EurACA SECRETARIAT

 

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EurACA SECRETARIAT

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EurACA SECRETARIAT INTRODUCTION Today, citizens of the most countries in the Eurasian region share a common problem in internet connectivity. Most Eurasian citizens do not have access to the internet at favorable conditions and quality compared to developed information societies of the world; hence they have become part of a regional “digital divide”. Consumers and businesses pay substantially higher prices for connectivity: monthly prices of 1Mbps connections exceed $500 USD in – some countries, while prices are below $30 USD in most developed European and Asian economies. International access costs account for a significant portion (50-60%) of high connectivity prices in Eurasia. Undersupply of international connectivity and resulting low broadband penetration levels in the region lead to a risk of “isolation” from today’s connected world. The long term risk of this continuing imbalance for these countries is potentially missing opportunities for social and economic development. It has become apparent that establishing the right infrastructure to provide international connectivity is a must for the region. Building on this need and analyzing possible options, the Ministry of Communication and Information Technologies of Azerbaijan (MCIT) has decided to establish an initiative among Eurasian countries to jointly plan, build and manage a Trans-Eurasian Information Super Highway. The Government of Azerbaijan has been discussing and promoting at various lengths the idea of a Trans-Eurasian Information Super Highway as a solution to overcome Eurasia’s lagging behind other regions in information society infrastructure and services. The Trans-Eurasian Information Super Highway (TASIM) project is a major regional initiative aiming at the creation of a transnational fiber-optic backbone targeting primarily the countries of Eurasia from Western Europe to China, particularly establishing the Eurasian Connectivity Alliance (EurACA). MCIT has decided to establish this initiative among Eurasian countries to jointly plan, build and manage a Trans-Eurasian İnformation Super Highway. The purpose of this document is to show the digital divide in the Eurasian region and its causes. In the document, suitable infrastructure options and a cooperation model between countries of the region will be discussed, considering geographical, topological and infrastructure features, as well as laying the foundation for a Eurasian information super highway. 1

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EurACA SECRETARIAT ICT - the Leading Factor of Development: Background of Eurasian "Digital Divide" & Contemporary ICT Challenges During recent decades, Information Communication Technologies (ICT) have been a significant enabler for socio-economic development. ICT’s strong influence on socio-economic development is evident along three dimensions. The growth of the ICT sector contributes to overall economic growth, as it influences the productivity and output of other sectors. The spread of ICT improves the freedom of people through reducing inequalities among citizens and increasing social inclusion. In terms of employment, ICT increases the chances in the labor market, affects income opportunities and creates new jobs. By improving the education and health services, among other sectors, ICT has an important impact on the quality of people’s lives. Examples include “ambient assisted living” (health) or eLearning services (education). In the developed countries with high ICT penetration (“connected” countries), the information age is directly transforming societies. The effects of this transformation can be perceived across three main sectors: Governments / Public Administration; Civil Society; and Enterprise Development. Offering online services has become prevalent among governments of “connected” countries in order to increase efficiency and effectiveness of services as well as the satisfaction of citizens. Through government portals, citizens are able to obtain information on administration-related topics (e.g. obtaining a passport), download forms, change their residency, search for jobs, pay taxes, and obtain information on authorities. Utilizing ICT for creating interactive applications has various benefits for governments, including increased efficiency of services via by-passing the need of physical contact, easy and effective provision of information, increased responsiveness to the needs of citizens, lower cost of services and inter-/intragovernmental coordination. In addition, the perception of a modern, serviceoriented Government by citizens is significantly increased through e-Government applications improving accessibility, speed and availability of services. From a public perspective, the internet plays an increasingly important role in people’s lives. A growing number of people are using on-line media to gather information, download multimedia content and engage in social networking. The consumption of high-bandwidth multimedia content leads to a deferral of demand towards new media content with increasing bandwidth requirements. 2

