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Does this mean I can donate my thousands of Kindle e-readers to developing nations as well?
Probably not. I doubt you can donate your digital "used" books either.
I love the convenience of Kindle e-books -- readable on my phone, tablet, and Kindle device -- but I miss the ownership benefits of physical books. It's nice to be able to freely lend, sell, or donate books. I think that laws need to evolve to guarantee that e-book owners have the same options.
To be fair, in my home (developing) country, people mostly pirate their digital books anyway. Hardware on which to read them properly would be more appreciated.

Our government recently gave e-readers preloaded with some books in the public domain and others donated by local writers to children in some schools to encourage reading.

I'm not going to be cynical here. I'm going to assume there are no sinister motives, that it's just a large corporation using its resources to get some good publicity.

Given that, what difference will this make? In the UK at least, even the poorest of areas has a well-stocked library. The problem isn't access to reading material, it's lack of desire and ability to read it. Those areas need more people actively teaching and encouraging kids to read what books are already there. If it started raining Kindles each containing 1000s of books, I don't imagine anything would change.

So is it different in Kenya and Seattle? Does demand for books outstrip supply?

I'm not sure this is true. The ease of acquiring and opening books is so much easier when I read on my phone, that I now read many more books than I used to. And I find when I have a paper book, I'm magnitudes less likely to finish it than an electronic version.
Totally agree; since installing the Kindle app I spend a lot more time reading books during dead time, such as when travelling, waiting, etc, than I do aimlessly browsing the internet looking for something to pass the time away.
"Those areas need more people actively teaching and encouraging kids to read what books are already there."

This true but since there isn't much chance of this happening in any meaningful way I guess we have to take what we can? So amazon's initiative has some merits.

Your point also reminded me of the Dolly Parton thing that's done a lot of good work, in a totally non-cynical way. https://imaginationlibrary.com/

amazon deserves zero praise whatsoever for this cynical, self-serving endeavour.
Considering they are a mature market, why are ebook readers still so expensive? The introductory price for a Kindle hasn't budged in years.
Where are the lower priced competitors? If there is no reason to lower price, it won't be lowered.
Numerous studies has shown people still prefer print books. For a lot of reasons, and for me personally, even the best E-Book reader, the Kindle with e-ink, isn't anywhere as good quality as printed book, it needs instant refresh rate, and much higher PPI, And proper black or white colouring.

The tech is simply not good enough. Having said that, current tech means much easier discovery and therefore more likely read.

And i think it isn't about digital reading, it about getting people the habit to read books ( not short form like tweet or blogs ). Once there are more people who read books, digital reading will come.