Project Information Document (PID)

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Caribbean Digital Transformation Program (P171528)Public Disclosure AuthorizedPublic Disclosure AuthorizedThe World BankPublic Disclosure AuthorizedProject Information Document (PID)Public Disclosure AuthorizedConcept Stage Date Prepared/Updated: 28-Jun-2019 Report No: PIDC27392Jun 23, 2019Page 1 of 14

The World BankCaribbean Digital Transformation Program (P171528)BASIC INFORMATIONA. Basic Project Data OPS TABLECountryCaribbeanProject IDP171528Parent Project ID (if any)RegionLATIN AMERICA ANDCARIBBEANFinancing InstrumentInvestment Project FinancingEstimated Appraisal DateMar 30, 2020Estimated Board DateJun 05, 2020Borrower(s)Ministry of FinanceImplementing AgencyProject NameCaribbean DigitalTransformationProgram (P171528)Practice Area (Lead)Digital DevelopmentMinistry of Information,Science,Telecommunications andTechnologyProposed Development Objective(s)To contribute to increased access to digital connectivity, digital public services and the creation of technology enabledbusinesses and jobs across the participating Eastern Caribbean countriesPROJECT FINANCING DATA (US , Millions)SUMMARY-NewFin1Total Project Cost65.00Total Financing65.00of which IBRD/IDA65.00Financing Gap0.00DETAILS-NewFinEnh1World Bank Group FinancingInternational Development Association (IDA)65.0065.00IDA CreditEnvironmental and Social Risk ClassificationJun 23, 2019Concept Review DecisionPage 2 of 14

The World BankCaribbean Digital Transformation Program (P171528)ModerateTrack II-The review did authorize the preparation tocontinueB. Introduction and ContextRegional ContextRapid digital transformation is re-shaping the global economy, permeating virtually every sector and aspect ofdaily life, changing the way we learn, work, trade, socialize, and access public and private services andinformation. In 2016, the global digital economy was worth some USD 11.5 trillion, equivalent to 15.5 percent of theworld’s overall GDP. It is expected to reach 25 percent in less than a decade, quickly outpacing the growth of theoverall economy. However, countries in the Eastern Caribbean are currently capturing only a fraction of this growthpotential and need to strategically and proactively invest in the foundational elements of their digital economy tokeep pace and thrive in a digital world.Eastern Caribbean countries have made significant progress towards reducing poverty and inequality. GrossNational Income (GNI) per capita ranges between USD 6,5901 in Dominica to USD 9,180 in Grenada. The regiondemonstrates very low levels of extreme poverty, measured at USD 1.90 per day, ranging between 0 to 3% in OECScountries. The incidence of general poverty (measured at USD 5.50 per day) in OECS is moderate, but lower thanmany countries in Latin America and the Caribbean (LAC), and their income group in general.Historically, the region has successfully leveraged external demand for specialized goods and services such asagricultural products and tourism, as well as regional integration and collaboration to overcome challenges oftheir small internal markets and labor forces. The openness of their economies and specialization have helpedachieve rapid economic growth, but also exposes the economies to greater volatility, and increases risk due to lackof economic diversification. The Eastern Caribbean states have developed relatively strong regional institutions suchas OECS, Eastern Caribbean Central Bank (ECCB), Eastern Caribbean Telecommunications Authority (ECTEL),Caribbean Community (CARICOM) etc. that have played prominent roles in the development of the region. Keysectors such as agriculture, tourism and financial services have developed in coordination across the region, toprovide the necessary scale.However, economic growth has slowed in recent in recent years and countries in the region face sharedchallenges of small populations and markets, lack of economic opportunity and vulnerability to climate shocks.The cumulative population of Organization of Eastern Caribbean States2 (OECS) member states was just under625,000 in 2016, with a cumulative GDP under USD 9 billion.3 While primary school enrolment is nearly universaland secondary school access is higher than the average in LAC, there is a significant skills-job mismatch and theregion suffers from significant brain-drain. This has led to capacity constraints in both the private sector and withinpublic institutions. Unemployment remains high – ranging between 19 – 23% in Grenada, St. Lucia and St. Vincent1Atlas method, current USDThe OECS is an International Inter-governmental Organization, established in June 1981, when seven Eastern Caribbean countriessigned the Treaty of Basseterre, agreeing to cooperate with each other and promote unity and solidarity among the Member States.The treaty was replaced with the Revised Treaty of Basseterre creating an Economic Union. The Revised Treaty establishes a singlefinancial and economic space within which goods, people and capital move freely, monetary and fiscal policies are harmonized andcountries continue to adopt a common approach to trade, health, education and the environment, as well as to the development ofsuch critical sectors as agriculture, tourism and energy.3World Bank Group, World Development Indicators, 20162Jun 23, 2019Page 3 of 14

