Covid-19 News

During the COVID-19 pandemic, digital technologies have helped to mitigate some of its negative effects, to combat the virus and ensure the continuity of many economic activities. Lockdowns and other preventive measures that Governments have put in place to curb the spread of the virus have disrupted economic activity in ways for which societies were often unprepared. Amid the slowing economic activity, the pandemic led to a surge in e-commerce and accelerated digital transformation. While this transformation was already taking place, COVID-19 served as a catalyzer of digitalization.[1]

But countries are unevenly prepared for “going digital”. Due to persistent divides in infrastructural, technological and human capabilities, the accelerated shift towards greater reliance on digital solutions has in some respects resulted in wider rather than more narrow divides and inequalities. This is of particular concern to the least developed countries (LDCs).

There are multiple digital divides that need to be overcome. According to the International Telecommunication Union, about 27 per cent of people in LDCs used the Internet in 2021, compared with 90 per cent in developed countries. [2] And where connectivity exists in the LDCs, it is typically offered at relatively low bandwidth and with a relatively high price tag attached. For example, the average mobile broadband speed is about 3 times higher in developed countries than in the LDCs. And while more than 80 per cent of Internet users in Europe shop online, in many LDCs, fewer than 10 per cent do so.[3]

Recently released data from the World Bank’s Global Findex database sheds light on the extent to which LDCs have adopted e-commerce in the past few years (figure 1). For the 18 LDCs for which data exist, the picture varies. By far the largest increase in the share of adults who shopped online using a mobile or the internet between 2017 and 2021 was observed in Myanmar, where it surged from 3% to 20%. Other countries with significant increases include Senegal, Liberia, Uganda and Lao PDR. But for most of the countries, increases were limited and in some cases, the share even declined (South Sudan, Togo and Zambia).

In the area of trade, although global ICT goods trade has grown significantly during the pandemic, the LDCs as a group saw their exports and imports of such goods fall sharply. Similarly, the increase of the share of digitally deliverable services in total services exports was considerably smaller in LDCs than in more advanced economies.[4] In other words, LDCs in general have fallen further behind during the pandemic, raising the risk of widening inequalities. So, doubling the share of LDCs in world trade – as stipulated in Sustainable Development Goal target 17.11 – is likely to be even more difficult unless the ability of countries to participate in and benefit from digital trade is strengthened.

Source: World Bank Global Findex Database

 

A multi-faceted challenge

To create more opportunities for LDCs to take advantage of the fast-evolving digital opportunities, it is essential to look beyond the connectivity aspect. Most LDCs lack sufficient financial, technical and other resources to capture value from digitalization. While significant advances in law adoption have been made since 2015 in many LDCs, the share of LDCs with relevant laws in data and privacy protection and consumer protection is still low (48 and 41 per cent, respectively).[5] In addition, the pandemic’s negative impact on economic growth has also strained public funds that might be available for developing capacities needed in multiple areas.

Coping with digitalization is particularly difficult for governments as the issues involved are cross-cutting in nature and thereby touch upon multiple government ministries. The speed at which technologies are evolving adds a further challenge for policy makers as they often find it hard to determine the most appropriate policy responses. In order to manage the risks and seize the opportunities associated with digitalization, including e-commerce, there is a need for a whole-of-government approach.

Many LDCs can benefit from international financial and technical support in this area. More resources are badly called for to help countries meet increasing financing needs at a time when fiscal space is shrinking and debt burdens are growing in many countries, making the mobilization of domestic resources even more difficult. Current financial support from the international community is far from enough, as shown in recent Aid for Trade commitments. UNCTAD calculations, based on OECD data, show that the share of Aid for Trade resources allocated to the ICT sector increased from 1.2 per cent in 2017 to 2.7 per cent in 2019 and remained unchanged in 2020. In absolute terms, the resources allocated to the ICT area rose by $300 million that year.[6]

 

Assessing and enhancing eTrade readiness

The scale and complexity of this challenge require new forms of international collaboration. At the United Nations Conference on Trade and Development (UNCTAD), we have identified two main problems to address. The first concerns the limited readiness of many developing countries to engage in and benefit from e-commerce and the digital economy. The second relates to insufficient and ineffective support from the international community to address issues related to the digital economy.

One response to the first problem is UNCTAD’s eTrade Readiness Assessments, launched in 2017. While awareness of the importance of digitalization is growing, many governments are struggling to determine what measures to take first to strengthen a country’s digital readiness. Without a clear understanding of the priorities, it is difficult for a government to indicate the type of support that might be sought from development partners. This has sometimes been mistakenly interpreted as a lack of demand for development assistance in the digital area.

Each eTrade Readiness Assessment reviews the state-of-play of the e-commerce enabling environment in the country and provides specific recommendations on how to address existing weaknesses through concrete actions on the ground.[7]  As of August 2022, a total of 32 such assessments had been completed, 24 of which are LDCs (covering 15 of the LDCs included in figure 1). Support for the implementation of the recommendations contained in the assessments is provided through an Implementation Support Mechanism (ISM).

The extent to which LDC governments are acting upon the recommendations contained in the assessments varies considerably. Our follow-up analysis confirms Cambodia as the top-performer, with an implementation rate of 92 per cent of all recommendations, followed by Bhutan, Senegal and Togo (all standing at 81 per cent). In Cambodia, the Ministry of Commerce recognizes the catalytic role played by the eTrade Readiness Assessment for several government initiatives in support of the e-commerce ecosystem. One recommendation prioritized by the Royal Government of Cambodia was to develop a national E-commerce Strategy. The growing importance of e-commerce in the South-East Asian nation has also prompted the Government to develop a Digital Economy and Society Policy Framework 2021-2035, which sets out a long-term vision to build a vibrant digital economy and society. But as indicated in figure 1, uptake of e-commerce in Cambodia was still limited in 2021.

In following up on the recommendations, each assessment identifies potential partners that could offer technical support if needed. For example, UNCTAD has partnered with several LDCs to develop a national e-commerce strategy (Benin, Myanmar, Rwanda, Solomon Islands), to strengthen the legal and regulatory framework for e-commerce (in ASEAN and EAC), empower women digital entrepreneurs in LDCs (e.g. in Rwanda), and boost the capacity to measure e-commerce and various aspects of the digital economy (e.g. in the Pacific). And if UNCTAD does not have the expertise required, the assessments will point to other partnering organizations that may be in a better position to support them. Many of them are members of the eTrade for all initiative.

