Key challenges for accelerating investment in digital connectivity
Capex needs
A recent report by ITU has assessed that globally USD 382 billion investment into telecommunications infrastructure is needed.[145] Another USD 40 billion is needed for investment in skills, summing up to total investment of USD 422 billion – not yet taking investments for Building Digital Ecosystems into account the investments required in infrastructure and skills in the LDCs, LLDCs and SIDS are – given the low starting point – relatively high on both a per capita and per GDP basis. While globally this represents investments of USD 55 per capita and 0.5 per cent of GDP, for sub-Saharan Africa this represents USD 85 per capita and 5.7 per cent of GDP. For the LDCs, LLDCs and SIDS the challenge is even bigger with required investment of USD 100 per capita and 10 per cent of GDP.
Infrastructure deployment at scale
Achieving the target of connecting all of humanity to broadband Internet by 2030 is, above all, an infrastructure investment challenge. Around 2.6 million 4G BTS and 700,000 km of backbone fibre transmission infrastructure would have to be rolled out on top of the existing broadband network capabilities. 5G deployments will be increasing globally. Datacentres are also key for development of the digital ecosystem. As of January 2021, almost 80 per cent of all collocated data centres are in the developed countries and Africa currently has the least number (~ 69) as compared to some of the other developing regions like LATAM and transitioning economies.
Venture Capital (VC) investments
There is limited data available about the total investment flow into the LDCs, LLDCs and SIDS related to ICTs. A few indicators however show that the current level of investment is clearly insufficient. VC investment into the LDCs is only USD ~500 million compared to over USD 11 billion for Africa as whole. Also the increase in number of servers and base stations per Point of Presence (POP) is clearly lagging not only versus developed countries but also versus other countries in Asia and Africa.
Projects financing dipping
The COVID-19 crisis caused a dramatic fall in foreign direct investment (FDI) in 2020. Global FDI flows dropped by 35 per cent to USD 1 trillion, from USD 1.5 trillion in 2019. This is almost 20 per cent below the 2009 trough after the global financial crisis. The decline was heavily skewed towards developed economies, where FDI fell by 58 per cent. FDI patterns contrasted sharply with those in new project activity, where developing countries are bearing the brunt of the investment downturn. In developing countries, the number of newly announced greenfield projects fell by 42 per cent and the number of international project finance deals – important for infrastructure – by 14 per cent.
Regulatory environment
As forecast in the World Investment Report (UNCTAD) 2020, the trend towards more regulatory or restrictive policy measures accelerated in the wake of the pandemic.[148] These measures amounted to 41 per cent of all the new investment policy measures reported for 2020 (not considering measures of neutral or indeterminate nature) – compared with only 24 per cent in 2019 and 28 per cent in 2009, during the global financial crisis. Although developed economies adopted the vast majority of these measures, several developing countries and emerging economies also began to strengthen their FDI review mechanisms. This surge in regulatory or restrictive investment policy measures is not only a response to an extraordinary crisis but also a continuation of a policy trend in the era since the global financial crisis.
Footnotes
[145] ITU. (2020). New ITU study estimates US$ 428 billion are needed to connect the remaining 3 billion people to the Internet by 2030.
[146] ITU. (2020). Connecting Humanity.
[147] PeeringDB. (2022). The Interconnection Database.
[148] UNCTAD. (2020). World Investment Report 2020.
[149] UNCTAD. (2021). Investment Policy Hub.