DEVELOPMENT AND GOVERNANCE IMPACTS OF DIGITAL PUBLIC INFRASTRUCTURE IN ETHIOPIA (DPI ETHIOPIA)

Digital Public Infrastructure (DPI) is the foundation for digital transformation of economies. The goal of digital transformation in government is to create a more transparent, efficient, and responsive public sector that meets the evolving needs of citizens. Ethiopian government has developed legal and regulatory frameworks and launched several initiatives over the last decade to enhance DPI and digitalization. Accordingly, the strategy for digitalization was launched in July 2020 with four cross-sectoral areas: infrastructure, supporting systems, digital interaction, and digital ecosystem. This pilot study project is primarily aimed to achieve the three specific objectives: (1) highlight the mechanisms through which DPI could contribute to socio-economic development; (2) identify the socio-economic impact of DPI on disadvantaged and underserved communities; and (3) highlight the potential of DPI to improve governance and public service delivery. This report investigated the state and challenges of DPI in Ethiopia and highlighted the impact of DPI on development and governance using cross-country panel dataset to compare Ethiopia’s relative position. The study used both primary and secondary data. Primary data were collected through key informant interviews (KIIs) with selected institutions more involved in digitalization. Primary data on policy insights and digital initiatives related to the National ID program, Integrated Tax Administration System (ITAS), E-procurement, and Digital Education were collected. To understand the state of digitalization, the associated challenges, and policy insights in Ethiopia, in-depth interviews were conducted with 12 key informants from different digital institutions. Cross-country secondary data were also collected from national and global official sources to identify the impacts of DPI on development and governance in Ethiopia and beyond. Three DPI indicators were selected to measure their parametric and nonparametric links with development and governance. The indicators of DPI and digitalization used in the study are E- Government Development Index (EGDI) Inclusive Internet Index (3I), and Information and Communication Technology (ICT). Development was measured by GDP per capita (constant int.$, log), (as a measure of economic progress), Human Development Index (HDI) (as a measure of social progress), and structural change (as a measure of economic transformation arising from the movement of labor and other 10 productive assets from low productivity sectors to high productivity sectors). On the other hand, overall governance was measured by Worldwide governance Indicators (WGI), Corruption Perception Index (CPI), and Public Service Index (PSI). Both parametric and nonparametric methods of data analysis were employed. Time series plots and correlation analysis were employed to investigate the dynamic relationship between DPI and socioeconomic progress and governance. Linear panel data models were employed to estimate the spatiotemporal effects of DPI on development and governance. Ethiopia plans to deliver 1,000 e-government services by 2030, following a systematic and targeted strategy. Currently, around 325 e- government services are available online. However, the key concerns include institutions' ability to implement digital services, infrastructure readiness, institutional preparedness, and the availability of qualified human resource. A Comprehensive effort has been launched to enhance digital skills and literacy, aiming to reach 10 million individuals by 2025. However, Ethiopia's digital literacy confronts with serious challenges related to poor infrastructure, shortage of power, and insufficient digital equipment. By mid-March 2025, a total of 12.7 million National ID registrations were completed, of which 9.4 million (73.6%) were authenticated. This is only 15.5% of the adult population (81.7 million) estimated for 2024. A total of 52 institutions have been integrated, and around 342+ services were offered online. For successful implementation of the National ID program, challenges related to security of the system, general digital literacy of the society, coordination among actors, resistance to digitalization, fees charged to get digital ID, and the other digital divide need to be addressed. Over the last two and half decades, development of digital infrastructure in Ethiopia has shown substantial progress. However, there is substantial disparity in e-government and e-participation among countries. Ethiopia, with an e-government index of 28.7%, and very low e- participation (19.3%) is among the bottom countries with very low digitalization. Ethiopia was ranked 92 nd in inclusiveness with inclusive internet index (3I) of 48.2%. Ethiopia’s relative position in inclusive digital finance is also very low, though significant improvements are observed in recent years. Only 19.7% of the adult population makes/receives digital payments. Gender gap in digital finance is very high where only 15.4% 11 female and 24.3% of male made/received digital payments, indicating a digital finance gap of 8.9%. Only 3.9% of adult women in Ethiopia use mobile phone or the internet to send money, which is substantially lower than their counterparts in Kenya (66.6%), SSA average (27.9%), and the world average (31.7%). Both the parametric and nonparametric results are found to be consistent. The parametric results clearly show that the impacts of DPI on development and governance are very strong. Digitization strongly and significantly enhances socioeconomic progress and accelerates structural change around the world. Similarly, digitalization substantially improves governance and public serviced delivery and helps reduce corruption across countries. However, unlike the global trend, digitalization in Ethiopia is not effectively utilized to enhance development and good governance. Despite the substantial progress in DPI and digitalization, socioeconomic progress and structural change in Ethiopia are deteriorating since 2017. The negative association between development and governance and digitalization in Ethiopia is mainly associated with the widespread domestic conflicts adversely affecting DPI and digitalization, eventually leading to loss of welfare and prevalence of poor governance. The results generally imply that Ethiopia requires huge additional investment on inclusive DPI and digitalization across regional states, ensure peace and security to enhancing socioeconomic progress by improving governance.