To respond to the second problem mentioned above, UNCTAD in 2016 launched eTrade for all. It is a global initiative of 35 partners (September 2022) that seeks to connect the dots among organizations, donors and beneficiaries to foster more inclusive e-commerce development. By reaching beyond sector-by-sector silos and taking a comprehensive approach to various policy challenges that countries are facing when they develop their e-commerce ecosystems, the initiative seeks to facilitate more inclusive development outcomes. Its online platformOpens a new window serves as a single gateway to organizations offering technical assistance and capacity building related to e-commerce in English, French and Spanish, and allows potential beneficiaries to connect directly with any offering partner.

 

More is needed

As countries gradually and unevenly emerge from the pandemic, a return to business as usual is no longer an option. Work, education, entertainment and communications are likely to be more dependent on digital technologies than before. This accentuates the need for public policies that can maximize opportunities and address challenges and concerns related to digitalization, including policies and regulations that ensure that the digital economy works for the benefit of people and the planet.

In this context, there will be a need for more rather than less coordination and collaboration. The eTrade for all initiative, with its focus on information sharing to leverage the strengths of different actors, has enhanced mutual understanding of what each partner is doing and where there are opportunities for synergies.

Given the urgency to bridge the gaps in digital capabilities and the insufficient levels of development assistance, development organizations (including the Technology Bank) and bilateral donors, will need to develop new and innovative ways of working together. It takes time to develop and implement solutions for improving legal and regulatory frameworks to enhance trust online, building skills for the digital economy, strengthening women’s digital entrepreneurship and facilitating digital financial inclusion.

 

 

[1] See e.g. https://unctad.org/system/files/official-document/tdb_ede5d2_en.pdfPDFOpens a new window

[2] See e.g. https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspxOpens a new window

[3] See https://unctad.org/webflyer/digital-economy-report-2021Opens a new window

[4] UNCTAD (2021). Impacts of the COVID-19 Pandemic on trade in the digital economy. UNCTAD Technical Notes on ICT for Development No. 19. https://unctad.org/system/files/official-document/tn_unctad_ict4d19_en.pdfPDFOpens a new window

[5] https://unctad.org/system/files/official-document/dtlstict2022d1_en.pdfPDFOpens a new window

[6] See https://unctad.org/system/files/official-document/dtlstictinf2022d2_en.pdfPDFOpens a new window

[7] For more information, see https://unctad.org/topic/ecommerce-and-digital-economy/etrade-readiness-assessments-of-LDCs

Advanced digitalization is becoming one of the key drivers of industrial resilience and competitiveness.

 

The economic impact of COVID-19 on manufacturing industries around the world is now well-documented. Global manufacturing output fell by 11.4 per cent during the second quarter of 2020, compared to the same quarter of 2019, and only returned to growth by the end of the fourth quarter of 20201

Data collected on approximately 4,000 firms in 26 developing countries show that, on average, annual profits declined by 27 per cent between 2019 and 2020; that monthly sales fell by 17 per cent between 2020 and 2021, and that around 16 per cent of jobs have been laid-off since the start of the pandemic (see figure below). These averages, however, mask strong heterogeneities across firm sizes, with small and medium-sized enterprises (SMEs) suffering more than larger firms, though significant diversity is also observable within each group and across regions.


The impact of COVID-19 on manufacturing firms’ profits, sales and jobs

Note: SMEs have up to 99 employees. Large firms have 100 or more employees. Profits = change in yearly profits in 2020 compared to 2019; Sales = change in monthly sales the month before the survey with respect to the same month one year before; Jobs = total laid-off workers at the time of the survey over the total number of workers in December 2019.
Source: Authors elaboration based on UNIDO COVID-19 firm-level survey

Explaining this heterogeneity is important as it can point to resilience factors and inform preparedness strategies for future shocks. An analysis of the survey results suggests that country- and industry-specific factors—including the stringency of governments’ containment measures, the fiscal space to implement support policies and the labour intensity of industry—played a role in firms’ robustness. At the firm level, characteristics such as size, liquidity, skills, export orientation and digitalization were all important factors.2

It is important to explain this heterogeneity as it can point to resilience factors and inform preparedness strategies for future shocks.

Crucially, those few firms that do use ADP technologies tended to be less impacted by COVID-19 than others in the same size class.

Of these, digitalization–specifically, the use of advanced digital production (ADP) technologies–is of particular relevance as it has the capacity to support resilience along two dimensions: (i) by helping firms absorb shocks (robustness) and (ii) by helping firms react and respond to shocks (readiness). ADP technologies associated with the Fourth Industrial Revolution (4IR) are not yet widespread in most developing countries (see figure below), with less than 16 per cent average penetration in each of the three regions surveyed. Rather, most firms use either analogue or outdated digital technologies.


The use of digital technology by manufacturing firms around the world

Note: Analogue/simple mechanization (or rigid production) refers to manual production and/or basic electronic stand-alone machinery with no or only specific use of basic digital technologies (e.g. Internet for emails). Automation (or lean production) refers to automated production with the use of some isolated digital technologies (e.g. design software for product development and manufacturing). Digitally advanced (or smart production) technologies entail the use of interconnected and Internet-based digital production technologies associated with the 4IR.
Source: Authors elaboration based on UNIDO COVID-19 firm-level survey

Crucially, the few firms that do use ADP technologies tended to be less impacted by COVID-19 than others in the same size class (see figure below). In other words, digitalization seems to have supported firms’ robustness to the shock.


Digitally advanced firms were more robust in absorbing the COVID-19 shock

Firms are dynamic entities that respond to changing circumstances by adjusting their strategies and reoptimizing new incentives and limitations. Following the outbreak of COVID-19, some manufacturing firms identified and adjusted one or more aspects of their activities, as illustrated in the figure below, to cope with the changed scenario and adapt to the “new normal” following the pandemic.


Responding to the crisis: Transformational changes as a response strategy

Source: Calza et al (2021).

Here again, digitalization supports transformation by, for example, facilitating the shift to remote work, where possible, and otherwise allowing for more flexible reorganization of production processes to accommodate safety measures and social distancing (see figure below).


