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CUTS | WTO

This newsletter provides brief updates related to the Joint Statement Initiatives (JSIs) on investment facilitation, electronic commerce, and micro, small, and medium-sized enterprises (MSMEs).

Investment Facilitation

Since the publication of our last newsletter, WTO Members participating in the Structured Discussions held two negotiating meetings and two intersessional meetings. In that context, they have continued work on new proposals as well as on the “Easter Text” (circulated by the coordinator of the structured discussions in mid-April), which is becoming the main basis for negotiations.

According to a summary record of the negotiating session held on June 15-16 (INF/IFD/R/24), participants received an update from the facilitators of the Small/Discussion Groups on “Scope” and on “’Facilitation of the Entry and Temporary Stay of Business Persons for Investment Purposes” (Movement of Business Persons – MBP). Participants discussed revised versions of Section II (“Transparency of investment measures”) as well as of Provision 30 on “Responsible Business Conduct”. Participants also considered text prepared by the coordinator on a possible Most-Favoured Nation (MFN) Treatment provision and continued discussions on a revised version of a proposed provision on ‘Transfers and Payments” submitted by one delegation. On June 15, participants held a dedicated session on implementation, technical assistance, and capacity building.

When they met on July 12 and 13, according to the annotated agenda by the coordinator (INF/IFD/W/35), Members received reports from the facilitators of the Small/Discussion Groups on “Scope” and on MBP. Among other topics, they also discussed draft provisions of the “Easter Text”. These include the “Preamble” and provision 1 on “Objectives”; text under title 31 “Measures against corruption”; provisions 35 on “Dispute Settlement” and provision 36 on “Final Provisions”. Participants also conducted a “stocktaking exercise” aimed at assessing the state of play in the negotiations and planning their activities for the second half of the year up to the WTO’s 12th Ministerial Conference (MC12).

Towards the end of July, the coordinator issued a revised version of the “Easter Text” (INF/IFD/RD/74/Rev.1). This document contains updates to Sections II (“Transparency of investment measures”); III (“Streamlining and speeding up administrative procedures”); IV (“Focal points, domestic regulatory coherence and cross-border cooperation”); and, VI (“Sustainable investment”). It also includes some new definitions in Section I “Scope and general principles”.

At the beginning of August, the coordinator circulated revised text for the preamble, as well as for Articles 1 on Scope, 24 on Cross-Border Cooperation, and 35 on Dispute Settlement.

According to the timetable adopted by participants (INF/IFD/W/29/Rev.2), the next negotiating meetings will be held on September 7-8, October 4-5, November 2-3, and November 24. Intersessional meetings, if needed, will be held on September 23, October 20-21, and November 16-17.

Electronic Commerce

The negotiations under the e-commerce JSI involved two plenary meetings on June 21 and July 22.

During the plenary meeting held on June 21, participating Members initiated discussions over the options for the integration of the outcome of the e-commerce JSI into the WTO legal framework. Ambassador Yamazaki (Japan), co-convenor of the initiative, characterized the discussions on data flows, data localization, and the “legal architecture” as “challenging” and emphasised the need “for participants to give due consideration on how to move forward”. Ambassador George Mina (Australia), co-convenor, also pointed to a number of “key issues” where intensified negotiations and discussions are still needed to narrow down differences and deliver progress; these include data flows, localization, source code, and customs duties on electronic transmissions.

At the plenary meeting held on July 22, facilitators of small group discussions provided updates on their groups’ progress. The co-convenors—Australia, Japan, and Singapore—noted the progress made by participating Members, with “cleaned” articles on spam, electronic signatures and authentication, and e-contracts. Open government data and online consumer protection are “virtually cleaned” with one outstanding issue remaining in both texts, as per their respective small-group leaders’ updates. Concerning other topics, the deliberations of the small group on open internet access are still ongoing and the recently established small group on electronic transactions frameworks had “useful” early discussions, as reported by the UK, and will intensify their work. On the same occasion, participants also initiated discussions on cybersecurity and on electronic availability of trade-related information; discussions on cybersecurity are expected to intensify in the second half of the year.

In other related developments, proposals were submitted by the following members: i) Nigeria on Flow of Information (INF/ECOM/65); ii) Cote d’Ivoire on options for capacity building and technical assistance (INF/ECOM/66), and iii) Brazil and the Republic of Korea on access to online platforms/competition (INF/ECOM/67).

As in previous occasions, participating members held information sessions with thematic experts. In this context, members received presentations on issues related to services market access from the OECD, the Information Technology Industry Council, and the National Foreign Trade Council.

