Public policy towards the Internet and development

Two years ago, the Internet was seen as changing the world. The most prestigious business schools were rushing to create concentrations in E-commerce, and the conjunction of the entrepreneur (preferably with a Stanford degree) with the venture capitalist was heralded as the key to the "new economy", in which, according to some, there would be no more recessions. Today, the dotcoms are perceived to be dying, and the firms in the information technology sector seem to be leading the world towards a recession.

What are policy makers supposed to do in these confusing circumstances? Is an Internet policy still important for a developing country? What sectors of the economy will be affected? What are the links to telecommunications policy? The aim of this paper is to provide some elements to help analyze these problems and to discuss what economists know and do not know about the answers. I feel somewhat nervous speaking about this topic in front of this audience. Indeed, South Africa has gone through a remarkable public debate on the issue, which has cumulated in the "Green Paper on Electronic Commerce for South Africa" and the answers that have been given to that Green Paper.

However, I feel that there might be some benefits to take a somewhat more academic approach to the topic. This will lead us to the following conclusions. First, the Internet is indeed an important phenomenon, that is progressively changing many aspects of the way in which modern economies function. Second, the Internet creates opportunities, but is also a source of threats; policy makers cannot afford to ignore it. I will argue in particular that the exporting sector of all economies need access to a first rate communications infrastructure. Third, public policy is important, and it should be oriented to the creation of a high quality telecommunications infrastructure. In this perspective, the rapid introduction of competition in the telecommunications sector, and I know that this is a subject of debate in South Africa, is a necessary component of any forward looking policy in this domain.