The World BankCaribbean Digital Transformation Program (P171528)and the Grenadines, with youth unemployment exceeding 40%. The lack of diversification of the economy andgeographic location leave the region vulnerable to changing global economic trends and business cycles and at riskof frequent natural disasters.The Eastern Caribbean needs a new way forward to promote economic dynamism, diversification and jobcreation. Traditional mainstays such as tourism and financial services face headwinds from changing travel patternsand global competition and stricter Anti Money laundering/ Counter Financing of Terrorism (AML/CFT) relatedissues. Average annual tourist arrivals rose only 0.6% annually between 2005-17, compares with 4.2% globally.Competitiveness of the services sector increasingly relies on technology and digital platforms to serve the demandsof the modern consumer, but too few OECS businesses are rising to this challenge and too few workers are equippedwith the technology and soft skills to drive the needed transformation.Sustaining economic growth and development in OECS countries will require improvements in productivity andcompetitiveness in key sectors by adapting to the digital era. It also will require these countries to continuebuilding the fiscal, financial, environmental, socio-economic, and institutional resilience necessary for adapting toclimate change. The rise of digital technologies and the digital economy offers a unique opportunity for thegovernments of OECS countries to unlock new pathways for economic growth, job creation and enhancing thedelivery of public services, as well as to improve the resilience of its institutions by embracing technologies thatsupport business continuity.By working together to create a more deeply integrated, dynamic and resilient regional digital economy and adigitally empowered citizenry and institutions, Eastern Caribbean countries can chart a new path. By taking bold,decisive action, the region’s governments can help build a future in which seamless and efficient public services areavailable at the touch of a screen from even the remotest island, where individuals are equipped with thetechnology and soft skills to find meaningful employment in a knowledge and services driven regional and globaleconomy, and where businesses and entrepreneurs are pushing the frontiers of innovation, creating new jobs, andaccelerating the region’s economic growth.Sectoral and Institutional ContextDevelopment of a dynamic, inclusive and safe digital economy requires a comprehensive, ecosystem approach,simultaneously building up a range of interlinked foundations: Jun 23, 2019Digital Infrastructure: ensuring that every individual, business and government has access to high speed,low cost and reliable broadband;Digital Platforms: Building the enabling public platforms and components (infrastructure, software, digitalID and institutions) critical to more efficient public services delivery and an environment supportive ofprivate sector platforms for e-commerce, value chain integration and access to information andemployment opportunities;Digital Financial Services (DFS): ensuring that every individual, business and government has the ability tocarry out financial transactions digitally, including e-payments, and transaction accounts;Digital Entrepreneurship and Innovation: building an ecosystem that supports innovation, new businesscreation and investment – bringing the digital economy to life with new digitally enabled services, businessmodels, content and jobsDigital Skills: ensuring that every individual is digitally literate and able to access digital services andcommerce, building a sufficient pool of advanced digital talent to support growth of new ‘digital’ businessesPage 4 of 14

