Digital revolution gains often remain unrealized, says World Bank report

The report explores the impact of the Internet, mobile phones, and related technologies on economic development


Photo: AFP
Photo: AFP

New Delhi: Digital technology is spreading rapidly, but digital dividends—the broader benefits of faster growth, more jobs, and better services—are not, according to the World Development Report 2016: Digital Dividends.

The report released last week explores the impact of the Internet, mobile phones, and related technologies on economic development. The report is divided into two parts. Part 1 shows that potential gains from digital technologies are high, but often remain unrealized. Part 2 proposes policies to expand connectivity, accelerate complementary reforms in sectors beyond information and communication technology (ICT), and address global coordination problems.

The report makes a compelling case that while the digital revolution has forged ahead, its “analog complements”—the regulations that promote entry and competition, the skills that enable workers to access and then leverage the new economy, and the institutions that are accountable to citizens—have not kept pace.

As a result, the development impact can be disappointing.

The authors argue that if more than 40% of adults in East Africa pay their utility bills using a mobile phone, why can’t others around the world do the same? If 8 million entrepreneurs in China—one-third of them women—can use an e-commerce plat-form to export goods to 120 countries, why can’t entrepreneurs elsewhere achieve the same global reach? And if India can provide unique digital identification to 1 billion people in five years, and thereby reduce corruption by billions of dollars, why can’t other countries replicate its success? Indeed, what’s holding back countries from realizing the profound and transformational effects that digital technologies are supposed to deliver?

The report states two main reasons why digital dividends are not spreading rapidly enough. First, nearly 60% of the world’s population is still offline and can’t participate in the digital economy in any meaningful way. Second, and more important, the benefits of digital technologies are being offset by growing risks such as vested business interests and regulatory uncertainty.

So how can different countries bridge this digital divide and take full advantage of the opportunities that the Internet and related technologies present? The report has some solutions.

• For countries where the digital economy is still emerging and Internet access is low, the task is to create the conditions for greater adoption and use. Reforms include removing fundamental barriers such as lack of basic ICT (information and communication technology) and supporting infrastructure, excessive regulation of product markets, and high tariffs for digital goods, more than 25% in some countries. Education systems need to focus on basic literacy and numeracy skills, connect teachers to content, and promote adult literacy. And small steps to promote institutional change in the public sector include providing simple information services using mobile phones, strengthening monitoring, and leveraging non-state provision.

• For countries transitioning to a digital economy with fairly high technology use, the task is to ensure that opportunities are open to all. For effective competition, countries should develop regulations that open protected sectors and strengthen enforcement. The skills agenda needs to focus on teaching advanced cognitive and socio-emotional skills—preparing for careers rather than specific jobs—since fewer than half of today’s schoolchildren can expect to work in an occupation that exists at present. And governments can introduce or strengthen such e-government tools as digital IDs, financial management systems, and e-services for citizens and businesses, while also changing provider incentives and increasing transparency.

• For countries already transforming into a digital economy, the main task is to address the difficult problems that the Internet poses. In the business sector, this involves tasks such as ensuring that digital platforms do not abuse their dominant position and promoting fair competition between online and offline services. Education and training systems should put more emphasis on advanced ICT skills and—especially in rapidly aging societies—offer more opportunities for lifelong learning. And where basic e-government functions are already effective, digital tools can facilitate closer collaboration between all parts of the government, enable full integration of public and private services, and ensure greater involvement of citizens in truly participatory policy making.

“Connectivity for all” remains an important goal and a tremendous challenge. But to bring maximum benefits, countries also need to create the right environment for technology.

The full report can be read here.

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