40 Million People in Djibouti and Ethiopia to Reap Gains from Expansion of Digital Economy
Communities in Djibouti and Ethiopia, including borderland areas, refugees and host communities, will benefit from enhanced connectivity as part of a World Bank-backed initiative to promote the expansion of an integrated single digital market across Eastern Africa.
“This project is not only a significant milestone for regional integration, but also a powerful catalyst for national inclusion. By fostering a single digital market in the Horn of Africa, this initiative extends its benefits to both Tadjourah and Obock regions in Djibouti, making a substantial contribution to the country’s digital inclusion strategy,” said Ilyas Moussa Dawaleh, Djibouti’s Minister for the Economy and Finance, in charge of Industry. “This marks a crucial and pivotal step towards the amalgamation of regional growth and national connectivity.”
The Eastern Africa Regional Digital Integration Project Series of Projects-II (EARDIP-SOP-2) will utilize $130 million in International Development Association* (IDA) financing to increase cross-border broadband connectivity, data flows, and digital trade in the region. It will advance digital market integration in the Eastern Africa region by increasing affordable access to regional broadband connectivity, strengthening the enabling environment and policy convergence for cross-border digital trade and data flows, and developing digital skills. This project is the second in a series of projects.
The first operation in the series, covering Somalia, South Sudan, the Eastern African Community (EAC), and the Intergovernmental Authority on Development (IGAD), was approved by the World Bank Board of Executive Directors on May 18, 2023. In addition, Kenya benefits from regional funding under the Kenya Digital Economy Acceleration Program (KDEAP) to contribute towards the same objectives. That brings the total of countries covered to five: Djibouti, Ethiopia, Kenya, Somalia and South Sudan.
“Digital transformation presents a once in a generation opportunity for new growth and new jobs,” said Dr. Belete Molla, Minister of Innovation and Technology for the Federal Government of Ethiopia. “This project will set us on the right path to grow our digital economies in the Horn of Africa together, as a single digital market.”
The project will crowd in private sector investment by leveraging high-level of engagement from network operators, including mobile network operators, satellite operators and internet service providers, who will vie for competitively awarded project funds for connectivity under the project. The estimated level of private capital mobilization is $30 million.
One of the primary challenges for Djibouti and Ethiopia is the lack of connectivity in the areas being served. The absence of diverse cross-border links and well-developed fiber optic backbone networks is limiting cost-effective distribution of international traffic and creating risks of single points of failure. Fragility and conflict dynamics have damaged key information, communication and technology (ICT) infrastructure and resulted in mass displacement limiting incentives for market investments in connectivity infrastructure. Refugees in the border regions of Somali and Gambela alone amount to over 680,000, not including the recent inflow of refugees from Somalia and Sudan. Insecurity and low disposable incomes have kept these areas off the digital grid with limited incentives for investment. The current levels of infrastructure investment, in middle- and last-mile networks, shows evidence of market failure and are unlikely to meet the growing demands in the absence of de-risking investments through the provision of concessional financing.
“These regional challenges call for regional solutions. By taking a regional approach, EARDIP will create economies of scale, enabling cross-border flows of digital services and promoting regional connectivity,” said Boutheina Guermazi, World Bank Director for Regional Integration in Africa and the Middle East. “By aligning national interventions with regional goals, it will contribute to advance the digital integration agenda in the region and across the continent.”
The project will be implemented by the Ministry of Innovation and Technology (MinT) in Ethiopia, and the Ministry of Communications, in charge of Posts and Telecommunications (MCPT) in Djibouti.
The Eastern Africa region has been one of the fastest-growing economic regions on the continent, but growth has faltered in recent years due to local imbalances and international shocks. Countries along the coast are set to benefit from increasing access to international connectivity capacity, however, deficits in cross-border, inland fiber networks limit transmission across the region. Countries such as Somalia and Djibouti will see connectivity capacity intake more than double due to their proximity to the Red Sea.