Ethiopia Digital Foundations Project

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The Ethiopia Digital Foundations Project is intended to develop Ethiopia’s digital economy. It will enable its citizens, businesses and government to reap digital dividends in the form of faster growth, lower transaction costs, more jobs and greater efficiency. It will support the necessary steps to introduce market competition, private sector participation, foreign investment and independent sector regulation. The country must also expand and strengthen its basic digital infrastructure, especially the fiber network and mobile broadband, towards achieving the African Union goal of universal affordable and quality broadband access by 2030. A particular area of focus will be enhancing broadband services to Government and better serving educational institutions and government offices in provincial areas. The country needs to generate opportunities for new jobs through its investments and reforms in digital transformation, and this will also require creating a new licensing enviroment in which digital service providers can thrive.The storyline underlying the project design begins with telecom market reform (component 1), which then creates new opportunities for digital service providers, amd 2) digital transformation in government and education (component 2). There is also a reverse causality whereby the IDA commitment to invest in creating demand for internet capacity in secondary cities and rural areas, through the pre-purchase mechanism, will in turn stimulate market entry and fuel network roll-out as part of the telecom reform program. Governments, schools and universities thus serve as anchor tenants to drive nationwide roll-out or fiber and 4G mobile networks. Similarly, the provision of additional internet capacity in schools and universities will nurture a new generation of professionals with advanced digital skills. Thus, the project is intended to create a virtuous circularity between supply and demand.Component 1: Digital Economy, enabling legal and regulatory environment (US$30m)The aim of this component is to strengthen the analog foundations of the digital economy, in particular policy-making, and effective regulation for the telecommunications sector and for the development of digital entrepreneurship. A strong telecommunications sector is built on market competition, private sector participation and effective, independent regulation – all of which have been lacking in Ethiopia to date. The GoE has requested support from the IFC for the award of two new full-service telecommunication lic enses to compete alongside the incumbent, Ethio Telecom. The Government has also announced that the partial privatization of Ethio Telecom would go ahead with the sale of up to 45 per cent to a strategic partner, with a further 10 per cent of shares set aside for an initial public offering on the new Stock Exchange. To fund the technical assistance, and the transaction advisory for the competition transaction led by IFC, the GoE requested (on August 30, 2019) funding from the Global Infrastructure Facility (GIF). For the privatization transaction and regulatory support, the Government signed (on October 22, 2019) a Project Preparation Advance (PPA) of US$6m under this project. The three sub-components to be financed under this: Sub-component 1.1: Partial privatization of Ethio Telecom; Sub-component 1.2: Strengthening independent ICT sector regulation; Sub-component 1.3: Supporting the development of the Digital EconomyComponent 2: Digital Government and Connectivity (US$128m)The objective of this component is to develop the capacity of the Government to deliver digital services, including building the digital skills of Government officials, and to crowd-in private sector investments to improve regional and domestic connectivity infrastructure, to connect public institutions and educational institutions to broadband internet. It will build upon the market opening measures supported in Component 1 to stimulate private-sector-led investment to expand the geographic coverage of broadband networks, to better serve government institutions, businesses and citizens across the country. This component will support the following activities: Sub-component 2.1: Digital Government and COVID-19 response; Sub-component 2.2: Connecting targeted public institutions to broadband; & Sub-component 2.3: Connecting selected educational institutions to broadbandComponent 3 – Support for MInT (US$5m)Following restructuring and cancellation of funds, this component aims to to provide technical assistance to the Ministry of Innovation and Technology (MInT) for updating digital market regulations and project implementation. Component 4: Project Management (US$7 million)Subject to the Fiduciary Assessment, it is envisioned that the Project Implementation Unit (PIU) will be set up at the MInT, and was operational by the time the project became effective. For implementation of the PPA, the Channel One Programs Coordinating Directorate (COPCD) within the MoF managed implementation, working closely with ECA and MInT, under the supervision of the Ministry of Finance.Component 5: Contingent Emergency Response Component (CERC ~ US$0 M)A “Contingent Emergency Response Component” (CERC) is added to the project structure. This will have an initial zero value but may be financed during the course of the project to allow for an agile response to emerging events.