Effect of digitalization on the implementation of response strategies

Calza et al (2021).

This hypothesis is supported by the survey data, which indicate that digitally advanced firms consistently introduced more changes across all business strategies than their peers (see figure below).


Changes introduced by manufacturing firms to face the crisis

Created with Datawrapper
Note: The x-axis shows the share of firms. Digitally advanced firms = firms adopting ADP technologies.
Source: Authors elaboration based on UNIDO COVID-19 firm-level survey

The pivotal role of digitalization is confirmed by an econometric analysis, which controls for other factors such as firm size, ownership, innovation and production capabilities, participation in global supply chains and export orientation3. Not only did digitally advanced firms suffer less, on average, during the crisis; they were also more likely to react to the crisis by introducing transformational changes in their operations. Advanced digitalization has therefore become one of the key drivers of industrial resilience as well as competitiveness.

Advanced digitalization is therefore becoming one of the key drivers of industrial resilience, as well as competitiveness.

The diffusion of ADP technologies in manufacturing firms in developing countries, however, is still limited to a few cutting-edge firms that are typically large and well-integrated in global production networks. The vast majority of firms instead operate very far from the technological frontier, using outdated digital technologies or no digital technologies at all. This digital gap needs to be filled if industrializing countries are to succeed in the contemporary economic landscape and weather the inevitable shocks of the future.

This blog entry is part of a series that highlights insights from research for development policies and practices, supported by the Knowledge for Change Program (KCP).

A critical principle that the KCP program tries to promote is that the independent scrutiny of research can strengthen the empirical foundations for policymaking and reduce the emulation of “best” practices that deal with short-term vulnerabilities and challenges. While it is difficult to strike a balance between resilience and agility in policy responses during a crisis, one needs to take an evidence-based approach to constantly assess the impacts of certain policies.  

In this blog, we highlight two projects that leveraged data-driven policymaking processes and simulations, and asked the following questions:

  1. Face masks are a widely promoted, non-pharmaceutical intervention broadly asserted to curb the spread of COVID-19. Is there systematic evidence in any country that demonstrates that increases in the supply of masks have actually slowed the spread of COVID-19? 
  2. The COVID-19 pandemic threw a devastating blow at the private sector. What would be the simulated effects on firms’ profits, payrolls, exit rates and governments’ tax revenues?  

Informing Evidence-Based Policy Making for Improved Public Health Outcomes through Digitization
As part of a joint effort with government authorities, this research project supported by the KCP, used novel administrative receipt data in Rwanda to produce rigorous impact evaluation evidence for policy decisions. It is the first analysis of its kind in Sub-Sahara Africa, which is comparable to existing work in the United States.

When the pandemic started in Rwanda, the Government licensed and incentivized textile manufacturers to produce certifiably high-quality masks to slow the spread of COVID-19. The study of product level exemptions using transaction data is enabled by the proliferous use of Electronic Billing Machines (EBMs), introduced in Rwanda in 2013. EBMs aim to reduce VAT evasion and accounting costs, strengthen accountability and transparency, elevate government capacity, and accelerate the formalization of the economy. The research team worked with the Rwanda Revenue Authority (RRA) to analyze this novel set of data to study the effectiveness of increasing the supply of high-quality masks in slowing the spread of COVID-19 in Rwanda.

Overall, the research demonstrated that increased access to formally manufactured masks slowed the spread of COVID-19 in the early stages of the pandemic
More specifically, the researchers used administrative data from the RRA, including EBM receipts, customs, and firm registration, complemented with census data, to study the impact of incentivizing high-quality mask production in Rwanda. Digitally signed and time-stamped EBM receipts collected by the tax authority allowed the researchers to track product-level sales between firms and final consumers.

Licensing domestic mask manufacturers conservatively reduced mask prices by 8.8 percent and reduced monthly growth in COVID-19 infections (proxied by demand for anti-fever medicine) by 12 percent. The dynamics of the results suggest that increased mask quality explained reduced infections, in a context where there was strict enforcement of mask mandates and informal markets for masks. The analysis suggests that licensing and associated incentives generated social benefits at least 5 times as large as their cost.

Strengthening data-driven policy making by generating simulated effects of lockdowns on firms and public finances
In the early days of the pandemic, governments struggled with two challenges: 1) what would be the effects of government-imposed restrictions on firms, and 2) how would various support measures help firms cope during the pandemic and alleviate the negative impacts? Using a novel set of administrative corporate tax records from 10 low-and middle-income countries, this KCP project analyzed the direct effects of the lockdowns on firms’ profits, payrolls, and exit rates, along with their implications for tax revenues and government support policies. Three key findings revealed by the project:

  1. Less than half of all firms would remain profitable by the end of 2020, about 5-10% of the aggregate annual payroll would be lost, and the rate of firm exits would on average double.
  2. While wage subsidies were a widely discussed policy tool to mitigate formal employment losses, wage subsidies would largely be inefficient for countries in Sub-Saharan Africa and would be useful to protect employment only in moderately impacted sectors in middle-income countries.
  3. On average across countries, even an optimistic scenario (lower-bound predictions) would suggest that only half of all firms would remain profitable, tax revenues remitted by corporations would fall by 1.5% of GDP, and aggregate corporate losses would increase by 2.9% of GDP.

Each country’s situation is different, so country-specific requests were included to generate customized policy notes for AlbaniaCosta RicaEcuadorEswatiniEthiopiaGuatemalaMontenegroRwandaSenegal and Uganda. In Albania for example, the team estimated the effect of changing the size threshold that determines the corporate income tax bracket. In Ecuador, the government requested a training on using administrative data to perform further simulations. To provide more insightful analysis, the team is currently updating the data to compare their predictions with realized data.

The two projects provided rigorous evidence on the actual or simulated effects of familiar policy tools during a crisis, such as mask requirements and wage subsidies. Findings and recommendations from this research are being utilized by governments and form the foundation of evidence-based policy making. To establish to what extent these simulations were accurate, the project is updating the data to compare their predictions with the realized data.

