How to Build Inclusive Digital Economies

By Atul Mehta, Director, IFC, Telecom, Media & Technology, Fintech, Venture Capital & Funds; Ceyla Pazarbasioglu, Senior Director, World Bank Group, Finance, Competitiveness and Innovation Global Practice; and Jose Luis Irigoyen, Senior Director, World Bank, Transport and Digital Development Global Practice


digital-economyIf we wish to create a future built on shared prosperity, digital technology will be critical.

Today, of the world’s 10 largest companies by market capitalisation, six are technology companies. And of those, only two were in the top 10 just five years ago — which gives you a sense of how quickly the global economy is being disrupted.

In fact, as technology innovation accelerates, it may be the best path to inclusive growth. Extending Internet access in developing countries to levels seen in developed countries could enhance productivity by as much as 25%, according to Deloitte. The resulting economic activity could generate USD 2.2 trillion in additional GDP and more than 140 million new jobs.

At the World Bank Group, we have been putting quite a lot of thought into understanding what it takes to create a successful and inclusive digital economy, in light of our mission to end extreme poverty and boost shared prosperity. Technology can be a force for good — by promoting economic inclusion, efficiency, and innovation. But it can also cause upheaval — by displacing jobs or imperiling the security of personal and government data, and even critical infrastructure. And it can widen the digital divide — increasing the gap between those who benefit from technology and those who are excluded and risk falling further behind. That’s why technology’s risks and opportunities must be carefully managed.

We have identified key ways to do this:

1) Strengthen Digital Infrastructure: By this, we mean the system of broadband cables, mobile network operators, towers and data centres that allow everyone and anything to connect to the Internet. More than 6.4 billion connected devices existed in 2016. That number is expected to increase five to 10 times over the next four to five years.

Yet we have a fundamental challenge: Today, 4 billion people lack access to the Internet, and one out of every four countries worldwide lacks connectivity. If you include those that are connected but have not yet developed a fully digital economy, then we’re talking about 61% of the world’s population who are living “offline.”

The development and business communities must shift mindsets to consider digital infrastructure as a necessary universal resource for all. We must begin to prioritise this connectivity in much the same way we do sanitation, power or even water. All countries can and must have access to this universal resource.

2) Improve Institutions, Digital Skills, and Literacy: Technology and innovation are changing the nature of work. Some studies estimate that as many as 65% of primary school children today will work in jobs or fields that don’t exist yet. We don’t know what that future will look like, but we do know that artificial intelligence and automation will increase. Many low-skilled jobs will disappear — up to 50% of current work tasks, representing USD 15 trillion in wages, could be automated already using existing technologies. The new job world that emerges will demand digital literacy and more sophisticated skills.

Governments have a key role to play in this new world by strengthening the “analog” foundations of the digital economy. They must develop policies and regulations that enable firms to leverage digital technologies to compete and innovate — and strong cybersecurity policies and safeguards will be critical here. They must strengthen educational systems, so people can take full advantage of digital opportunities. They must build accountable institutions that respond to citizens’ needs and demands.

3) Build Digital Platforms: The ability to transact online and through mobile phones reduces the cost of serving the world’s most hard-to-reach populations. Digital platforms — through new fintech providers and products — expand access to financial services and accelerate financial inclusion, which can improve people’s lives and transform entire economies.

Global e-commerce sites are expected to surpass USD 6 trillion in trade over the next five years. In China, companies selling on Alibaba reach some 100 export destinations — more than twice the average of offline firms — and more than 4.5 million small businesses and microenterprises have found access to markets and credit on Alibaba’s Taobao Marketplace. Yet few emerging markets are showing sufficient progress in the development of digital platforms.

Electronic ID systems are also crucial. At least 1.1 billion people across the world lack reliable forms of identification, according to the World Bank. Digital IDs enable people to quickly access services such as healthcare, education and banking, and help governments and businesses deliver services more efficiently — because they know who they’re dealing with. We must find ways to improve electronic identification to facilitate the transfer of social benefits. Without it, we risk creating a new class of poor — the digital poor — who will find it extremely difficult to catch up with the rest of society.

4) Expand Entrepreneurship: Technological change will cause considerable displacement in labor markets in coming years. Manufacturing, for example, will likely continue to shrink as a source of high-paying jobs. That means entrepreneurship will be crucial for job creation. Tech startups introduce new products, adapt cutting-edge technologies to local contexts and open new markets. The result: the potential to make a major contribution to sustainable economic development.

At the World Bank Group, it is our mission to make sure that developing countries can take advantage of technological change to drive sustainable economic growth. And we are making it a priority to work with governments, investors, development partners and thought leaders to connect the world in ways that minimise the risks and maximise the benefits of technology.

Digital technology offers a rare opportunity for shared progress. It must not be squandered. Unless we build an inclusive digital economy, the digital divide will widen, leading to a more fractured world. We must jumpstart digital development — and we can do so by focusing on these foundational elements.

The 2 March 2018 business meeting of the OECD’s Emerging Markets Network (EMnet) will focus on “Accelerating Digitalisation in Emerging Markets,” with a special focus on Asia.

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