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EurACA SECRETARIAT In summary, the internet has increasingly become a key source of information. Social media sites and services such as Facebook, Myspace and Youtube, influence the way people spend their time and interact with each other. Accordingly, people have developed new internet usage habits such as: watching TV shows and other audio/video content; creating and publishing own content; networking with other people; buying and trading online, performing banking transactions. These activities require a growing amount of bandwidth, as the usage increases and the services and applications become more interactive and functional. Meanwhile in order to adapt to global changes, enterprises have been re-defining their business models. In this respect, many applications and solutions are being utilized to enhance the competitiveness and the efficiency of companies (such as Enterprise Resource Planning (ERP) applications, Customer Relationship Management (CRM)/service provisioning solutions, efficiency/productivity improving applications such as fleet management and mobile e-mails). The significant impact of ICT on the business sector as can be seen in terms of the following: growth of multi-factor productivity: the smart use of ICT can help firms increase their overall asset efficiency in combining labor and capital, or MultiFactor Productivity (MFP). Although Azerbaijan´s GDP has grown at impressive rates in recent years, the country aims to create areas of economic growth beyond the mere generation of hydrocarbon windfall income; network Effects: ICTs use can also contribute to network or spillover effects between firms, such as lower transaction costs and more rapid innovation. Using online transactions or integrated supplier networks, firms are able to source from and sell to wider audiences, working around middlemen and lowering transaction costs; use of available knowledge: Using ICTs to capture and leverage institutional knowledge within organizations or to deliver training content to workers can greatly enhance an organization’s competitiveness; quality of management: a successful management depends on the availability of a meaningful amount of information about the state of the business and its environmental parameters. Generating, integrating and supporting the analysis of business information, ICT can support appropriate decisions of owners, managers and workers and lead to more efficient resource allocation; quality and Consistency of Production: integrating ICT into the core production processes of companies can greatly enhance the consistency and reliability of processes, steer the flow of material and labor to the right time and place and provide on-time financial information for further decision-making. Integrating the core production process with financial, administrative and human resource processes in Enterprise Resource Planning (ERP) applications has helped many businesses to gain an improved control over their allocation processes; and more effective relationships with customers and suppliers: the beneficial effects of ICTs on the business enterprise do not end within the legal, organizational or physical limits of the individual enterprise but extend into interaction with suppliers and customers. 3

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EurACA SECRETARIAT Joint forecasting and supply-chain planning with suppliers or selling to new customer segments through online channels (possibly at discriminatory price points) are only two examples through which businesses can reduce capital cost, improve yield on transactions and maximize their value creation through the application of ICT. Overall the e-society and its development have strongly contributed to an exponential increase in the demand for global bandwidth. Therefore, the increase in internet usage has also been triggered by the uptake of broadband services with higher bandwidths - between 2001 and 2007, the number of broadband subscribers increased from 30 to 337 million subscribers worldwide. Based on this tremendous infrastructure investments continue in Europe and the US to support the growing broadband demand. For instance, Deutsche Telekom invested €3 billion in a VDSL fiber network to guarantee a high speed connection of 50Mbps in 50 cities of Germany by 2007; British Telecom recently revealed plans to invest £1.5 billion to replace copper wire with a fiber network to provide super fast broadband (up to 100 Mbps in 2012, potentially over 1000 Mbps in future); France Telecom is investing up to €4,5 billion until 2012 for broadband infrastructure in order to provide Fiber to the Home (FTTH) service covering 4 million households; The Belgian telecom company, Belgacom, invested €330 million to cover two million households offering FTTH service; and Swisscom invested approximately €500 million to cover 50% of the population with Fiber to the Curb (FTTC) in 2007. Consequently the ICT investments over the last couple of decades have created the information economies of today, bringing considerable economic and social improvements. The ‘information age’ is changing and re-shaping society: 4

