The Tribune

• Nation to enjoy return 23’ times $31m outlay

• IDB predicts 4,000 job gain, productivity up

• Warns on Internet cost, download speeds

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas stands to gain a $715m boost if it invests just $31m to close the “digital infrastructure gap” between itself and the world’s leading economies, a multilateral lender is arguing.

The Inter-American Development Bank (IDB), in its just-released Caribbean Quarterly Economic Bulletin, asserts that The Bahamas’ could enjoy economic returns 23.3 times’ greater than the investment outlay required to bring its broadband and mobile Internet networks up to the same standard as Organisation for Economic and Co-Operation and Development (OECD) countries.

Doing so, the IDB argued, would increase Bahamian economic output (gross domestic product) by 5.6 percent over a six-year period, will also generating productivity gains over the same timeframe. And, with COVID-19 having driven many companies and workers to Internet-dependent remote working, the lender forecast that eliminating the digital divide will help create 4,000 jobs.

The IDB report did not break down exactly where the $30.7m needs to be invested, or provide the underlying calculations that gave rise to its projections, although it referenced other studies that it drew upon. The forecasts, though, strengthen the case for increased private and public sector investment in The Bahamas’ digital transformation as an area that can generate great returns for a relatively modest outlay.

The report also acknowledged that The Bahamas is ahead of the leading developed economies when it comes to the nation-wide mobile broadband coverage provided by the combination of Aliv and the Bahamas Telecommunications Company (BTC), but warned that was a potential impediment to greater penetration and usage.

In particular, the IDB said the monthly fee for a fixed Internet broadband connection in The Bahamas was some 113 percent higher than the average for OECD states on a purchasing power parity (PPP) basis, while mobile Internet fees were 24 percent higher.

And Internet download/connection speeds in The Bahamas were said to be 50 percent, and “close to one-third”, of those in OECD nations (the US and major European countries) for mobile and fixed broadband respectively.

“Although among Caribbean countries The Bahamas fares well in terms of digital infrastructure, an estimated investment of $30.7m is needed to close the gap with the OECD averages, equivalent to 0.27 percent of GDP,” the IDB report said.

“Such investment would increase the fiscal deficit for fiscal year 2021-2022 from 7.8 to 8.1 percent [of GDP], but closing the digital infrastructure gap would bring benefits estimated at 5.6 percent of GDP and productivity gains of 4.6 percent over six years.

“Although these gains are below Latin American and Caribbean averages (9.5 percent and 7.7 percent, respectively) they still well offset the costs, as the digital multiplier is above 20. Moreover, such an investment would also create more than 4,000 jobs,” the IDB report continued.

“The resources needed in urban areas represent 61 percent of the total, with the other 39 percent would be needed in rural areas. The gap for fixed broadband amounts to $17.1m, while for mobile broadband it is slightly smaller at $13.6m.”

It is unclear whether such investment is to come from the Government, private sector or both, and the IDB report made no mention of upgrading this nation’s communications network to 5G (fifth generation) technology - a move that the Prime Minister and his administration are taking a keen interest in, but which both Aliv and BTC have said requires significant expenditure.

The “estimated gap” between The Bahamas and OECD economies on fixed broadband Internet was estimated at just 11.2 percent, with only Barbados, Trinidad & Tobago and Uruguay having less ground to bridge out all nations in the Western Hemisphere. However, the distance was greater on mobile broadband, with this country facing a 60.2 percent gap.

Still, the IDB report said The Bahamas would enjoy the third greatest economic returns in the Latin American and Caribbean region - behind only Trinidad & Tobago and Barbados - if it eliminated its digital infrastructure gap with major world economies.

With benefits estimated at 23.3 times’ the initial $30.7m investment, this would amount to a $715m boost in a relatively short six-year period, averaging just over $119m per year. Describing the results and their implications as “striking”, the IDB said: “For three of the six economies - The Bahamas, Trinidad and Tobago, and Barbados - the potential benefit in terms of the cumulative positive impact on growth could be between 23 and 58 times’ the associated costs.