Micro, Small, and Medium-Sized Enterprises

The MSME Informal Working Group (IWG) held two meetings on June 24 and on July 26, respectively. Participating members discussed a draft Ministerial Declaration for MC12, reviewed the implementation of the package of six recommendations and declarations adopted in December 2020, and continued discussions on specific substantive issues based on presentations by the Director General of the World Intellectual Property Organisation (WIPO) as well as on submissions by IWG Members.

Ministerial Declaration on MC12: Members of the IWG moved closer to a final text (INF/MSME/W/33/Rev.2), with only a few remaining brackets around issues still under consideration. At the meeting held on 26 July, the Coordinator of the Group, Ambassador José Luis Cancela (Uruguay), urged members to intensify their consultations and announced he will discuss with all concerned members with the aim to finalize the text for adoption by the IWG at its next meeting on September 24, 2021.

Review of the implementation of the December 2020 Package: The Group reviewed the implementation of the package, which contains a set of voluntary and non-binding recommendations and declarations on various areas. The IWG discussed ways to track actions taken to support their implementation. In connection to that, Uruguay and Brazil provided updates on their preparations for setting up automatic transmission of tariff and trade data to the WTO Integrated Database (IDB). In turn, Côte d’Ivoire indicated that it would submit its proposed roadmap regarding the recommendation on access to trade finance at the September meeting,

Other topics: Members heard presentations on intellectual property rights and innovation in relation to MSMEs by WIPO’s Director General Daren Tang and by the WTO Secretariat. DG Tang introduced the organization’s work to develop intellectual property tools (such as the IP Diagnostic Tool) to support MSMEs’ growth and innovation. The WTO Secretariat informed the Group on how the issue of MSMEs and innovation has been raised in the TRIPs Council since 2014. This includes discussions of national strategies to help MSMEs deal with the complexity of IP systems; technical assistance; and the linkages with e-commerce. Ecuador shared its experience in supporting MSMEs’ innovation in rural areas, in particular in the flower and agribusiness sectors.

Other initiatives: The “Digital Champions for Small Business” initiative (aimed at helping small businesses go digital and increase their participation in international trade) was launched on June 25. Proposals on how to help MSMEs address the difficulties they face with digital trade are to be submitted before September 15. The winning proposals will be announced at MC12.

The original newsletter can be accessed here.

UNCTAD

Young people can be catalysts of inclusive development. That’s the mantra of Linda Okero, a communication enthusiast who leads Youth Action Hub Kenya, a group of young trailblazers from Nairobi.

Their mission is to integrate the voices of marginalized youth into the development agenda by providing an educational platform for them to learn about issues that affect them and nurturing their leadership skills through capacity-building programmes.

“We see thousands of young Kenyans actively engaging in discussions on economic opportunities and sharing their pain points when it comes to accessing decent livelihoods,” Ms. Okero says.

Almost 60% of the African population is under the age of 25, according to the Mo Ibrahim 2019 Forum Report. Many of the young people were struggling economically even before the coronavirus crisis, which has deepened their vulnerability.

Youth Action Hub Kenya is helping the youth shape their future by equipping them with the skills to effectively engage in community-building activities and foster an intergenerational dialogue with decision makers. “The goal? To chart a new narrative for Africa’s future,” Ms. Okero says.

Harnessing digital jobs

With the COVID-19 pandemic accelerating digital transformation across sectors – spurring the rise of platform economies and with it the emergence of new employment trends, job roles and opportunities – the youth in Kenya are looking towards the future of work with hope and optimism.

“Economically empowered young people are more likely to step into leadership roles and dare to voice and propose solutions, hopes and visions for a better tomorrow,” Ms. Okero says.

In Kenya, digital access has been instrumental in reshaping the concept of work, with many unemployed youth, students or young professionals leaning towards newly available short-term jobs or “gigs” to earn an additional income.

In the next five years, the gig industry in the country is projected to grow by 33% annually, offering the youth with relevant digital skills a chance to compete for opportunities on a global scale.

Against this backdrop, e-commerce is seeing a lot of growth. In 2020, approximately 15 million Kenyans shopped online and spent $1.1 billion.

To leverage this blooming sector, Youth Action Hub Kenya launched the “Own Your Voice on SDGs” project to educate young people on emerging job opportunities within the digital economy.

More than 15,000 people participated in the group’s webinars on the future of work organized in collaboration with other organizations.

“We wanted to demystify the concept of the gig economy and create a new economic narrative for Africa to show the world the potential of our youth,” Ms. Okero says.