The authors would like to acknowledge contributions from the following projects under the guidance of task team leads (TTLs) and researchers: Recording Small Receipts: Digital Technology Adoption at the Margin of Formalization (TTL: Astrid Maria Theresia Zwager/Florence Kondylis); Cross-Country Firm Dataset Built from Administrative Tax Return Data (TTL: Pierre Bachas)

The Covid-19 pandemic continues to hit hard the countries of the United Nations Special Programme for the Economies of Central Asia (SPECA) and highlights the need to diversify from current, resource-dependent models of economic development. This will mean putting ‘innovation and technology that focus on green and digital transformation’ at the centre of their recovery processes.

To achieve sustainable, innovation-led economic development requires the broad and systematic experimentation with innovative ideas across the economy, together with Government policies that play a catalyzing role. Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan have committed to stepping-up their efforts to enhance national innovation policies as well as regional cooperation and integration on innovation and technology under the “SPECA Innovation Strategy for Sustainable Development” (adopted in 2019) and the “Asia-Pacific Information Superhighway Action Plan 2022-2026”.

During 19 – 20 July 2022, the SPECA government representatives as well as experts and private sector representatives, gathered to take stock of the progress made on these commitments and discussed the way forward, at the Expert Group Meeting on Innovation and Technology for Sustainable Development, organized by ESCAP and UNECE in Almaty, Kazakhstan and online.

In follow-up to the outcome of the Expert Group Meeting, the third session of the SPECA Working Group on Innovation and Technology for Sustainable Development, held in Almaty and online on 20 July 2022, which was attended by the SPECA member countries, adopted a set of important decisions in the area of innovation and digitalization, such as: confirmation of their support to the implementation of the “Asia Pacific Information Superhighway Action Plan 2022-2026”, and the proposed establishment of a Digital Solutions Center for Sustainable Development in Kazakhstan to promote digital cooperation and integration in the sub-region.

In addition, the Working Group welcomed the launch of a pilot SPECA Network of Business Incubators and Accelerators for Sustainable Development, based on UNECE work on business incubators. In this connection, the Working Group expressed its support to the innovative high-growth firms in the sub-region, and the recent “Innovation for Sustainable Development Review” of Uzbekistan. Participants from the SPECA countries expressed their strong interest in engaging with this Network to enhance support to their innovative entrepreneurship.

UNECE and ESCAP have been providing extensive capacity-building and policy advisory support to SPECA and continue to support their progress towards the Sustainable Development Goals through ‘innovation and technology’ as one of the key drivers towards their structural economic and social transformations.

This session presented the main findings of the ADB report on Aid for Trade in Asia and the Pacific 2022, which examined how trade and Aid for Trade can support developing Asia in meeting their sustainable development goals through the lens of regional cooperation. The report presents the Aid for Trade landscape in Asia, recent development in trade indicators and discusses the impact of the COVID-19 pandemic and associated trade policy measures. It also explores the potential of trade and digital agreements to support a resilient, inclusive and sustainable development, with a special focus on the most vulnerable economies. It discussed Aid for Trade beyond “hard infrastructure” investments to show that more Aid for Trade focus should be placed on “soft infrastructure” at both, improving the capacity of developing countries to participate in, design and implement of trade and digital agreements. It also highlighted the need for a reform of the Aid-for-Trade Initiative to reflect the new trade challenges and evolving environment, promoting regional assistance and economic spillovers.

The session focused on the need for use of trade and digital agreements for sustainable development. The session saw the release of the Asian Development Bank’s 2022 report on Aid for Trade in Asia and the Pacific—Leveraging Trade and Digital Agreements for Sustainable Development. A presentation was also made highlighting the issues covered in the report.

Panellists stated that in an era which is seeing a weakness in the international trading system, focus on aid for trade (AfT) is needed. This can help build and enhance Low-and-Middle-Income Countries’ (LMICs) participation in the global economy by integrating them into the international market. The Covid-19 pandemic has increased inequalities and further increased the requirement to build back better by enhancing trade. Inclusivity of women, young people, MSME etc., who have been disproportionality affected from pandemic should become a priority.

After the pandemic, there has been a rise in regional agreement as opposed to multi-lateral agreements. In this scenario, how new trade agreements relate to the already existing multi-regional needs to be evaluated. Since new agreements do not super succeed existing ones, whether regulatory convergence and coherence is promoted or not with such new agreements needs to be evaluated through an evidence-based approach. Further, whether these agreements get used by the private sector or whether they are just signed and not used also needs to be evaluated. Monitoring the effectiveness of an agreement can be done by assessing utilisation rates. Low utilisation rates suggest that a preference scheme is not working. Further, high utilisation may not always be a positive sign. However, utilisation rates are important as they are key to increasing transparency.

Panellists also highlighted that not all AfT programs in the nature of capacity building have equal success. However, successful programs have a few things in common. All such programs are demand driven and based on custom. They are a response to immediate requirement and ownership is the key ingredient. These programs have forward looking effort and involve private sector and civil society. Further, they also have a strong donor coordination. Adopting such measures can lead to developing synergies so that comparative advantage of each stakeholder can be exploited.

Panellists opined that the digital economy is key to enhancing global trade. Pandemic has increased digitalisation and most of the new generation Free Trade Agreements (FTAs) are focusing on digital economy. Digital Economic Partnership Agreement (DEPA) signed between Chile, New Zealand and Singapore is a good example. It has been based on factors like end-to-end facilitation of trade, Trust, innovation, and inclusion. Further, there are soft norms included such as focus on interoperability and coherence. New issues can be added and new members can join.

However, only 0.4% of total AfT is utilised for digital transformation. Thus, there is a need to refocus and modernise AfT. AfT can help in the following way for digital transformation. Digital agreements are happening between developed countries and developing countries missing from the table. Rules for trade are being developed right now and developing countries have to join in co-designing the rules. For this purpose, developing countries need to have a good policy framework such as a National Digital Strategy and further regulatory building blocks should be in place which include frameworks for data protection, cyber security, competition policy for digital economy, digital transactions, and consumer protection, among others. Policy makers need to know how to regulate the digital economy and its aspects like artificial intelligence, digital identity, etc. Here, civil society and businesses need to be brought on the table. Developed countries can open opportunities for engagement and collaboration for developing countries.