The World BankCaribbean Digital Transformation Program (P171528)and digitization of traditional industries and equipping all workers with the skills and lifelong learningopportunities to thrive in the economy of the future.These foundations must be reinforced by an environment of trust, inclusion, and resilience. This includes robustcybersecurity, data protection/data sharing and privacy protections, continuity of operations for criticalinfrastructure and information systems and efforts to ensure that no one is locked out of an increasingly digitizedeconomy and society.In the small island state context, the role of the government and the public sector as “enablers” in stimulating andincubating a digital economy is critical, considering that the market scale is likely to disincentivize the privatesector from leading on the digital economy agenda. Governments can and should take the lead (in consultationwith private sector and citizens) in shaping and defining the digital economy and provide the authorizingenvironment (regulatory, infrastructure, and other foundations) to facilitate digital transformation within theirrespective countries and across the OECS region. Such wholescale change must be guided by an institutional reformand change management vision driven by government whereby technology and digital platforms facilitatetransformation and sets the stage for a joint public-private sector dialogue around digital transformation.Eastern Caribbean countries are lagging on all foundational elements of the digital economy, with common areasrequiring improvement. Figure 1 highlights how varying regulatory environments and market developmenttrajectories have resulted in differing market outcomes such as broadband adoption. However, the countries are atsimilar level of development of cross-cutting areas like cybersecurity, and the use of digital platforms – public andprivate.Figure 1: Digital economy readiness indicators for OECS Countries4Source: World BankAvailability of digital infrastructure has improved in the region, but a significant digital divide remains amongdisadvantaged groups and remote communities – locking them out of the digital economy and therefore jobs and4note that reliable, comparable data is not available on DFS, digital skills or digital entrepreneurship for most OECS countriesJun 23, 2019Page 5 of 14

The World BankCaribbean Digital Transformation Program (P171528)prosperity. Compared to income peers, OECS countries perform well in terms of fixed broadband services adoptionby households. However, users of these services tend to be richer and concentrated in urban areas, with far lowerrates of access in rural areas or remote islands. As seen in panel a of the below figure, 4G population penetration,the predominant form of access for individuals at the bottom of the pyramid, lags income peers significantly. This ispart stems from challenges of affordability, as the price a basic mobile data package as a percentage of GNI percapita is relatively high (see panel b). Lack of scale to spread infrastructure costs across many customers and limitedcompetition in the market disincentivizes price reduction, and expansion of networks in areas with lower economicviability, which tend be rural or remote places. Further, the region has yet to take full advantage of opportunitiesfor deeper integration of telecoms markets to create the scale needed to achieve greater efficiency in infrastructuredeployments and to attract and sustain new market entrants.Figure 2: Adoption and affordability of broadband services - Panel a) 4G LTE population penetration vs GNI percapita; Panel b) Price of 500 MB mobile broadband plan vs GNI per capita5a) 4G Population Penetration vs GNI ves40%SamoaTonga20%0% -United BarbadosMauritiusGrenadaAntigua and BarbudaDominicaSurinameBelizeJamaicaGuyanaEstonia 10,000 20,000 30,000 40,000 50,000 60,000b) Mobile broadband plan price (500 MB plan in USD) vs GNI PC 50.00 40.00 30.00Belize 20.00Haiti 10.00 -JamaicaDominicaGrenada Trinidad and TobagoSt. Kitts and NevisDominican RepublicMalaysia SeychellesAntigua and BarbudaSt. LuciaTongaBarbadosGuyanaTurkeyLatviaSt. Vincent and the MauritiusLithuaniaEstoniaGrenadinesSamoaFiji 5,000.00 10,000.00 15,000.00 20,000.00Malta 25,000.00Source: TeleGeography GlobalComms Data, 2018Note: Scales of the above charts have been limited to make the charts more readable, resulting in exclusion of certain high income and highfixed and mobile penetration economies.54G population penetration greater than 100% is largely due to multiple mobile connection ownership by individuals.Jun 23, 2019Page 6 of 14

