UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

No.71 DECEMBER 2018 LEAPFROGGING: LOOK BEFORE YOU LEAP

New technologies, such as digital mobile communications, drones for precision agriculture and decentralized renewable energy systems that provide electricity in rural areas far from the grid, open up opportunities for leapfrogging. As developing countries have limited capabilities, opportunities for leapfrogging in these countries are presented primarily through the adoption of technologies. Innovation policies can help developing countries foster and facilitate the deployment of frontier technologies and their adaptation to meet their needs, to promote sustainable development.1

Frontier technologies and Potential for leapfrogging leapfrogging In large part, the experience of the ICT Discussions of the developmental dimension sector has brought increased attention to of frontier technologies, particularly digital leapfrogging. Rapid technological advances technologies, often highlight the possibility and cost reductions in ICT in recent decades have enabled some developing countries,

POLICY BRIEF of “leapfrogging”, the concept of “bypassing intermediate stages of technology through notably in Africa and Asia, to skip the Key points which countries have historically passed development of landline infrastructure by 2 moving directly to mobile telecommunications. • Countries engage in during the development process”. The leapfrogging by bypassing traditional notion of “catch-up” refers For example, in the early 2000s, Cambodia, the imtermediate stages of to the narrowing of gaps in income and Côte d’Ivoire, Gambia, Ghana, Mali, Nepal technology in a development technological capabilities between a late- and Timor-Leste had less than three fixed- process. telephone subscriptions per 100 inhabitants, • Rapid technological advances developing country and a front-runner and cost reductions in country. Historically, this has entailed a well below the global average of 23.1. Mobile ICT have enabled some sequential process of learning by latecomers subscriptions were also marginal (figure 1). developing countries to By 2017, however, these countries had skip the development of in skills, process technology, design and landline infrastructure by product development. A major barrier is the bypassed the landline infrastructure and moving directly to mobile need to learn product design and acquire the reached levels of mobile subscriptions per telecommunications. capability to create new products, as front- 100 inhabitants that were above the global • To support leapfrogging, average of 108.9: Gambia (139.2), Côte d’Ivoire countries need strategic runner firms are generally unwilling to grant innovation policies, sound licences to catching-up firms. (130.7), Ghana (127.5), Nepal (123.2), Timor- infrastructure and institutions, Leste (119.3), Cambodia (116) and Mali (112.4). and appropriate technological However, the nature of recent technological Most developing countries have followed standards. advances, notably in information and the same pattern. For example, in 2017, the communications technology (ICT) and energy, mobile penetration rate in those countries was means that catch-up no longer requires 98.7 subscriptions per 100 inhabitants, following the paths of frontrunners, as it can while that of fixed telephones was be achieved by leapfrogging. 8 per 100 inhabitants.3

1 This policy brief is based on UNCTAD, 2018, Technology and Innovation Report 2018: Harnessing Frontier Technologies for Sustainable Development (United Nations publication, Sales No. E.18.II.D.3, New York and Geneva). 2 UNCTAD, 2018, p. 84. 3 UNCTAD calculations, based on data from the International Telecommunication Union. Figure 1 Countries that leapfrogged to mobile technology: A comparison of (a) fixed-telephone and (b) mobile subscriptions per 100 inhabitants, 2000 and 2017 a) b) 23.1 16.0 18.0 World average 108.9 2.7 0.5 1.9 Gambia 139.2 1.6 2.8 1.3 Côte d'Ivoire 130.7 1.1 0.7 1.0 Ghana 127.5 1.1 0.0 2.9 Nepal 123.2 0.2 2.1 0.2 Timor-Leste 119.3 0.3 1.1 0.8 Cambodia 116.0 0.4 0.1 1.1 Mali 112.4 2017 2000 2000 2017 Source: UNCTAD calculations based on data from the International Telecommunication Union. Note: Earliest data for Timor-Leste is for 2003; latest data for Gambia and Mali is for 2016. The rapid adoption of mobile technology has An example of the potential for leapfrogging not only contributed to increased productivity in frontier technologies is the development and new markets, it has also enabled innovative of decentralized renewable energy systems. financial technology services. Examples Prices in renewables have fallen sharply in are the M-Pesa mobile banking system recent years as investments have increased. and Grass Roots Bima insurance company Since 2009, the cost of wind turbines has in Kenya, and the Flutterwave technology dropped by nearly 33 per cent, and that of company for large financial institutions in solar photovoltaic modules, by 80 per cent, Nigeria. And they all bear major implications making both technologies increasingly for financial inclusion. For instance, in 2017, competitive with fossil fuel generation. Solar countries in sub-Saharan Africa had the energy is now the cheapest generation highest percentage of adults with a mobile technology in many parts of the world. money account, with a regional average of 21 per cent, compared with 4 per cent Cost reductions represent an opportunity worldwide. According to the Global Financial for electrification in rural areas, especially in Inclusion Database, the following countries developing countries, through off-grid and are leaders in mobile financial inclusion, mini-grid solutions. with over a quarter of the adults in the first An analysis using geospatial data shows four income deciles using a mobile account that to bring electricity to all households in service: Kenya (59 per cent), Uganda sub-Saharan Africa by 2030, the most cost- (40 per cent), Zimbabwe (40 per cent), Gabon effective mix of conventional and renewable (37 per cent), Ghana (32 per cent), the United energy technologies for several countries Republic of Tanzania (30 per cent), Namibia would be off-grid and mini-grid solutions using (29 per cent), Côte d’Ivoire (27 per cent) and solar technology. These solutions could serve Senegal (27 per cent). a large share of the population with a lower Figure 2 Potential for leapfrogging in decentralized solar photovoltaic technology (Percentage)

