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The Digital Divide Is Impeding Development

By the end of the next decade, growth, productivity gains, and human development will be determined by levels of integration into the digital economy. To guard against new forms of inequality, the international community must do more to help developing countries close the connectivity gap.

GENEVA – It is easy to assume that access to the digital economy is ubiquitous, and that online shopping is the natural evolution of commerce. For example, in July, Amazon sold more than 100 million products to consumers worldwide during its annual Prime Day event, a $4.2 billion bonanza that included sales of table salt in India, Coke Zero in Singapore, and toothbrushes in China.

But figures like these mask the fact that for many people in developing countries, the road to e-commerce is riddled with potholes. Simply put, the growth of e-commerce is not automatic, and the spread of its benefits is not guaranteed.

Some of the obstacles are logistical. On the tiny South Pacific island of Tuvalu, for example, fewer than ten streets in the capital, Funafuti, are named, and only about 100 homes have a postal address. Even if everyone in Tuvalu had access to the Internet (which they don’t; only 13% of the country’s population had broadband in 2016, according to the World Bank), delivery of goods purchased online would be difficult.

Elsewhere, billions of people lack bank accounts and credit cards, and in many developing countries, consumer-protection laws do not extend to goods purchased online. These challenges are particularly acute for people in Sub-Saharan Africa, in remote island states, and in several landlocked countries.

By contrast, in most developed economies, well-functioning postal systems and strong legal frameworks mean that products can be purchased online and delivered without a second thought.

But e-commerce is only one facet of the evolving digital economy. Innovation, production, and sales are all being transformed by technology platforms, data analytics, 3D printing, and the so-called Internet of Things (IoT). By 2030, the number of IoT-connected devices is expected to reach 125 billion, compared to 27 billion in 2017. Moreover, this rapid pace of digital tethering is occurring even as half the world’s population remains unconnected from the Internet.

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If left unaddressed, the yawning gap between under-connected and hyper-digitalized countries will widen, exacerbating existing inequalities. Levels of digitalization may even influence whether countries are able to achieve the Sustainable Development Goals set by the international community for tackling challenges like hunger, disease, and climate change. That is why I believe more must be done to support poor countries as they strive to integrate into the digital economy.

How that economy will develop is difficult to predict. But we already know that actions taken by governments, donors, and development partners will determine the way forward. One effort – the Going Digital project, launched by the OECD in 2017 – is helping countries seize opportunities and prepare for technological disruption. Areas of focus include competition, consumer protection, innovation and entrepreneurship, insurance and pensions, education, governance, and trade. It is a holistic approach that specialists in development cooperation should emulate.

Moreover, by the end of the next decade, information and communication technology (ICT) will drive economic growth and power productivity gains. To thrive, people will need new skills and knowledge, and countries will require updated policies to protect online users. Small companies, including those owned and operated by women, will be especially vulnerable to the changing business environment.

Unfortunately, only 1% of all funding provided by Aid for Trade – an initiative by World Trade Organization members to help developing countries improve their trading infrastructure – is currently being allocated to ICT solutions. Similarly, multilateral development banks are investing just 1% of their total spending on ICT projects, and only about 4% of this limited investment is being spent on policy development, work that is critical if digital economies are to be well regulated.

At my organization, the United Nations Conference on Trade and Development, we are creating strategies to help developing countries leverage their assets and improve digital capabilities. One initiative, “eTrade for all,” is aimed at making it easier for developing countries to source financial and technical assistance. Since the program’s inception two years ago, nearly 30 global partners have been recruited, and an online platform has linked governments with organizations and donors to share resources, expertise, and knowledge.

The G20 is also planting its flag on this issue; in August, I joined G20 ministers in Argentina to discuss what can be done to spread the benefits of the digital transformation. Needless to say, the meeting could not have come at a better time.

Still, while programs and summits can offer the world’s developing and least-developed countries a place to start in their push for greater connectivity, more support is needed if we are ever to close the digital divide. With billions of people still below the first rung of the digital ladder, the climb to prosperity is becoming more challenging than ever.

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