Mobiles and Development

The Economist writes:

Mobile phones have become indispensable in the rich world. But they are even more useful in the developing world, where the availability of other forms of communicationroads, postal systems or fixed-line phonesis often limited. Phones let fishermen and farmers check prices in different markets before selling produce, make it easier for people to find work, allow quick and easy transfers of funds and boost entrepreneurship. Phones can be shared by a village. Pre-paid calling plans reduce the need for a bank account or credit check. A recent study by London Business School found that, in a typical developing country, a rise of ten mobile phones per 100 people boosts GDP growth by 0.6 percentage points. Mobile phones are, in short, a classic example of technology that helps people help themselves.

There is anecdotal evidence that reducing taxes on handsets can boost government revenues. People would rather pay a small tax on a legal handset than no tax on a smuggled one that cannot be returned if it goes wrong. There are some hopeful signs: India cut its import duty on handsets to 5% last year and plans to scrap it altogether. Mauritius recently cut its taxes on handsets to boost adoption.

The GSMA is now making a 50-country study that will, it hopes, provide conclusive proof of the benefits of cutting taxes on mobile phones. The aim, says Mr Soppitt, is to show that a win-win-win scenario is possible, in which customers get cheaper access, manufacturers and operators sell more handsets and airtime and governments raise their tax revenues. (Oh, and the digital divide vanishes, too.) With its new focus on low-cost handsets, the industry is doing its part to extend access to communications technology. Now governments must do their part, too.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.