90 Malawi Niger Chad 80 Mali Burkina Faso Ethiopia Zambia 70 Lesotho Central African Republic Zimbabwe 60 Mauritania Namibia 50 Angola South Sudan Gabon Botswana Somalia 40 Uganda Eritrea Sudan Democratic

2012–2030 Guinea-Bissau Republic of the Congo 30 Congo Mozambique Kenya Guinea United Republic of Tanzania 20 Nigeria Djibouti Gambia Senegal Swaziland Burundi Rwanda Liberia 10 South Africa Ghana Equatorial Cameroon Benin Togo Madagascar Guinea Côte d'Ivoire Sierra Leone

and off-grid solar photovoltaic technology, solar photovoltaic technology, and off-grid 0 Percentage of population served by mini-grid of population served Percentage 0 10 20 30 40 50 60 70 80 90 100 Percentage of population without access to electrification, 2012 Source: UNCTAD calculations based on data from the United Nations open-source spatial electrification tool. Note: Electrification scenario considers 22 kWh of electricity consumption per household per year, grid electricity cost of $ 0.1 per kWh and cost of diesel of $ 0.7 per litre. cost in the following countries: Malawi machines, and is based on developments (84 per cent of the population), Chad in Internet technology, smartphones and (83 per cent), the Niger (80 per cent), Burkina new sensing technology. In Bangladesh, Faso (78 per cent), Mali (74 per cent), Ethiopia the Internet of things is being used to assess (73 per cent), Zambia (72 per cent), Lesotho groundwater chemistry and protect people in (67 per cent), the Central African Republic the Ganges Delta from drinking water that is (62 per cent), Zimbabwe (60 per cent), contaminated with arsenic. This lessens the Mauritania (57 per cent) and South Sudan need for investments in the implementation (53 per cent) (figure 2). In many cases, a wide and maintenance of traditional monitoring electrification gap – the percentage of the networks. population without access to electricity – Small-scale satellites are used in is associated with a large potential for communication networks and applications leapfrogging. These countries are represented that draw on high-resolution imagery in on the right-hand side of figure 2. Exceptions monitoring land use and urban planning, are due to factors such as a higher density for example. These satellites will soon be of population close to existing or already affordable for more developing countries, planned national grids, which reduce the businesses and universities, diminishing need for off-grid and mini-grid solutions. the need for investment in more costly and Frontier technologies traditional satellite technologies. as an alternative to traditional These examples highlight the potential paradigms for leapfrogging through the adoption of Many leapfrogging opportunities are in technologies developed elsewhere. technologies that offer an alternative solution for costly investment in infrastructure related Leapfrogging and the to traditional technological paradigms. development of new technologies For example, mobile and renewable energy Another type of leapfrogging is through the technologies eliminate the need for large development of new technologies. A few investments in infrastructure such as landlines, economies in the East Asian region, such as extensions of the national energy grid and the Republic of Korea and Singapore, have the establishment of financial branches in experienced rapid growth by successfully remote areas with a low population density. leapfrogging in the development of a limited Drones represent a leapfrogging opportunity number of short-cycle technology sectors for precision agriculture in developing such as semiconductors and other countries to measure and respond more electronics. Typically, they begin with the effectively to variability in crop and animal assembly of final goods using imported parts. production. This technology offers an Next, they move on to the development of alternative to more costly agronomic low-technology components, and gradually information based on traditional remote- to higher-technology components, before sensing technology. For example, the Third learning to modify the design of existing Eye project in Mozambique used low-cost products and ultimately, to develop new drones to help small-scale farmers improve products. crop production by 41 per cent and reduce Yet for many developing countries, water use by 9 per cent. These results illustrate leapfrogging in the industrial sector is the systemic nature of the innovation process, a challenge, particularly with the development which in this case includes the training of of new technologies. Catch-up requires local drone operators, communication of learning modern technologies and relevant agronomic information to farmers accumulating indigenous technological and widespread availability of mobile phones. capabilities in innovation and technological Drones could also revolutionize the delivery know-how for production, as well as investing of supplies to remote areas. For example, in physical assets. However, these innovation in Rwanda, the Government has partnered capabilities are often lacking, especially in the with a robotics company, Zipline, to address least developed countries. For example, in maternal mortality by using drones to deliver 2014, the average intensity of research and blood to medical facilities, reducing the time development in most developing countries to procure blood from 4 hours to 15 minutes. was below 0.5 per cent, much lower than the The Internet of things also offers innovative world average (over 1.5 per cent). With regard and alternative solutions in health care, to output in innovation, the technological gap agriculture, energy and water management, is reflected in the differences in productive for example. The Internet of things monitors capacities. For example, countries with a and manages connected objects and high prevalence of extreme poverty mainly  [email protected] Ms. ShamikaN.Sirimanne [email protected] Division onTechnology Tel 41229175510 41 229175828 www.unctad.org and Logistics Press Office Contact Director