To support disadvantaged and vulnerable groups, the project included seminars for the youth from the Kakuma refugee camp located in northwestern Kenya.

“People who are just trying to survive, they don’t hope anymore,” Ms. Okero says. “Giving them the opportunity to learn a skill or two is helping them reclaim their voice, hopes and dreams.”

Tackling barriers, building bridges

Promoting youth participation in formal decision-making and community-building processes requires the removal of structural barriers, values and beliefs, according to the UN World Youth Report 2020.

Ms. Okero and her team are tackling these barriers and building a bridge between African youth and the stakeholders involved in the continent’s development.

Their project was part of a trilogy of socioeconomic transformative initiatives supporting the UNCTAD Youth Forum slated for 16 to 18 September as part of UNCTAD’s 15th quadrennial conference events. Ms. Okero will be one of the speakers at the forum.

Her group is also involved in a 10-year sustainable development challenge called “My2030Vow”, a storytelling campaign that encouraged people across the world to commit to the UN Sustainable Development Goals for individual and collective accountability.

Making trade part of the solution

Youth Action Hub Kenya also focuses on making trade part of the solution to the challenges facing young people.

It partnered with the Kenya Trade Network Agency on workshops to explore how the youth can benefit from the new single market created by the African Continental Free Trade Area agreement.

“The youth have not been empowered enough to realize they can be the ones to instigate the change they wish to see,” Ms. Okero says.

To change that, her group has engaged Kenya’s ministry of trade and council of governors to add its voice to forums on topics that impact the youth.

Created at UNCTAD’s Youth Forum 2018, the Youth Action Hubs initiative empowers young people to think globally and express their views on matters within UNCTAD’s mandate.

ERIA

Over the past decades, technology adoption and the digital transformation have allowed entrepreneurs to be instantly connected with people, resources, and ideas all over the world. The growing global connectivity has fostered opportunities and access for entrepreneurs to translate their ideas into business that could reach millions of consumers in the global market while expanding their connections beyond borders. ASEAN and East Asia have exhibited strong economic development with high-growth and innovative enterprises over the years, and their entrepreneurship ecosystem has become a driver of the global innovation frontier. The COVID-10 pandemic has accelerated the trends towards borderless entrepreneurship with many new businesses trying to connect with global markets from the very beginning of the pandemic. However, borderless entrepreneurs are confronted by a number of challenges related to a lack of regulatory coherence across the region’s countries as well as a wide range of  consumer preferences and behaviours.

The 7th episode of ERIA’s Entrepreneurship, Start-Up, and Innovation (E-S-I) webinar series with the theme ‘Borderless Entrepreneurship – Is that the future? was held on 31 August 2021 and attracted more than 200 participants from the Asia-Pacific region.

Four speakers from four countries shared their perspectives on borderless entrepreneurs:

  • Laurent Tam Nguyen, Co-founder and General Manager Digital Mekong, Vietnam;
  • Haewon Rah, Engagement Manager Techstars, Korea;
  • Jirut Wattom, Technology Strategy Manager, Chemical Business, SCG Partner SPRINT; Accelerator, Thailand;
  • Wisnu Nugrahadi, CEO and CO-Founder Sampingan, Indonesia.

Mr. Laurent Tam Nguyen, Co-founder and General Manager Digital Mekong, Vietnam shared his experience in creating Digital Mekong, an agile virtual market agency that addresses the need for an entrepreneurship freelancer market in Vietnam and ASEAN, with a flexible pricing scheme to allow access by SMEs in the region. This regional virtual platform now serves clients from all over the world and will continue to expand its borderless business moving forward. From his perspective, Covid-19 has shaped a profound mega trend where digitalization is now the way to do business. He highlighted two important opportunities that borderless entrepreneurship can offer: the ability to work without physical boundaries and to have more autonomy to determine the personal and professional life balance. As the trend of borderless entrepreneurship is escalating quickly, he emphasized several soft skills that all entrepreneurs should have which include resilience, adaptivity, empathy and transparency in managing start-up teams and building businesses.

Ms. Haewon Rah, Engagement Manager Techstars, Korea highlighted her experience in managing Techstarts as an accelerator to connect entrepreneurship with institutions and corporations within and outside South Korea. She mentioned that even before Covid-19, many start-up founders were aiming to accelerate their virtual business. For her, borderless entrepreneurs means that founders are able to expand their business beyond their region and set up  teams that consist of both local and global talents. Haewon emphasized how investors would be likely to support and investment invest in start-ups that are interested to scale up their business globally. Furthermore, she shared two important factors for successful borderless businesses and entrepreneurship: 1) utilize entrepreneurship networks; 2) create small wins/steps, such as learning how businesses in the region work, which form the foundation for expansion to another region.