On the panel were Albert Park, Chief Economist and Director General, Economic Research and Regional Cooperation, Asian Development Bank; Amy Stuart, Counsellor (Services and Investment), Australian Permanent Mission to the WTO in Geneva; Jong Woo Kang, Principal Economist, Economic Research and Regional Cooperation Department, Asian Development Bank; Francesco Abate, Adjunct Professor, Turin University; Pramila Crivelli, Economist, ERCI, AsDB; Andrea Giacomelli, Aid-for-Trade and Trade Policy Advisor, Permanent Delegation of the Pacific Islands Forum to the United Nations, World Trade Organization, and Other International Organizations in Geneva; Stephanie Honey, Co founder, Global Trade Insights; Roy Lagolago, Head of the PACER Plus Implementation Unit, (PPIU); Shawn Tan, Senior Economist, ERCI, AsDB.

Expanding people’s access to finance, reducing the cost of digital transactions, and channeling wage payments and social transfers through financial accounts will be vital to mitigating recent economic setbacks in developing countries. Governments and the private sector can help further this transformation in several ways.”

Around the world, high inflation, slow economic growth, and food shortages are hurting the poor the most. Coming on top of the unequal effects of the COVID-19 pandemic, today’s multiple crises have already caused dramatic reversals in development and led to a substantial increase in global poverty.

On the positive side, the COVID-19 crisis spurred unprecedented change, especially in industries with a large digital component This digital revolution has catalyzed increases in access to and use of financial services in developing economies, transforming how people make and receive payments, borrow, and save. 

These changes are strikingly evident in the latest edition of the Global Findex database, compiled from a survey of more than 125,000 adults in 123 economies, covering use of financial services throughout 2021. The survey found that 71% of adults in developing economies now have a formal financial account – whether with a bank, another regulated institution such as a credit union or microfinance lender, or a mobile money service provider – compared to 42% when the first edition of the database was published a decade ago. In addition, the difference in the share of men and women in developing economies who own an account has fallen for the first time, from nine percentage points to six. 

This digital transformation makes it easier, cheaper, and safer for people to receive wages from employers, send remittances to family members, and pay for goods and services. Mobile money accounts can better handle high-volume, small-denomination transactions, which help users to access financial services and save in order to cope better with crises. Individual accounts also give women more privacy, security, and control over their money.

The share of adults in developing economies who make or receive digital payments grew from 35% in 2014 to 57% in 2021 . In Sub-Saharan Africa, 39% of mobile money account holders now use their accounts to save. And more than one-third of people in low- and middle-income countries who paid a utility bill from an account did so for the first time after the start of the COVID-19 pandemic.

Importantly, the digital revolution also serves as a powerful anti-corruption tool, because it helps to increase transparency as money flows from a government’s budget to public agencies to citizens . Government social programs can now reduce delays and leakage by channeling transfers directly to their beneficiaries’ mobile phones. Millions of people in developing countries received payments in this way during the pandemic, helping to cushion the impact of COVID-19 on livelihoods.

Building on these encouraging trends is crucial, especially given the current economic headwinds. Expanding people’s access to finance, reducing the cost of digital transactions, and channeling wage payments and social transfers through financial accounts will be vital to mitigating development setbacks resulting from the ongoing turbulence.

Governments and the private sector can help further this transformation in several critical areas. First, they need to create a favorable operating and policy environment. For example, enabling the interoperability of systems allows for payments across different types of financial institutions and between mobile money service providers. Improving access to finance depends much more on the mobile-phone system than on the physical banking system. Cheap and functional mobile phones and affordable internet access are prerequisites for expanding digital finance. Consumer protections and stable regulations are also needed to foster safe and fair practices that bolster trust in the financial system.

Establishing digital-identification systems also is essential, because lack of verifiable identity is one of the main reasons why some adults remain excluded from financial services . We know from the experiences of countries such as India and the Philippines that government identification programs and financial-inclusion programs can work in tandem to equip hard-to-reach populations with official identification documents and financial accounts. India, for example, has pioneered a successful accessible digital ID system that pays due attention to safety and privacy.

Another high priority should be to promote the digitalization of payments. The Global Findex data for 2021 show that 865 million account owners in developing economies opened their first account at a bank or similar institution in order to receive money from the government. This helped households directly and also helped build the digital financial ecosystem, because people who received payments into an account were more likely to use their account to make payments and access other services. Digital payments by governments thus serve as a foundation for assembling credible social registers and identifying gaps and overlaps.

As digital payments become more widespread and less costly, many private businesses will be able to pay their workers and suppliers electronically – and should. The digital revolution offers a chance to increase formal-sector employment without making compliance excessively burdensome. At a time of tighter government budget constraints, digital payments can help broaden the revenue base by reducing tax avoidance and evasion.

Finally, policymakers will need to make additional efforts to include underserved groups. The gender gap in financial access has narrowed, but it still exists. Women, along with the poor, are more likely to lack a form of personal identification or a mobile phone, to live far from a bank branch , and to need support to open and use a financial account. Financial-education programs, especially those that involve peer-to-peer learning (such as through women’s self-help groups) are essential as well.

The World Bank is firmly committed to expanding financial inclusion through digitalization. We will continue to support countries as they enhance mobile-phone networks, rework regulations to foster access to finance, adopt e-government platforms, and modernize social-protection systems. For the many millions of people who still lack an account, we need to redouble our efforts and find creative ways to connect them to the financial system, build economic resilience, and reap the benefits of inclusion.


This piece was originally published by Project Syndicate on July 7, 2022

Three quarters of adults now have a bank or mobile money account; gender gap in account ownership narrows

The COVID-19 pandemic has spurred financial inclusion – driving a large increase in digital payments amid the global expansion of formal financial services. This expansion created new economic opportunities, narrowing the gender gap in account ownership, and building resilience at the household level to better manage financial shocks, according to the Global Findex 2021 database.

As of 2021, 76% of adults globally now have an account at a bank, other financial institution, or with a mobile money provider, up from 68% in 2017 and 51% in 2011. Importantly, growth in account ownership was evenly distributed across many more countries. While in previous Findex surveys over the last decade much of the growth was concentrated in India and China, this year’s survey found that the percentage of account ownership increased by double digits in 34 countries since 2017.

