In the most significant single initiative yet to start to narrow the global digital divide and jumpstart the new digital economy in the developing world, the International Finance Corporation is joining with Softbank Corp. of Japan to spawn startup Internet companies in some 100 developing countries.
Softbank, a Japan-based global Internet company, and IFC, part of the World Bank Group, will invest US$200 million to found Softbank Emerging Markets (SBEM) to incubate Internet-related businesses in developing countries. IFC will also join Softbank.s recent Latin America- and China-focused Internet investment funds, bringing the total commitment to global Internet development to $500 million.
SBEM will nurture new Internet enterprises both by investing seed money and by providing an array of technological, legal, and management support to quickly turn ideas into solid businesses. SBEM will serve as an accelerator to speed the creation of Internet-anchored enterprises in developing countries by working with a network of global industry leaders and local partners.
SBEM will help entrepreneurs in developing countries use established business models to start up locally adapted versions of some of the world.s leading Internet companies.
And SBEM will also provide risk capital and support for entrepreneurs in the developing world to turn their own business concepts into successful Internet enterprises.
.The digital divide is one of the greatest impediments to development, and it is growing exponentially,. said World Bank Group President James D. Wolfensohn. .With this initiative by IFC and Softbank, we are taking a lead in the effort to close the gap. This investment will accelerate the inclusion of the developing countries in the information revolution. It will transfer technology from the rich countries to the developing world, fostering sustainable new local businesses which will promote prosperity and reduce poverty. And it will, I hope, encourage others to follow with their own investments and initiatives to establish technology and information centers all around the world..
"This historic partnership will play a crucial role in building the new digital economy in developing countries around the world," said Masayoshi Son, President and CEO of Softbank Corp. "By leveraging Softbank's global Internet capabilities and IFC's expertise in international development, this unprecedented initiative offers tremendous opportunity to investors and entrepreneurs to build successful new Internet businesses in emerging markets. At the same time, these markets will benefit from the economic rewards and quality-of-life gains associated with Internet growth."
The initiative is based on IFC.s long experience of private sector investment in developing countries around the world, using project finance to build the businesses that are the foundation of sustainable growth in developing economies; and Softbank.s market leadership in taking Internet businesses international and at replicating successful models in other countries. Softbank operates or is currently developing more than 30 Internet companies in Japan, Europe and globally, including local operations of Yahoo! and WebMD. Softbank has developed a strong track record for building Internet companies and for the incubation approach that has proven critical to fast-paced development of online enterprises with the key factor of first-mover advantage.
SBEM will be established in Silicon Valley, California, with initial capital of $200 million, 75 percent provided by Softbank and 25 percent by IFC. The total investment of more than $500 million includes two recent Softbank funds for China and parts of Latin America, in which IFC is participating.
SBEM will also establish a Global Incubation Center to facilitate the transfer of the latest Internet technologies and business models from developed countries to emerging markets. This technology company will ensure adequate technical resources for the incubated companies and foster the development of a mature technological base in the target countries.
SBEM will establish joint ventures with leading Internet companies to oversee the company's global roll-out in the targeted developing countries. These joint ventures will, in turn, create joint ventures with local entrepreneurs and investors to build, launch and operate local Internet companies, utilizing the parent's model, for each targeted country. SBEM plans to announce its first incubated company in May 2000.
SBEM will also support local Internet ventures by providing funds and strategic resources to help entrepreneurs develop their own promising Internet business concepts into successful operating companies.
The investment will bring successful leading edge Internet models to developing markets, and foster local enterprises, through the incubation approach that allows entrepreneurs to focus on business concepts while a core of centrally-based experts handles many of the ancillary business start-up requirements. Growth of e-business and Internet-based enterprises in the developing world will narrow the gap . or digital divide . between countries with access to information technology and countries that are hampered by reliance on traditional sources of information and business tools.
The project will seek to improve Internet access levels in targeted countries by generating investor interest in emerging markets, which in turn should help lower the price of Internet access and increase the number of subscribers. SBEM will also promote free or subsidized Internet service to schools and other educational institutions to increase knowledge and access for people in developing countries.
The mission of IFC is to promote private sector development in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets and provides technical assistance and advice about the private sector. The World Bank has been active in building access to the Internet in developing countries and serving as a catalyst by becoming a knowledge center for the emerging markets. It is advising governments on how to shape policies, rules and regulations to encourage growth of the Internet industry, and has supported infrastructure, from telecommunications networks to delivery systems and payment mechanisms. The World Bank Group has just established a new Global Information and Communications Technologies department which brings together IFC.s private sector transactional expertise and World Bank policy and regulatory advice to promote the transfer of information technologies to the developing world.
Softbank has emerged as one of the world's leading Internet market forces. Through its ownership positions in more than 120 Internet companies and its unique Internet management concept, it is able to create market synergies for its family of companies on a global scale. In Japan its activities encompass distribution, publishing, Internet media platforms, a broad range of e-commerce businesses, and joint ventures with companies including Microsoft, Cisco, Yahoo!, the National Association of Security Dealers, and many other market leaders. In the U.S., Softbank is the largest shareholder in leading Internet companies including Yahoo!, E*TRADE and ZDNet, in Europe has established Internet joint ventures with News Corp. and Vivendi, and is helping build Internet companies in Latin America, Australia, New Zealand, India, China and Korea.