How does ICT development affect poverty reduction in Uzbekistan?
Tashkent, Uzbekistan (UzDaily.com) -- Information technology contributes to economic growth due to the fact that modern technologies facilitate the interaction of people and increase the productivity of workers. As a direct result of the impact of ICT on the standard of living of the population, there is a steady decline in absolute poverty in developing regions.
Experts from the Institute for Forecasting and Macroeconomic Research (IPMI) assessed the impact of ICT on poverty reduction in Uzbekistan.
According to the results of the study, the following results were revealed:
1. An increase in the length of the fiber-optic Internet by 100 km contributes to a reduction in the level of poverty by 0.06 p.p. in a year and 0.09 p.p. after 2 years.
2. Growth in the number of Internet users by 1 p.p. will reduce the poverty rate by 0.02 p.p. after 2 years, while this effect is not particularly different from the effect obtained after 1 year.
Rizwan Mushtaka and Catherine Bruno on the example of 61 countries in the period from 2001 to 2012 found a positive correlation between the development of ICT and the growth of financial institutions. Using ICT as a tool for financial inclusion accelerates economic growth, reduces poverty and inequality. In other words, information technology contributes to the development of financial services, thereby accelerating the process of reducing poverty and social inequality.
ICT is seen as one of the main driving forces for overall economic development integrated with micro, small and medium enterprises (MSMEs). E-commerce plays a big role in achieving business efficiency in the developing countries of Asia. MSMEs using ICT can reduce poverty and unemployment. The authors’ study also proves that MSMEs using ICT and e-commerce can increase employment and create new jobs, which can contribute to overall economic development.
An analysis of the causal relationship between ICT and poverty reduction shows that there is a small but positive benefit from ICT for the poorest population, and the availability of mobile phones in particular is a potentially valuable tool to improve the lives of the very poor in the medium term (6–10 years).
To analyze the impact of the development of the Internet and mobile communications on the level of poverty in Uzbekistan, econometric models were built based on statistical data of the State Committee on Statistics of the Republic of Uzbekistan by regions (12 regions, the Republic of Karakalpakstan and the city of Tashkent) for the period 2015 - 2020 (84 observations)
As a dependent variable reflecting the level of poverty, for econometric modeling, such an indicator as the share of low-income population (%) was used.
The following indicators were selected as indicators reflecting the development of ICT:
1. Length of fiber-optic communication lines, thousand km;
2. Number of cellular base stations, thousand pieces;
3. Number of subscribers with access to the Internet (number of users), per 100 people.
Based on econometric models, it can be concluded that an increase in the length of the fiber-optic Internet by 100 km contributes to a reduction in the poverty rate by 0.06 p.p. in a year and 0.09 p.p. in 2 years, the coefficients are significant at the 1% level significance. The coefficient reflecting the effect in the same year turned out to be significant at the 10% level. This means that the length of fiber-optic communication lines has a long-term impact on poverty reduction in the country.
Growth in the number of Internet users by 1 p.p. will reduce the poverty rate by 0.02 percentage points in 2 years, while this effect does not differ much in the same period and after 1 year. This result is consistent with previous findings in studies by Alimi S. and Okunade O. (2020) that Internet use can have a quick effect, but not have a long-term perspective.
The number of cellular mobile base stations did not have a significant impact over 2 years. This may be due to the fact that the effect may be longer, which is difficult to see in this study due to the limited time period.
Taking lag of 2 years is due to the fact that poverty reduction is a rather long process and the effect of the introduction of information technologies is difficult to notice at the first stages. Moreover, according to the above study, ICT, on average, improves the living standards of the poor within 6-10 years.
This phenomenon is explained by the uneven distribution of ICT in terms of income of the population in the countries of the world. As a result, the overall standard of living is growing faster than the standard of living of the low-income segment of the population.
Thus, the development of information and communication infrastructure is essential for reducing poverty in the medium term. Analyzing the action plan for the development of ICT for the coming years, it can be assumed that this factor will increase its significance and lead to an increase in the education of the population, the availability of digital services, including financial ones, as well as in general to an increase in incomes of the population and a reduction in poverty in the country.
IPMI project manager
IPMI Senior Research Fellow