The pandemic has also led to an increased use of digital payments. In low and middle-income economies (excluding China), over 40% of adults who made merchant in-store or online payments using a card, phone, or the internet did so for the first time since the start of the pandemic. The same was true for more than a third of adults in all low- and middle-income economies who paid a utility bill directly from a formal account.  In India, more than 80 million adults made their first digital merchant payment after the start of the pandemic, while in China over 100 million adults did.

Two-thirds of adults worldwide now make or receive a digital payment, with the share in developing economies grew from 35% in 2014 to 57% in 2021. In developing economies, 71% have an account at a bank, other financial institution, or with a mobile money provider, up from 63% in 2017 and 42% in 2011. Mobile money accounts drove a huge increase in financial inclusion in Sub-Saharan Africa.

“The digital revolution has catalyzed increases in the access and use of financial services across the world, transforming ways in which people make and receive payments, borrow, and save,” said World Bank Group President David Malpass“Creating an enabling policy environment, promoting the digitalization of payments, and further broadening access to formal accounts and financial services among women and the poor are some of the policy priorities to mitigate the reversals in development from the ongoing overlapping crises.”

For the first time since the Global Findex database was started in 2011, the survey found that the gender gap in account ownership has narrowed, helping women have more privacy, security, and control over their money. The gap narrowed from 7 to 4 percentage points globally and from 9 to 6 percentage points in low- and middle-income countries, since the last survey round in 2017.

About 36% of adults in developing economies now receive a wage or government payment, a payment for the sale of agricultural products, or a domestic remittance payment into an account. The data suggests that receiving a payment into an account instead of cash can kickstart people’s use of the formal financial system – when people receive digital payments, 83% used their accounts to also make digital payments. Almost two-thirds used their account for cash management, while about 40% used it to save – further growing the financial ecosystem.

Despite the advances, many adults around the world still lack a reliable source of emergency money. Only about half of adults in low- and middle-income economies said they could access extra money during an emergency with little or no difficulty, and they commonly turn to unreliable sources of finance, including family and friends.

“The world has a crucial opportunity to build a more inclusive and resilient economy and provide a gateway to prosperity for billions of people,” said Bill Gates, co-chair of the Bill and Melinda Gates Foundation, one of the supporters of the Global Findex database. “By investing in digital public infrastructure and technologies for payment and ID systems and updating regulations to foster innovation and protect consumers, governments can build on the progress reported in the Findex and expand access to financial services for all who need them.”

In Sub-Saharan Africa, for example, the lack of an identity document remains an important barrier holding back mobile money account ownership for 30% of adults with no account suggesting an opportunity for investing in accessible and trusted identification systems. Over 80 million adults with no account still receive government payments in cash – digitalizing some of these payments could be cheaper and reduce corruption. Increasing account ownership and usage will require trust in financial service providers, confidence to use financial products, tailored product design, and a strong and enforced consumer protection framework.

The Global Findex database, which surveyed how people in 123 economies use financial services throughout 2021, is produced by the World Bank every three years in collaboration with Gallup, Inc.

Regional Overviews: 

Global Findex 2021 Regional Overviews

EAP

In East Asia and the Pacific, financial inclusion is a two-part story of what is happening in China versus the other economies of the region. In China, 89% of adults have an account, and 82% of adults used it to make digital merchant payments. In the rest of the region, 59% of adults have an account and 23% of adults made digital merchant payments—54% of which did so for the first time after the beginning of the COVID-19 pandemic. Double-digit increases in account ownership were achieved in Cambodia, Myanmar, the Philippines, and Thailand, while the gender gap across the region remains low, at 3 percentage points, but the gap between poor and rich adults is 10 percentage points.

ECA

In Europe and Central Asia, account ownership increased by 13 percentage points since 2017 to reach 78% of adults. Digital payments usage is robust, as about three-quarters of adults used an account to make or receive a digital payment. COVID-19 drove further usage for the 10% of adults who made a digital merchant payment for the first time during the pandemic. Digital technology could further increase account use for the 80 million banked adults that continued to make merchant payments only in cash, including 20 million banked adults in Russia and 19 million banked adults in Türkiye, the region’s two largest economies.

LAC

Latin America and the Caribbean saw an 18 percentage -point increase in account ownership since 2017, the largest of any developing world region, resulting in 73% of adults having an account. Digital payments play a key role, as 40% of adults paid a merchant digitally, including 14% of adults who did so for the first time during the pandemic. COVID-19 furthermore drove digital adoption for the 15% of adults who made their first utility bill payment directly from their account for the first time during the pandemic—more than twice the developing country average. Opportunities for even greater use of digital payments remain given that 150 million banked adults made merchant payments only in cash, including more than 50 million banked adults in Brazil and 16 million banked adults in Colombia.

MENA

The Middle East and North Africa region has made progress reducing the gender gap in account ownership from 17 percentage points in 2017 to 13 percentage points—42% of women now have an account compared to 54% of men. Opportunities abound to increase account ownership broadly by digitalizing payments currently made in cash, including payments for agricultural products and private sector wages (about 20 million adults with no account in the region received private sector wages in cash, including 10 million in the Arab Republic of Egypt). Shifting people to formal modes of savings is another opportunity given that about 14 million adults with no account in region—including 7 million women—saved using semiformal methods.

SA

In South Asia, 68% of adults have an account, a share that has not changed since 2017, though there is wide variation across the region. In India and Sri Lanka, for example, 78% and 89% of adults, respectively, have an account. Account usage has grown, however, driven by digital payments, as 34% of adults used their account to make or receive a payment, up from 28% in 2017. Digital payments present an opportunity to increase both account ownership and usage, given the continued dominance of cash—even among account owners—to make merchant payments.

SSA

In Sub-Saharan Africa, mobile money adoption continued to rise, such that 33% of adults now have a mobile money account—a share three times larger than the 10% global average. Although mobile money services were originally designed to allow people to send remittances to friends and family living elsewhere within the country, adoption and usage have spread beyond those origins, such that 3-out-of-4 mobile account owners in 2021 made or received at least one payment that was not person-to-person and 15% of adults used their mobile money account to save. Opportunities to increase account ownership in the region include digitalizing cash payments for the 65 million adults with no account receiving payments for agricultural products, and expanding mobile phone ownership, as lack of a phone is cited as a barrier to mobile money account adoption. Adults in the region worry more about paying school fees than adults in other regions, suggesting opportunities for policy or products to enable education-oriented savings.

