Title page

Contents

ACKNOWLEDGEMENTS 12

ABBREVIATIONS 13

EXECUTIVE SUMMARY 15

OVERVIEW 16

1. INTRODUCTION 38

2. DIGITAL INFRASTRUCTURE 46

2.1. The Importance of Digita lInfrastructure: Promoting Socioeconomic Development by Closing the Digital Gap 47

2.2. Current State of Digital Infrastructure: Affordability and Inadequate Digital Infrastructure as Barriers to Closing the Digital Gap 48

2.3. Recommendations: Investing in Fixed and Mobile Infrastructure and International Bandwidth and Leveraging Regulatory Tools to Lower Internet Prices 63

3. DIGITAL PUBLIC PLATFORMS 66

3.1. The Importance of Digital Public Platforms: Improving End-to-end Public Services for all Ecuadorians 67

3.2. Current State of Digital Public Platforms: Fragmented and Underused Digital Public Platforms 70

3.3. Recommendations: Toward a Whole-of-government Approach to Digital Public Platforms 77

4. DIGITAL FINANCIAL SERVICES 80

4.1. The Importance of Digital Financial Services: A Cornerstone for Financial Inclusion and Economic Resilience 81

4.2. Current State of Digital Financial Services: Financial Sector Growth with Limited DFS Adoption 82

4.3. Recommendations: Enabling Fintech Growth, Investing in Interoperable Payment Infrastructure, and Digitizing Government Payments to Promote... 98

5. DIGITAL BUSINESSES 102

5.1. The Importance of Digital Businesses: Better Jobs and Higher Productivity Through Digital Businesses 103

5.2. Current State of Digital Businesses: Insufficient Funding Opportunities and Nascent Digital Business Ecosystem 104

5.3. Recommendations: Assessing the Availability of Venture Capital Financing and Updating Market Regulations to Promote Ecuador's Digital Business... 121

6. DIGITAL SKILLS 125

6.1. The Importance of Digital Skills: Encouraging Better Jobs and Higher Employability Through Digital Skills Development 126

6.2. Current State of Digital Skills: Low Digital Skills Levels Risk the Future of Many Ecuadorians 127

6.3. Recommendations: Creating a Comprehensive Framework to Guide and Measure Students' Digital Skills 135

7. TRUST ENVIRONMENT 139

7.1. The Importance of a Trust Environment: Building the Foundation for a Well-functioning Digital Economy 140

7.2. Current State of the trust Environment: Overcoming Challenges in the Implementation of Ecuador's National Strategy 140

7.3. Recommendations: Strengthening Incident Response Management and Protection of Critical Information Infrastructures 151

REFERENCES 156

Annex 1. Digital Technologies to Help Ecuador Address its Persistent Development Challenges: A Theory of Change 162

Annex 2. World Bank Global Digital Business Database 163

Annex 3. Main Laws and Regulations Governing Data Protection in Ecuador 164

Table R.1. Summary of the Analysis of Digital Public Platforms in Ecuador 23

Table R.2. International Digital Skills Frameworks and Ecuador's National Curriculum 33

Table R.3. Summary of Key Safeguards and Enablers for Ecuador and Selected Benchmark Countries 34

Table R.4. Key Policy Recommendations to Accelerate the Digital Transformation in Ecuador 36

Table 1.1. Alignment Across Pillars Between Ecuador's Digital Transformation Agenda 2022-2025 and DE4LAC 39

Table 2.1. Data Prices as a Share of Average Monthly Income in 2021 55

Table 2.2. Internet Speed in Urban and Rural Areas 58

Table 2.3. Digital Infrastructure: Key Challenges and Opportunities 63

Table 2.4. Digital Infrastructure: Policy Recommendations 64

Table 3.1. Digital Public Platforms for Digital Transformation Planning 69

Table 3.2. Summary of Results of the Ecuador Analysis 75

Table 3.3. Key Public Digital Platforms: Key Challenges and Opportunities 77

Table 3.4. Digital Public Platforms: Policy Recommendations 78

Table 4.1. DFS Providers, Products, and Channels 83

Table 4.2. Limits on Interest Rates by Type of Credit Portfolio 92

Table 4.3. Digital Financial Services: Key Challenges and Opportunities 97

Table 4.4. Digital Financial Services: Policy Recommendations 98

Table 5.1. Digital Business Landscape in Ecuador and Benchmarking Groups 105

Table 5.2. Digital Business Subsectors in Ecuador with the Largest Differences from the LAC Region 108