“In each of these three cases, the estimated cost of closing these digital infrastructure gaps is relatively small - under one percentage point of GDP in each case.” The IDB acknowledged, too, that The Bahamas was starting from a strong position when it came to developing a technology-based economy.

“In The Bahamas, remarkably, mobile broadband (4G) coverage reaches 99 percent of the population, which is even above the average for OECD countries (98 percent),” it said. “However, regarding access, there are 61 mobile and 23 fixed broadband lines per 100 population in The Bahamas, above the average for the Caribbean but below OECD levels.

“In The Bahamas, 71 percent of households have at least one personal computer, and 66 percent have Internet access, while in the Caribbean these shares are 51 percent and 55 percent, respectively, and in the OECD they are higher, at 83 percent and 78 percent, respectively.”

But, while this nation may have solid foundations upon which to build, the IDB added: “One factor that could hinder further adoption is that costs are high. The monthly fee for a fixed broadband connection in The Bahamas is 5 percent above the Caribbean average and 113 percent above the OECD average, while for a mobile broadband connection the fees are 54 percent and 24 percent higher, respectively.

“Finally, it is worth noting that improvements in connection speed could be beneficial. Although average broadband speeds in The Bahamas are only slightly below the Caribbean average, they are close to half the mobile broadband speed in the OECD and close to a third of that in the OECD for fixed broadband.

“Overall, in The Bahamas 80 percent of the population uses the Internet, in line with the OECD average of 83 percent and above the Caribbean average of 60 percent. However, no data on intensity of use are available.”

The IDB also noted that The Bahamas had slipped five places on its 2020 Global Broadband Development Index compared to the 2018 rankings, dropping to 43rd out of 65 countries that were measured. This, though, still placed it second among Caribbean nations and seventh among those from Latin America and the Caribbean.

The Bahamas dropped to 12th place on “public policies and strategic vision” relating to mobile and fixed-line Internet; fell to 63rd or near-bottom on “strategic regulation”; and slipped to 37th on “applications and training”. It did, though, improve to 44th on infrastructure.

“Among Latin American and Caribbean countries, The Bahamas ranked 24th in strategic regulation, eighth in infrastructure, and third in training and capabilities,” the IDB added, putting a better gloss on the rankings as it highlighted the digital economy’s ever-increasing importance in a post-pandemic world.

“Digital infrastructure is a key booster of development, as reliable broadband access has a positive impact on many sectors. It has the potential to improve efficiency and productivity at multiple levels, which not only increases economic growth, but also improves living standards and the quality of life,” the report added.

“The COVID-19 pandemic has deeply impacted the way individuals and companies work, and it is now clearer than ever that putting in place solid digital infrastructure is key to remain competitive and connected to the world. Initial measures to contain the spread of the virus included mobility restrictions and limitations on face-to-face interactions.

“Businesses that had already incorporated digital tools in their day-to-day operations faced less disruption than those that had not. Companies had to adapt quickly in order to survive, and individuals without Internet access saw how many tasks, such as submitting payments or ordering items from the supermarket, became much more difficult.”

Pointing to the virtual learning environment that all students were thrust into, the IDB added: “Households with no Internet access, or without adequate and sufficient devices, were particularly affected. Unequal access to digital infrastructure exacerbates inequality, with poorer individuals facing exclusion and having fewer opportunities to advance......

“Given that the potential benefits outweigh costs, closing the gap and maintaining an adequate digital infrastructure, as well as providing broad access, should be a priority for The Bahamas.”

The IDB gave the Government credit for the launch of its My Gateway Internet portal, which aims to give Bahamians online access to 200 public services within five years. Some 6,000 Bahamians are already registered. And the Sand Dollar, the Central Bank-backed digital currency, was also singled out for mention.