The country’s support has helped build knowledge, capacity and consensus on how to harness the digital economy for development.

Sweden has committed 10 million Swedish krona (approximately $1 million) for research, technical cooperation, and consensus-building activities under UNCTAD’s e-commerce and digital economy programme  in 2022 and 2023.

The contribution will boost UNCTAD’s capacity to support member states in building inclusive digital economies – a shared challenge made more urgent by the COVID-19 pandemic and growing digital and data divides.

“The digital transformation opens great opportunities for inclusive growth, jobs and sustainable development around the world,” said Krister Nilsson, state secretary to the Swedish minister for foreign trade and Nordic affairs.

“The post-pandemic recovery must include support for the participation of developing countries in the digital economy,” he added.

Making digitalization work for all

Supporting countries with the lowest levels of readiness to take advantage of the opportunities and mitigate the risks presented by digitalization helps make digitalization a force for a more resilient, equitable and sustainable world.

“We are proud to welcome Sweden among the core donors of the e-commerce and digital economy programme,” said Shamika N. Sirimanne, director of UNCTAD’s division on technology and logistics.

She also noted that Sweden’s accession to the programme’s advisory board of core donors follows member states’ decision to strengthen UNCTAD’s mandate to support developing countries in digitalization.

Ms. Sirimanne said this is a welcome recognition of the results of UNCTAD’s work in this area, which were highlighted by a recent independent evaluation.

The evaluation, covering 2019 to 2021, found that activities undertaken under the programme’s technical cooperation pillar, particularly the eTrade readiness assessments, help to boost the e-commerce and digital economy agenda within beneficiary countries.

Partnerships for development

Such partnerships and stakeholder engagement initiatives contribute to a more holistic and collaborative approach to e-commerce and the digital economy for development.

A long-standing partner of the programme, Sweden’s generous support to date has made possible a number of initiatives under the programme, including work on measuring e-commerce and the digital economyeTrade for alleTrade for Women and eTrade readiness assessments.

The advisory board, which also includes Germany, the Netherlands and Switzerland, meets once a year after the release of the programme’s Year in Review.

It allows members to share experiences and lessons learned from supporting digitalization for development efforts and outline priorities for future support.

The pandemic’s impact on digital transformations and how e-commerce and associated digital technologies can contribute to the recovery are in focus during the UNCTAD eCommerce Week 2022 from 25 to 29 April.

New UNCTAD figures show that the significant uptick in consumer e-commerce activity fuelled by the COVID-19 pandemic was sustained in 2021, with online sales increasing markedly in value, despite the easing of restrictions in many countries.

The average share of internet users who made purchases online increased from 53% before the pandemic (2019) to 60% following the onset of the pandemic (2020/21), across 66 countries with statistics available.

But the situation prior to the pandemic and the extent of the boost to online shopping experienced vary between countries. Many developed countries already had relatively high levels of online shopping (above 50% of internet users) before the pandemic while most developing countries had a lower uptake of consumer e-commerce (Figure 1).

Figure 1. Online shopping before and during the COVID-19 pandemic
Percentage of Internet users who made purchases online, 2019 (x-axis) and 2020/21 (y-axis)

Source: UNCTAD based Eurostat Digital Economy and Society Statistics database, OECD ICT Access and Usage by Households and Individuals database, ITU World Telecommunication/ICT Indicators database), Argentina CACE, Australia Post, China Network Information Center, DANE Colombia, IMDA Singapore.

Notes: For most European/OECD countries, data relate to individuals aged 16-74 years who used the internet/shopped online in the 12 months prior to survey. For other countries, wider age ranges and different recall periods may apply. 2021 figures used when available (y-axis) but for a significant minority of countries (29 of 66 countries presented), and especially for developing countries (17 of 19 countries), the latest data relate to 2020.

Greatest rises in developing countries

The greatest rises occurred in several developing countries. In the United Arab Emirates, the share of internet users who shopped online more than doubled, from 27% in 2019 to 63% in 2020. In Bahrain the share tripled, reaching 45% in 2020, and in Uzbekistan it rose from 4% in 2018 to 11% in 2020.

In Thailand, which already had a relatively high uptake prior to the pandemic, a 16-percentage-point increase meant that for the first time more than half of internet users (56%) shopped online in 2020.

Among developed countries, the greatest increases were seen in Greece (up 18 percentage points), Ireland, Hungary and Romania (each 15 percentage points).

Of the 66 countries covered, online shopping remains the lowest in El Salvador (1% of internet users), Azerbaijan (5%), Uzbekistan (11%) and Colombia (17%).

One reason for such differences is that countries differ greatly in their extent of digitalization and therefore in their ability to turn swiftly to digital technologies to mitigate economic disruption. Least developed countries (LDCs) are especially in need of support to take up e-commerce but are not represented in this analysis due to a lack of data on internet usage.

Online retail sales particularly boosted by the pandemic

Official statistics, available for seven countries that together comprise around half of global GDP (including the United States and China), indicate that online retail sales increased substantially in these countries from around $2 trillion in 2019, immediately prior to the pandemic, to around $2.5 trillion in 2020 (not shown) and $2.9 trillion in 2021 [Figure 2, panel a].  China accounts for over half of the online retail sales across these countries and the United States for a further 30%.

The pre-existing upward trend accelerated in many of these countries [panel b]; especially those where a relatively low share of retail sales take place online. In Singapore, online retail sales in 2021 were approaching triple the 2018 level. Canada and Australia also experienced especially large increases over the same period.

Looking across all these countries, although the disruption and economic uncertainty wrought by the pandemic suppressed overall retail sales into 2020 (only Australia and the United States saw retail sales increase from 2019 to 2020), online retail sales grew strongly as people took to shopping online and as offline sales declined [panel c].

This led to a marked increase in the share of online sales in total retail sales – from 16% in 2019 to 19% in 2020 [panel d]. That level was sustained into 2021 despite offline sales picking up strongly. Online sales comprise a much greater share of total retail sales in China (around a quarter in 2021) than in the United States (around one eighth). As a result of steep increases following the onset of the pandemic, the United Kingdom joined Korea (Rep.) in having the highest overall online retail share in 2021, at 28%.