Table 5.3. Merger Notification Thresholds 120

Table 5.4. Digital Businesses: Key Challenges and Opportunities 121

Table 5.5. Digital Businesses: Policy Recommendations 122

Table 6.1. Digital Skills-Related Objectives, Digital Education Agenda 2021-2025 128

Table 6.2. International Digital Skills Frameworks and Ecuador's National Curriculum 129

Table 6.3. Digital and Technical Skills Training Programs in Ecuador 132

Table 6.4. Digital Skills: Key Challenges and Opportunities 134

Table 6.5. Digital Skills: Policy Recommendations 137

Table 7.1. Summary of Key Safeguards and Enablers for Ecuador and Selected Benchmark Countries 143

Table 7.2. Key Trust Environment: Challenges and Opportunities 150

Table 7.3. Trust Environment: Policy Recommendations 152

Figure R.1. The Digital Economy: Shared Prosperity and Reduced Poverty 17

Figure R.2. International Bandwidth Used, Mbps per 100 Inhabitants, 2021 20

Figure R.3. Data Affordability by Income Quintile: Monthly per Capita GNI ($, Left Axis) and Share of Monthly per Capita GNI (Right Axis) 21

Figure R.4. E-Government Development Index and Its Sub-Indices 2012-2022, Ecuador 22

Figure R.5. Account Ownership in LAC, Selected Countries 26

Figure R.6. Gaps in Account Ownership and Having Made or Received Digital Payments by Gender, Age, Level of Income, and Education 26

Figure R.7. Top 10 Digital Business Subsectors by % of Digital Businesses: Ecuador vs LAC Region ("Big Five") 29

Figure R.8. Share of Digital Businesses with Formal Investment 29

Figure R.9. Digital Maturity of Ecuadorian Businesses 31

Figure 1.1. Mechanisms of Digital Technologies and Growth 39

Figure 1.2. Digital Transformation in Ecuador: Theory of Change 43

Figure 1.3. Pillars of the Digital Economy 45

Figure 2.1. Data Infrastructure Supply Chain 47

Figure 2.2. Weighted Median IP Transit Cost, 2021 Second Quarter, 10GigE, $/Mbit 48

Figure 2.3. International Bandwidth Used, Mbps Per 100 Inhabitants, 2021 49

Figure 2.4. Relation Between International Internet Bandwidth and the Various Guaranteed Internet Download Speeds 49

Figure 2.5. Mobile Towers and Cell Density Per 10,000 Inhabitants (2021) 50

Figure 2.6. 3G and 4G Mobile Population Coverage in Ecuador 51

Figure 2.7. 3G and 4G Market Penetration, % of Market Population 51

Figure 2.8. Fixed Household Broadband Penetration in Ecuador Versus Peers 52

Figure 2.9. Fixed Coverage by Technology 52

Figure 2.10. Correlation between Urbanization and the Availability of Internet to Households in Ecuador 53

Figure 2.11. Male and Female Internet Users 54

Figure 2.12. Male and Female Mobile Phone Owners as a % of Male and Female Population 54

Figure 2.13. Data Affordability by Income Quintile. Monthly Per Capita GNI ($, left axis) and Share of Monthly per Capita GNI (Right Axis) 56

Figure 2.14. Price of the Cheapest Smartphone, % of GNI 2022 56

Figure 2.15. Affordability of the Cheapest Smartphone by Income Quintile 56

Figure 2.16. Average Fixed and Mobile Download Speed in Ecuador and OECD Countries, Mbps 2019-2020 57