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EurACA SECRETARIAT governments providing service online; people spending more time online and creating new social interaction patterns; and enterprises developing new and more efficient ways of doing business. As a result such developments translate into increasing bandwidth requirements on a regional and global scale. Nevertheless a huge Eurasian terrain majorly lacks the relevant modern digital connection, namely there is an obvious "digital gap". The lack of participation in the information society will lead to widening the gap between the developing and “connected” economies, “isolation” of the developing countries from the rest of the world, and as well as missed opportunities in terms of social and economic development. To begin with, the lack of political and financial investment in the Eurasian Region has led to internet penetration levels of below 5% and broadband penetration levels of below 1%. This results in a “digital divide” compared to the “connected world”, which is mainly driven by disproportionately high consumer prices (Figure 1). Figure 1 clearly indicates the correlation between high consumer price levels and low penetration rates. Although penetration levels and end-prices between countries are significantly different, penetration rates have reached up to 25% in countries such as the United Kingdom where consumer prices have dropped to levels of ca. 6 USD/Mbps. We have seen the exorbitant consumer prices of Eurasian countries, which are over one hundred times higher compared to the prices of “connected countries”, leading to very low broadband penetration takeup rates. Another observable effect is that the higher the speed of available internet 5

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EurACA SECRETARIAT connections, the higher the penetration rates tend to be (e.g., in countries where connection rates of ~100Mbps exist, penetration rates are close to/over 30%). Figure 1: Telecommunication Services Penetration (2007, Subscribers %) While international access costs account for around 2-10% of total access costs in western European countries this figure rises to 50-55% in the Eurasian countries. The lack of available international connectivity in Eurasia is the main driver for high international access costs. While proportionally high costs to pass subscribers are observed in European countries, they are partially driven by a dense and urban population and the high costs of establishing the fiber infrastructure. Overall high access costs and the lack of competition have led to low international bandwidth per capita usage in the Eurasian countries. The notion of disconnectedness is strengthened by the lack of broadband supply. Current intra-regional networks are under-developed and consist of heterogeneous technology. These networks (e.g. TAE) display inadequate capacity and the lack of single-unique technology to provide end-to-end connectivity at superior quality. Furthermore, effective intra-regional networks are hampered by administrative problems such as the lack of a single controlling entity, network monitoring or a pricing policy. On the other hand, developed countries such as Sweden, the United Kingdom and Germany, with an abundant supply of broadband capacity and infrastructure, can be characterized as “connected” countries. In these countries, an established regulatory framework, a market-driven competitive environment and significant infrastructure investments have resulted in sufficient supply, high bandwidth usage 6

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EurACA SECRETARIAT per capita and low usage prices. “Emerging” countries such as the Czech Republic, Bulgaria and Turkey have/are currently undergoing a period of liberalization and increased competition. As a result, increasing infrastructure investments are leading to sufficient bandwidth availability. Examining the GDP per capita and penetration correlation, a sizable broadband investment need and potential is seen in the Eurasian region, as shown in Figure 1: current broadband penetration per capita in Eurasian countries is still far below 5%. The strong need for investment is also evident in the growing demand for intra-Asian bandwidth, which is expected to reach a CAGR of up to 64% between 2006 and 2012. The increase in intra-regional traffic is predominantly going to be driven by regional content as well as information flows. Analysts predict that by 2012 around 67% of the Asian bandwidth will consist of intra-Regional traffic (up from 54% in 2008). Based on the existing infrastructure and penetration levels, it is clear that broadband investments are required to reach the ambitious growth targets and satisfy the national and intra-regional demand. In order to meet intraregional and countrywide demand, a proper infrastructure is needed. 7

