target for Private Sector Competitiveness Work? USAID Technical Brief no. 3, 2007

    Authored by: Judy Payne, EGAT/USAID Mike Ducker, J.E. Austin Associates

    As part of their economic growth portfolios, many USAID missions fund projects aimed at increasing the competitiveness of specific "target" sectors. Target sectors are selected using various techniques to sort out those that will have the largest economic impact, usually measured by jobs or revenue. USAID missions and their economic growth projects often select the information and communications technology (ICT) sector as a target sector, sometimes describing the choice as a "no brainer," given the direct effect of the sector on economic growth as well as its indirect effect on many other sectors.

    There are solid economic reasons why the ICT sector might be treated differently than other sectors. Research shows that the use of ICT products and services can have a catalytic effect on economic growth by enhancing productivity and innovation throughout a country's economy.

    It appears that the ICT sector may be selected too frequently as a target competitiveness sector given its potential impact on jobs and revenue relative to other target sectors, because teams assume it will have direct impacts on the sector as well as catalytic effects on the economy. The types of activities used to support a country's ICT sector as a target sector for competitiveness are not necessarily the activities that would best increase ICT's catalytic effect on a country's non-ICT economic sectors.

    In many cases, it might actually be more beneficial for teams to focus on ICT as a catalytic sector instead of as a target sector -- with activities tailored to this purpose. Economic growth project implementers along with USAID economic growth teams could probably do better at sorting out when it makes sense to focus on ICT as a target sector or when and how to promote ICT for its catalytic effects on the economy -- or both.

    This technical brief attempts to assist USAID mission staff and project implementers in determining when it is appropriate to utilize either of these two approaches and what project activities should be tailored to each approach. It was developed based on the authors' skills and experience as well as interviews with 19 current or recently completed economic growth projects (see Appendix A) that focused primarily on the ICT sector as a target sector (although a few also focused on using ICT as a means to improving impact in non-ICT target sectors).

    Appendix B poses a set of discussion questions which we hope will stimulate discussion regarding this paper's topic and help hone our understanding of best practices.

    The technical brief attempts to define a set of best practices, but it is a work in progress and thus poses questions not yet answered. What experience would you cite to hone the technical brief's advice? You are urged to contribute your insights via the BGI website1 so all of us can improve how we use ICT to strengthen the competitiveness of businesses in developing countries.

    Associated Activities and Documents
    »The effective use of volunteers in USAID Economic Growth Programs, 2009
    Synthesis Documents
    »Case studies in enterprise development in post-conflict situations: USAID Technical Brief no. 4, 2008
    »The Cluster Approach to Economic Development: USAID Technical Brief no. 7, 2008
    »Shareholder loan funds for SMEs in developing markets: USAID Technical Brief no. 8, 2009
    »Supporting buyer-supplier relationships: USAID Technical Brief no. 1, 2007
    »Business Environment and SME Exports: The case of Chile. USAID Technical Brief no. 2, 2007