Figure 2.17. Median Fixed and Mobile Speed Recorded, Mbps 58

Figure 2.18. ITU's ICT Regulatory Tracker Index, 2020 62

Figure 3.1. Building Block Approach to Digital Public Platforms 68

Figure 3.2. EGDI Ranking 2012-2022, Ecuador vs. Regional Peers 70

Figure 3.3. Electronic Government Development Index and its Sub-Indices 2012-2022, Ecuador 71

Figure 3.4. Contribution of Each Sub-index to the EGDI Total 2003-2022, Ecuador 71

Figure 4.1. Share of Credit Portfolio by Type of Financial Provider 82

Figure 4.2. Financial Institutions in Ecuador 82

Figure 4.3. Financial Authorities and Regulated Financial Institutions in Ecuador 84

Figure 4.4. Account Ownership and Having Made or Received Digital Payments in LAC, selected countries 86

Figure 4.5. Gaps in Account Ownership and Having Made or Received Digital Payments by Gender, Age, Level of Income, and Education 86

Figure 5.1. Firm-Level Technology Absorption Index, Ecuador and Selected Peers 103

Figure 5.2. Digital Business Density Across Countries 104

Figure 5.3. Digital Businesses by Founding Years 107

Figure 5.4. Top 10 Digital Business Subsectors by % of Digital Businesses: Ecuador vs LAC region ("Big Five") 107

Figure 5.5. Location of Headquarters of Digital Businesses Operating in Ecuador 110

Figure 5.6. Subsectors of Local and Foreign Digital Firms Operating in Ecuador 110

Figure 5.7. Share of Digital Businesses with Formal Investment 111

Figure 5.8. Latest Investment Type of Ecuadorian Digital Businesses 111

Figure 5.9. Nationality of Investors in Digital Businesses Headquartered in Ecuador 112

Figure 5.10. Share of Digital Businesses Reaching Exit Stage 113

Figure 5.11. Exit Types of Ecuadorian Digital Businesses Reaching Exit Stage 113

Figure 5.12. Platform-based or Data-Driven Businesses 113

Figure 5.13. Domestic vs Foreign Ownership of Platform-Based or Data-Driven Businesses 113

Figure 5.14. OECD Economy-Wide Product Market Regulation Indicator 2018 114

Figure 5.15. Ranking as per the Global Entrepreneurship Index, Ecuador and Selected Peers, 2019 115

Figure 5.16. Domestic Competition and Extent of Market Dominance Scores 2019, 1-100 (best) 119

Figure 6.1. School Closures in Ecuador and Regional Peers, Weeks 127

Figure 6.2. Digital Maturity of Ecuadorian Businesses 130

Figure 6.3. Digital Maturity of Ecuadorian Businesses, by Firm Size 130

Boxes

BOX 2.1. Impact of Non-Pharmaceutical Interventions During the COVID-19 Pandemic and the Role of Digital Infrastructure in Ecuador 59

BOX 2.2. Major Decisions are Due and Will Impact Development of the Telecom Sector in Ecuador 61

BOX 4.1. Auxiliary Financial Companies and Innovation 85

BOX 4.2. Payphone in Ecuador 87

BOX 4.3. Interoperable Platforms for Mobile Wallets: BIMO and BICCO 88

BOX 4.4. Activities of Fintech Providers in the Lending Space 89

BOX 4.5. Main Commitments to Expand DFS Included in the 2019 NFIS Draft 90

BOX 4.6. A Brief Analysis of Selected Provisions of the Fintech Law 93

BOX 4.7. New Protections Laid Out in the Consumer Protection Law 2022 94

BOX 5.1. Example of Private Initiatives to Map the Ecuadorian Tech Start-up Landscape: BuenTrip Hub's Radar Tech Start-up 106

BOX 5.2. Payphone and Tipti 109

BOX 7.1. National Cybersecurity Strategy 2022-2025 145

Annex Figures

Figure A2.1. Information Covered by the World Bank's FCI Digital Business Database 163