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EurACA SECRETARIAT The Eurasian Connectivity Alliance (EurACA) Bridging the "Digital Gap" of Trans-Eurasia As it was already mentioned Internet and broadband penetration levels reveal a “digital divide” in connectivity between developed economies and Eurasian countries. International bandwidth per capita is very low in Eurasian countries due to the disproportionately high end user prices, driven by high international access costs. This was explained by lack of national/regional infrastructure; limited access to international connectivity (most countries are land-locked) and lack of sufficient competition. On the other hand, the GDP per capita and broadband penetration correlation, as well as the growth of the intra-regional traffic, represent a significant upside potential and the need for investment in broadband infrastructure. Therefore the establishment of the required backbone infrastructure will ensure optimal connectivity at reasonable access prices, maximize benefits for all stakeholders (governments, citizens and corporations) and leverage the regional synergy potential. Perceiving the inquired necessity, during the Ministers’ Summit held within the framework of the 14th Azerbaijan International Telecommunication and Information Technologies Exhibition and Conference in November 2008, the Ministry of Communications and Information Technology of the Republic of Azerbaijan put forward the initiative to launch a project on building of the TransEurasian Information Super Highway (TASIM). A special Baku Declaration to create the Transnational Eurasian Information Super Highway was adopted at the Baku Regional Ministerial Meeting on the Transnational- Eurasian Information Super Highway (TASIM) held on November 11, 2008 in cooperation with the Department of Economic and Social Affairs of the UN Secretariat and with participation of representatives of Afghanistan, Azerbaijan, Belarus, Egypt, Estonia, Georgia, India, Iran, Jordan, Kazakhstan, Lithuania, Moldova, Russia, Slovenia, Ukraine and USA), as well as by the executives of the GAID (UN Global Alliance for the ICT and Development), RCC (Regional Communication Commonwealth) and TAE; the Declaration was also forwarded to Bulgaria, China, Pakistan, Turkey, Turkmenistan and Uzbekistan that did not participate in the Meeting. It was suggested to establish the Task Force of seven experts representing Azerbaijan, Georgia, Iran, Kazakhstan, GAID, RCC and TAE to coordinate the initiative and appoint GOA as a party responsible for the Task Force meetings. The Declaration also asked GOA to prepare the Terms of Reference and Action Plan of the Task Force and request the UN General 8

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EurACA SECRETARIAT Assembly for discussing and supporting this initiative. On December 21, 2009 the UN general Assembly unanimously adopted resolution (A/Res/64/186) entitled “Building connectivity through Trans-Eurasian Information Super Highway” calls for the implementation of the “Trans-Eurasian Information Super Highway” project. The project aims to lay transnational fiberoptic line covering the countries of Eurasia from Western Europe to Eastern Asia. The line will combine the major centers of information exchange in Europe and Asia. The transit line will stretch through China, Kazakhstan, Azerbaijan, Georgia and Turkey to Germany, likewise Reserve North transit line will pass through the territory of Russia, Ukraine and Poland. The resolution, supported by some of 30 countries also recognizes the coordinating role of the Government of the Republic of Azerbaijan in advancing the Project. Furthermore, on December 21, 2012, the UN General Assembly adopted the second resolution (A/Res/67/194) which renewed political support for the “TransEurasian Information Super Highway” project, initiated by the Government of Azerbaijan. The resolution enjoyed unanimous support of the UN Member states and was cosponsored by Afghanistan, Australia, Belarus, Canada, China, Georgia, India, Iraq, Israel, Japan, Kazakhstan, Kuwait, Lebanon, the Republic of Korea, the Republic of Moldova, Morocco, New Zealand, Pakistan, Russian Federation, Sri Lanka, Tanzania, Turkey, Ukraine, Uzbekistan, the U.S. just to name a few. Recently, the new resolution (GA/11404) was adopted during the 67th session of the United Nations General Assembly that was held at the UN Headquarters in New York on Wednesday, September 4th 2013 that supports the proposed establishment of the Eurasian Connectivity Alliance with the International Telecommunication Union (ITU) as a way to improve the development of regional telecommunications transit routes in the Trans-Eurasian region and invites Governments, the United Nations system, international development institutions and other actors to engage in relevant discussions on the proposed Alliance. Relevant international organizations also expressed their support to and interest in TASIM project, including International Telecommunication Union, United Nations Development Programme, and United Nations Special Programme for the Economies of Central Asia, United Nations Economic and Social Commission for Asia and the Pacific, and some regional organizations. The Project primarily envisages the establishment of the Eurasian Connectivity Alliance (EurACA) for making contribution to the development of telecommunication transit routes in the region and improving the coordination between the governments, private sector, civil society and international development institutions. The establishment of EurACA will lead to better 9