The World BankCaribbean Digital Transformation Program (P171528)Despite improving broadband access, Eastern Caribbean countries demonstrate a limited level of development ofdigital government platforms and services, in part the result of weak digital leadership and institutional capacity.Digitizing public services can significantly improve service delivery, particularly in the Eastern Caribbean context withpopulations living on small islands and atolls, distant from physical service locations, as well as improve efficiencyand reduce costs of public administration. The Online Services sub-Index (OSI) of the UN E-GovernmentDevelopment Index (UN EGDI) ranks the level of development of digital government services and Governmentportals. OECS countries perform relatively poorly for their income group, with rankings ranging between 93 forDominica and 148 for St. Lucia out of 193 countries globally – see figure 3. Countries in the region suffer from weakcapacity and financing of agencies responsible for digital transformation, lack of scale to justify the high costs ofinvestment in new systems and human talent, weak bargaining power with vendors, and lack of regionalcollaboration to set common standards and pool scarce resources. There is also a lack of investment in cross-cuttingplatforms and registries such as digital ID, geospatial platforms and land registries that can form a foundation uponwhich to layer new applications, services and analytics.Figure 3: UN E-Government Development Indicator Online Services sub-Index score vs GNI per capitaEGDI OSI Score vs GNI PC1.2DenmarkRepublic of Korea1EstoniaJapanFinlandLithuaniaSaint Kitts and NevisTrinidad and TobagoSeychellesGrenadaAntigua and IcelandFijiGuyana JamaicaSaint Vincent and theBelizeGrenadinesSaint LuciaMarshall Islands0 - 10,000 20,000 30,000 40,000 50,000 60,000Source: UN E-Government Development Index, 2018Development of the region’s digital economy is held back by low adoption of enabling private sector digitalplatforms – particularly financial services. Digital platforms can enable economic transactions, social connectionand exchange of information and services. Digital payment platforms are critical for online economic activities suchas e-commerce and services that require real time payment. The share of adults making or receiving digitalpayments in the Caribbean is below the LAC average and many countries still rely heavily on cash-basedtransactions,6 representing a significant barrier to development of the digital economy. The ability to make digitalpayments across borders is also important for the tourism sector, participation of individuals in the gig economy andfacilitating remittances between the large diaspora residing in OECS countries (55% of population).Cross-cutting enablers of the digital economy such as cybersecurity, data use, open data, and privacy are laggingin the region, and presents an opportunity for increased standardization, harmonization and collaborationbetween countries. Eastern Caribbean countries lack comprehensive polices, legislation, standards and capacity inthese areas. This limits citizens’ trust that their personal information is safe when transacting online and the ability6About 80.0 percent of all payments in the ECCU use cash or cheques (Source: ECCB)Jun 23, 2019Page 7 of 14

The World BankCaribbean Digital Transformation Program (P171528)of governments and private sector to protect critical, digitally reliant infrastructure and information systems.Additionally, a lack of regional standards for these areas hinders domestic and cross border digital service deliveryand limits the potential to achieve the scale needed to attract private investment and to incentivize innovation andlocal content development within the region.Digitization of key industries such as finance, tourism and agriculture represent a huge opportunity to improveproductivity and local value capture. Finance, tourism and agriculture are among the most digitized sectorsglobally, but in the Caribbean these industries have been slow to evolve. As a traditional financial services hub, theregion has the opportunity to leverage this leadership position to transform itself into a hub for digital finance andensure viability and vibrancy of the industry for years to come. The tourism sector can also benefit from aneconomy-wide digital transformation, and serve the needs and tastes of modern-day tourists, and potentially unlocknew demographic segments of the market.Figure 4High educational outcomes in the region have not translated intodevelopment of the skills needed in the digital era. Traditionaleducation institutions and curriculum are not providing the skillsetsdemanded by industry. Data from the OECD shows that on average,55% of workers lack basic problem-solving skills in technology-richenvironments, suggesting weak prospects for capitalizing on theopportunities offered by the digital economy. Digital skills are neededacross the spectrum, from basic digital literacy to ensure that everyonecan participate in the digital economy to more advanced technicalspecialists needed to drive digitization of industry and e-business skillsto leverage digital technologies to create new business models andenterprises. Regional collaboration is needed to share the high costs ofinvestment in specialized digital skills and to create a seamless pool ofdigital talent at the scale necessary to attract investment to the region.The Caribbean entrepreneurship ecosystem has pockets of talented digital entrepreneurs who are able and wouldlike to test new digital solutions in new and existing industries. Drawing on lessons learned from a recentCaribbean Mobile Innovation Project7 (P132570), a fragmented demand-side market, the lack of scale andinternationalization limits the viability of mobile (and digital) enterprises. To break out of a low growth cycle, takingadvantage of the unique geographic advantages of OECS territories for entrepreneurship and global technologytalent attraction and retention, this region can consider becoming a testing zone for cultiv

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized. The World Bank Caribbean Digital Transformation Program (P171528) Jun 23, 2019 Page 2 of 14 . Suriname Samoa Antigua and Barbuda Barbados Mauritius Malta Seychelles Maldives Latvia Fiji

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