Figure 2. Online retail sales, seven countries, 2018-2021
Value (US$ billions, current prices), Indices (2018=100) and percentage of retail sales

Online retail sales, seven countries, 2018-2021

Source: UNCTAD based statistics published by Australian Bureau of Statistics, Statistics Canada, China Ministry of Commerce, Kostat, SingStat, the UK Office for National Statistics, and the US Census Bureau.

Notes: There may be some differences in the coverage of retail trade statistics across countries. Indexes calculated based on US$ values in current prices.

The biggest online platforms benefit the most

The 13 top consumer-focused e-commerce businesses increased their revenues sharply during the pandemic [Figure 3].

In 2019, these companies made sales worth $2.4 trillion. Following the onset of the COVID-19 pandemic in 2020, this rose sharply to $2.9 trillion (not shown), and a further one-third increase followed in 2021, taking total sales to $3.9 trillion (in current prices).

The shift towards online shopping has further entrenched the already strong market concentration of online retail and marketplace businesses.

Alibaba, Amazon, JD.com and Pinduoduo increased their revenues by 70% between 2019 and 2021 and their share of total sales through all these 13 platforms rose from around 75% in 2018 and 2019 to over 80% in 2020 and 2021.

Expedia, Booking Holdings and AirBnB saw gross bookings decline by up to two thirds in 2020 as movement controls reduced demand for travel and accommodation services, though growth returned in 2021 as restrictions were eased.

Figure 3. Sales by major consumer-focused e-commerce businesses before and during the pandemic
$ billions, current prices

Sales by major consumer-focused e-commerce businesses

Source: UNCTAD based on company reports. Notes: These figures reflect the gross value of goods and services sold by/through these companies; only a portion of this accrues to the e-commerce business and goes toward profits. These businesses are primarily focussed on sales to consumers. However, businesses and other organisations may also make purchases from them, and these sales may not be excluded. Rakuten refers to “domestic e-commerce” only. 2021 figure for Amazon estimated. 2020 figure for WalMart estimated.

Better statistics are needed

These statistics only provide a partial perspective on the evolution of e-commerce during the pandemic.

There is a pressing need for more inclusive statistics on online retail sales, business-to-consumer and business-to-business e-commerce and cross-border digital trade that can provide insights covering a wider range of countries, especially developing nations.

UNCTAD and its partners are collaborating on establishing the foundations for international statistics that can bring about a better understanding of the links between e-commerce, trade and development and compiling the second edition of the Handbook on Measuring Digital Trade.

As I review the latest activities and results of the International Telecommunication Union (ITU), I am pleased to reflect on what our organization has achieved amid the COVID-19 pandemic.

Successful recent conferences – namely the latest World Telecommunication Standardization Assembly (WTSA) and the sixth World Telecommunication/ICT Policy Forum (WTPF-21) – attest to ITU’s resilience in challenging times.

ICTs for peace

Our world, however, is now also concerned with what is happening in Ukraine. This moment calls for global cooperation. On the opening day of WTSA three weeks ago, I called for all participants to be united in doing their best to stop this war. Unfortunately, it has not come to an end yet.

I am saddened by the loss of civilian life and suffering, including from our own community of telecom experts and engineers. I echo the call of the United Nations Secretary-General António Guterres and my UN counterparts for an immediate peaceful resolution.

I am also concerned by the mounting damage being caused to telecommunication infrastructure, which provides a vital lifeline for people and economies everywhere. I called on the ITU Council to promote information and communication technologies (ICTs) for peace.

Addressing inequalities

In the draft 2024-2027 ITU Strategic Plan, two clear goals have been identified – universal connectivity and sustainable digital transformation. This document comes at a time when 2.9 billion people are still unconnected around the world, most of them living in developing countries.

The COVID-19 pandemic has shown that equitable access to digital technologies is not just a moral responsibility.

It is also about recovery, growth, and sustainability. None of this will be possible if the ability to connect is as profoundly unequal as it is now.

Ongoing adaptation

The challenges of COVID – 19 have helped to prepare us. Despite working largely virtually for two years, we have ensured business continuity and delivered on all our core competencies.

WTPF-21, hosted online from 16 to 18 December 2021, adopted a set of Opinions in areas ranging from inclusive connectivity and digital skills to fostering an effective enabling environment. Apart from confirming how effective ITU can be in holding virtual and hybrid meetings, this timely forum sent a powerful message – one that aligns ICTs and emerging digital technologies with global priorities for sustainable development.

In a welcome signal of normality, WTSA and the associated Global Standards Symposium brought around 1,000 delegates from 120 countries together in Geneva, Switzerland, and was further enhanced by strong remote participation.

These conferences have underlined the fundamental importance of international cooperation – and the need to accelerate digital transformation for all. I hope we keep thinking about how we can best provide equitable opportunities for participation by all administrations going forward.

What’s ahead

This year is important in the plan to refit ITU for a dynamic future, as we prepare to dismantle one of our existing buildings and clear the site for our new, purpose-built sustainable headquarters. What we have learned about teleworking will be key to successfully managing the transition phase. In addition, some ITU Member States have expressed their interest in hosting our meetings during this period, and I encourage others to come forward.

The World Summit on the Information Society (WSIS) Forum 2022 has now started, bringing together wider networks of public and private stakeholders to advance ICT development.

In May, ministerial roundtable sessions will address key WSIS challenges and calls for action. As we mark this year’s World Telecommunication and Information Society Day on 17 May, we will highlight the benefits of digital technologies for older persons and healthy ageing.

The World Telecommunication Development Conference – taking place in Kigali, Rwanda, in June, preceded immediately by the Generation Connect Global Youth Summit – offers an opportunity to re-energize the global development agenda and accelerate progress on the UN Sustainable Development Goals.

Finally, the preparations are well underway for ITU’s upcoming Plenipotentiary Conference (PP-22) in Bucharest, Romania, from 26 September to 14 October.

When the pandemic first hit, we had to act quickly and efficiently – to keep up ITU’s regular engagement and address a succession of pressing issues. It was not always easy, but we forged ahead together.

That is what it means to be part of the ITU family, and it has never been more important. We have learned some important lessons, which will be invaluable as we navigate one of the busiest and most important years in ITU’s recent memory.

Based on Houlin Zhao’s State of the Union Address to the ITU Council on 21 March 2022.

See the full speech transcript.