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EurACA SECRETARIAT coordination between the governments, private sector, civil society and international development institutions. As the need for Eurasian infrastructure investment has been identified, the emerging next step should be to focus on “what” needs to be addressed and “how” this should be most effectively realized. Being a part of the EurACA will provide significant benefits to all involved parties. As previously stated, many countries in Eurasia are land-locked or located away from existing broadband highways. For such countries, it is not feasible to build their own terrestrial networks reaching global information highways. Other countries that have direct access also have improvement potential in terms of connectivity. Furthermore due to limited connectivity between the countries of the region, the intra-regional traffic has to be routed through complicated and illogical paths, leading to unnecessary interconnection costs. Thus, a joint venture for the EurACA will be very beneficial for participating countries, enabling: a) Minimization of financial risk through investment sharing - for land-locked countries having similar access problems, participation is already a must; other countries will have the chance to improve or establish their connectivity with additional supply; and countries on the route of the network will also benefit from the infrastructure investment through a countrywide telecom backbone; b) Leverage of regional synergies - use of existing international 10

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EurACA SECRETARIAT connectivity links in various countries; Intra-regional traffic will minimize rerouting of traffic, hence avoiding unnecessary interconnection costs; and sharing of know-how in connectivity will become possible (e.g. use of different technologies, satellite, terrestrial; experience with different suppliers). A stronger potential can be realized with the participation of as many countries as possible. In order to identify the optimal route and country participation, a long list of countries in Eurasia were considered. The following criteria were utilized in order to select potential participating countries: International Connectivity: Countries that have relatively easy and/or direct international access (direct access to submarine cables and high speed terrestrial networks); Broadband Penetration: Countries with relatively low broadband penetration and part of the digital divide; Topological Fit: Proximity of countries to each other and the urban population density as well as the urbanization level (e.g. number of cities above 20,000 population); Geopolitical Factors: Multilateral relations between countries and the cultural proximity factors (language, region, historic roots); and Partnership Experience: Experience in other consortiums as an advantage for a prospective initiative (e.g. TAE, pipelines). Considering this fact it is planned that a terrestrial fiber network will connect the Eurasian region to the data highways of the western and eastern world. Thus terrestrial fiber and satellite technologies were considered as potential options to provide the required backbone connectivity. Terrestrial fiber is seen as the most feasible option due to its superiority in terms of quality and capacity. It should be noted that satellite technology can be utilized as a complementary solution for difficult-to-reach destinations. The major concerns around terrestrial fiber are related to the fact that it requires cross-country digging; hence reliance on transit countries and their relationship with each other play an important factor. The resulting risks need to be effectively addressed within the scope of the operating model. According to this proposal, a terrestrial cable of 6270 kilometers (the red line in the figure above) can immediately cover 36 cities as well as more than 35 million people and six million households on its route. With a further potential extension (blue and red lines together), a total of 68 cities would be reached with a total coverage of around 55 million people and 9 million households. Defining the right operating model is just as important as the selected technical solution, as it will determine the operational success. A cooperation, which is unsatisfactory for participants or unfairly more advantageous to some of the participants, is destined to fail. 11

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EurACA SECRETARIAT Figure 2: EurACA Proposed Network Some basic principles have been taken into account while developing this potential network topology: Covering an immediate population with the shortest route by passing through the major/populated cities of the participating countries; Potentially reaching as many international connectivity alternatives as possible; Leveraging the existing national backbones (and extending them if necessary); Having more than one trans-Caspian route in order to maximize its benefits: intraregional connectivity and back-up for disruption. The options were assessed against the defined principles. The managing entity model was found to be more relevant for the planned infrastructure investment since it better ensures end-to-end quality and long-term stability through central management and control functions. A profit-oriented organization acting with commercial principles poses a more viable option in economic terms. The strong integration between the countries will also better serve the long-term objectives better, as it will enable realization of synergies to the common interest of the entity. In the short/medium term, internet adoption will increase with improved price and quality. Easy access to information and applications will be ensured, enabling integration of citizens with the rest of the world. The new infrastructure will strengthen the backbone services for telecommunication companies of the region, which will increase access of citizens to their services. Regionalization of internet will be realized by elimination of routing regional traffic to international directions. Developing and storing local content will be made possible. 12

