Digitalisation and growth

Can digitalisation spur growth and close gaps?

By Welby Leaman, Senior Director Global Policy Strategy, Walmart, Ana Valero, Director of Public Affairs and Regulatory for Latin America, Telefónica and Amy Alvarez, AVP, International External and Regulatory Affairs, AT&T [1]

Accelerated digital transformation has boosted e-commerce and digital service offerings. Across 13 African countries, more than 1 in 5 firms started using or expanded their use of digital technology in response to the shock of the pandemic. Decades of investment in connectivity, public-private collaboration and greater adoption of digital technologies by the public sector, including for public services, further accelerated digital transformation across emerging markets. Now, as countries struggle to return to growth, digital transformation can accelerate productivity and global trade. A 10% increase in digital connectivity between countries has been shown to increase trade in goods by nearly 2% on average, trade of parcels by 4%, and trade in services by over 3%.

Digitalisation can also help countries draw greater benefits from their regional trade agreements. When combined with a regional trade agreement, a 10% increase in digital connectivity gives rise to an additional 2.3% growth in exports of goods.  

Yet, as the shift towards digitalisation intensifies, closing digital gaps between and within countries is paramount to ensuring inclusive development. For this reason, beyond supporting connectivity, regulations should prioritise closing digital gaps across regions, businesses or socioeconomic groups, lowering the rural-urban divide and eliminating disparities linked to education and gender.

Measures such as implementing e-government and promoting the responsible use of technologies such as big data, AI and blockchain in healthcare, justice and education, are key. This was exemplified during the COVID-19 crisis, when real-time access to data and analytics enabled information sharing and guidance to all stakeholders and the public, while helping to manage and coordinate logistics during lockdowns and the vaccine administration phase. Additionally, digital policy agendas should prioritise public investment in the digitalisation of SMEs, fostering the development of digital economy start-ups and supporting innovative training programmes.  For example, the African Union Commission adopted a ten-year plan in 2020, The Digital Transformation Strategy for Africa (2020-2030), working with the private sector towards Agenda 2063 and the SDGs. The final aim is to stimulate job creation, reach sustainable growth and address poverty by leapfrogging in the adoption of digital tools.

Competing pressures on government budgets make this a challenge. Governments should consider how public-private collaboration can strengthen these efforts. Many companies are implementing digitally inclusive strategies leveraging their business models and proximity to suppliers and consumers.

To give a few examples, firms are driving progress in digital teaching, with programmes like ProFuturo or Conecta Empleo. They are implementing innovative models to close the urban-rural digital divide, such as Internet para Todos in Peru. To close the digital gender divide, programmes are seeking to increase women’s representation in STEM careers, support women entrepreneurs and promote women’s technical training and employability. Firms are investing in SME integration through digital transformation, leveraging digital payment infrastructure, for example, but also helping them build skills and use digital technologies effectively. Finally, they are investing in the creation of on-ramps to digital services through base-of-pyramid offerings, using hybrid models between physical and digital services to support the transition of underserved communities to the digital economy – as Walmart has done for example -, blending e-commerce and digitally enabled physical retail.

Public-private dialogue and a sound enabling environment can help to scale up all these efforts. Governments across emerging markets, which have long seen the private sector as a necessary partner for investment, innovation and new technologies, could also gain from collaborating on digital inclusion and adoption.  

These efforts are urgent beyond the imperative of an inclusive recovery from current crises. Digitalisation is reshaping future drivers of competitiveness, with a significant impact on how businesses from developing countries will be able to join and compete in global markets.

In addition to long-standing drivers such as innovation and technological capabilities, new competitiveness drivers, such as openness, reputation and trust are becoming increasingly important. Here again, the private sector can support government efforts. To give just one example, the “Digital Tools for Rule of Law & Recovery” (DT4RR) agenda, developed by Walmart in partnership with the Organization of American States and the Americas Business Dialogue, supports the introduction of key digital tools into government to enhance regulatory systems such as tax administration, customs, procurement, licensing and permitting. Governments across emerging markets should seize this opportunity to both incentivise investment and promote adoption.  

Recent years have shown us not only the potential of digital transformation to drive resilience, but also how digital divides exacerbate inequalities. For digital transformation to help reverse the trend of diverging growth prospects, digital inclusion – across and within emerging markets – must be a common priority.

[1] The OECD Emerging Markets Network (EMnet) will be holding a meeting to discuss The Future of Digital Transformation in Emerging Markets on 7 December 2022 as part of its Working Group on Digital Transformation in Emerging Markets. The authors are Co-Chairs of this Working Group.