a manufacturingbase,andthehard and depends on industrial development and Ultimately, long-termtechnologicalinnovation merchandise exports. manufacturing production and1percentof they represent only0.4percentofglobal export mineralsandagriculturalcommodities; need tobeappropriate toeachcountry’s and innovation technological learning In leapfrogging and other contexts, policies The needforstrategicinnovation societies. does notexacerbatethedigitaldividewithin is also necessary to ensure that digitization absorption capabilitiesanddevelopingskills Investing inbroadband installations,building swift technologicalchangeinthesector. latest technologiestokeepupwithcontinuing constant innovationandinvestmentinthe development. Sustaining progress requires the mobile revolution tofosterinnovationand to fullyexploittheopportunitiesbuildon co-evolve withthedevelopmentofICTand limitations ofinnovationpolicyinAfricato in otherregions. Thispartlyreflects the sub-Saharan Africaappearssmallerthan role ofICTs, theireconomicimpactin of leapfrogging. Despite the developmental revolution alsodemonstratesthelimitations Successful as it has been, Africa’s mobile ICTs, EnterprisesandPovertyAlleviation Information EconomyReport2010: agglomerations (see the UNCTAD publication, creation hasoccurreda fewmajorurban in the Philippines,mostdirect andindirect job Even inthesuccessfulcasesofIndiaand order effects suchasindirect jobcreation. automatic andare largely limited tosecond- to thepoorer segments of societyare not and costrequirements. Moreover, benefits partly duetostringentinfrastructure, quality substantial economicactivitiesinthisarea, relatively fewhavesucceeded indeveloping outsourcing inICTservices.However, participating inglobalvaluechainsthrough countries havemovedinthisdirection, the services economy–andsomedeveloping bypass manufacturingtoleapfrog into credited foropeningup opportunitiesto example,advancesinICTs havebeen For soft infrastructure forsuch development. 4

UNCTAD calculations,basedondata from theWorld Development Indicators(World Bank). 4 ).

of technologicalstandards appropriate to technological development. Theselection countries, particularlyintheearlystagesof which are lackingin many developing infrastructure andinstitutionalcapacity, leapfrogging depends on the state of developmenttrajectorybasedon a andsustain The potentialtoharness developing themfurther. production needsandto build capacityfor adaptation offrontier technologiestotheir to promote andfacilitatethe deploymentand the effectiveness oftheirinnovation systems by strategicinnovationpoliciesthatstrengthen Therefore, leapfrogging shouldbesupported national innovationsystem. for innovationthattheycreate, characterizea among themandtheenablingenvironment civil societyandconsumers–theconnections research andeducationsystems,government, The capabilitiesofstakeholders–firms, its publicinstitutionsandtheprivatesector. economic structure and the capabilitiesof level oftechnologicaldevelopment,its promote technologicalleapfrogging. productive andtechnologicalcapacitiesto countries in the development of national UNCTAD standsready toassistmember and othertechnicalcapacityprogrammes, technology andinnovationpolicyreviews put intheirrequests. Through science, Ethiopia, andseveralothercountrieshave Two reviews are ongoinginUgandaand and theIslamicRepublicofIran(2017). The latestreviews were carriedoutinRwanda 2018, 14 such reviews had been conducted. strategic innovationpolicies.Asoftheend the designandimplementationofnational mandated bytheCommission,contributeto technology andinnovationpolicyreviews, in frontier technologies.UNCTAD science, platforms aboutpolicychoicesonleapfrogging Development Goals,offer knowledge-sharing Technology andInnovationfortheSustainable and theMulti-stakeholderForumonScience, on ScienceandTechnology forDevelopment forums,suchastheCommission International also importantfactors. markets for complementary technologies are local circumstances and the development of

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