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EurACA SECRETARIAT In the long-term, it will help the development of economies with increased trade links between countries and development of regional e-commerce / e-marketplaces. Governments will be able to realize their information society targets as the new structure will be a key enabler for e-government, e-health and e-education initiatives. Consequently, considering above mentioned facts the main objectives of the EurACA are improving connectivity of central Eurasia to the international ICT backbone by increasing connection speed and lowering access costs. The project aims to establish a major new transit route between Asia (Hong-Kong) and Europe (Frankfurt). The immediate benefit is the improved global topology for international ICT backbone networks, high capacity, low latency, disaster-resilient TASIM routes will provide. Developed countries will benefit by better connecting their operating companies abroad, developing and implementing applications for the emerging economies, enabling effective provision of multimedia and cloud computing services to the expansive Eurasian markets. Collaboration of governments, businesses and international organizations in realizing this international infrastructure project will bring long-term economic and social benefits to the whole region. Particular attention should be paid to expanding the benefits of ICT/telecommunications and broadband access to the remote, underdeveloped areas of Eurasia. Strategically, the project will be implemented in two major stages. In the first stage, key regional countries and operators will build major transit and transport 13

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EurACA SECRETARIAT infrastructure, connecting the East and the West. This transit infrastructure will allow TASIM to become commercially viable and address the rapidly growing market of international IP transit. In the second stage, EurACA is expected to leverage the transit infrastructure to provide affordable ICTs/broadband connectivity to land-locked countries of central Eurasia, including Afghanistan and Central Asia. New fiber-optic routes can be developed in coordination with national telecommunication infrastructure development plans, and the existing routes can be upgraded technologically to allow integration into the EurACA network. The EurACA project represents a remarkable case of inter-government and publicprivate partnership in development of international broadband backbone infrastructure. Thus EurACA stressing the need to reduce the digital divide and to ensure that the benefits of new technologies, especially information and communication technologies, are available to all, noting that Governments, as well as the private sector, civil society and the United Nations, and other international organizations, have an important role in bridging the digital divide for the benefit of all and in building an inclusive and people-centered information society, recognizing that well-developed information and communication network infrastructures, such as information superhighways, act as one of the main technological enablers of the digital opportunities. Just as a consequence of these processes the establishment of the EurACA includes a number of principles and priorities that envisages the followings: • Along with being a unique possibility to eliminate network connectivity problems by increasing privileges provided to citizens and companies the EurACA can create a foundation within the organization resulting in economic development and positive social changes; The EurACA will ensure equality and transparency in the digital era; The EurACA will solve the emerging problems in mutual respect and cooperation; The establishment of the EurACA will play an important role in improving coordination between the governments, private sector, civil society and international development organizations for the development of telecommunications transit routes in the region; The EurACA will combine the major centers of information exchange of Europe and Asia; • • • • 14

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EurACA SECRETARIAT • The EurACA will contribute to create open information society in the region, increase the speed of Internet connection and the development of Internet services; The EurACA will lead to economic development, diversification of the economy and increased competition; The EurACA will facilitate the new cooperation perspectives of representatives of ICT sectors of member countries; The EurACA will be a platform to demonstrate to the world community the reforms of the ICT sectors that have become success stories; The EurACA will support the dialogue of bodies dealing with various complex international policy issues concerning the ICT; The EurACA will ensure coordination of synergies, and activities, cooperation, effective use of experiencs and resources existing in the member countries to contribute to the implementation of tasks envisaged in the field of ICT; The EurACA will make recommendations on and promote the combining of the major centers of information exchange of Europe and Asia placing emphasis on improvement of coordination between the governments, , private sector, civil society, international development institutions; The EurACA will study and develop relevant proposals on promotion of the best international experience in the field of the ICT to ensure the improvement and more effective implementation of the current ICT legislation, norms and standards; The EurACA will develop of recommendations on ICT standards and their implementation; The EurACA will ensure exchange of knowledge, information and experience in the field of ICT particularly on administrative, legislative and technical issues; The EurACA will make proposals in elaboration of the drafts of National ICT Policy, Strategy, Programs and plans as well as on providing support on concessional bases by Parties to project ; The EurACA will be the stage for the adoption and implementation of Annual • • • • • • • • • • • 15

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