Jirut Wattom, Technology Strategy Manager, Chemical Business, SCG Partner SPRINTAccelerator, Thailand, shared his experience as a borderless accelerator who found many start-ups in Thailand were struggling to commercialize their product in the science and technology sectors. Jirut mentioned that many entrepreneurs in Thailand are very interested not only to build Thailand’s start-up ecosystem but also to solve  much bigger problems in the region. The pandemic has provided an opportunity for entrepreneurs to scale up their businesses faster as they can mobilize and operate their teams to do business locally while also accessing global markets. For Jirut, although physical interaction remains important for Thailand entrepreneurs, digitalization has now helped many entrepreneurs to climb up the competition ladder with their counterparts around the world. He highlighted how the borderless entrepreneurship ecosystem has given Thai entrepreneurs high exposure with clients or talents from various cultures and backgrounds.

Wisnu Nugrahadi, CEO and CO-Founder Sampingan, Indonesia shared his view on handling a start-up business in Indonesia which has a huge local market, many languages, and geographical challenges. He underlined the importance of using technology to close the knowledge gap and to connect companies with a higher quality workforce. In his perspective, being connected to the global market means more opportunity for companies to invest in the workforces of smaller cities. Before the pandemic, the main challenge was to attract experienced talents to Jakarta. However nowadays, the companies can recruit experienced talents from outside Jakarta and train them remotely.

The webinar was co-hosted by Dr Giulia Ajmone Marsan, ERIA Director for Strategy and Partnership, Ms Lina Maulidina Sabrina, Programme Officer, ERIA and Mr TJ Ooi, Founder of Curated Connectors, a Singapore-based start-up. During the Q&A session, speakers discussed how entrepreneurs can address the challenge of national regulations in their own country by being creative and agile as well as learning in-depth about the entrepreneurship eco-system in other countries and the region. As digitalization has now reduced the cost for testing products, the speakers encouraged entrepreneurs to always conduct market testing before scaling up their start-ups. Lastly, joining start-up support programs or accelerator programs are also important ways to expand networks and opportunities to scale up businesses.

ERIA’s E-S-I webinar series is organised under ERIA’s Strategy and Partnership Programme, funded by Australia.

ITC

A crucial element of e-commerce is the timely and reliable delivery of goods. Postal service is the crux of this.

Today we are joined by Mr. Dan Kagwe, Postmaster General of Posta Kenya, and Mr. Twahir Mohamed, CEO of Taz technologies, an innovative ICT company that is steadily growing in various African countries.

In this episode, we discuss the need for small business owners to remain agile in changing times and the benefits of learning and incorporating e-commerce to increase business opportunities.

https://www.podbean.com/pu/pbblog-6re99-630ed7

ITU

The COVID-19 pandemic has highlighted the key role of digital infrastructure and the need to keep investing in our global technological future. Everyone, everywhere, must share in the benefits of digital transformation.

Digital channels – now the main point of access to the formal financial system – have given vulnerable people worldwide an economic lifeline amid the pandemic.

But along with being available and accessible, digital financial services must meaningfully address people’s needs. Cybersecurity, trust, and access to reliable information are nothing less than matters of public safety.

The importance of FIGI

This experience of the pandemic also underlines the importance of the Financial Inclusion Global Initiative (FIGI) – an open framework for collaboration led by the International Telecommunication Union (ITU), the World Bank Group, and the Committee on Payments and Market Infrastructures (CPMI), with support from the Bill & Melinda Gates Foundation.

Expanding financial inclusion

While financial services have always been a networked industry, we have entered a new frontier in recent years, with mobile phones enabling millions of people around the world to make use of life-changing financial services for the very first time.

Great optimism surrounds the ability of digital channels to expand financial inclusion, and with good reason. Some 1.7 billion adults worldwide do not have a bank account. Among them, however, more than two-thirds have a mobile phone.

FIGI is the successor to the ITU Focus Group on Digital Financial Services active from 2014 to 2016. That was the first initiative to bring together everyone who was working to expand financial inclusion. And it came at exactly the right time.

We saw excellent case studies emerging, as developing countries pioneered the use of digital channels to extend finance to the unbanked. Innovators were finding their feet, assembling the business case for digital financial inclusion and gaining an understanding of new business dynamics. The digital technology and financial service sectors were moving into a new shared space, with resulting convergences in the responsibilities of different regulatory authorities.

Since then, we have come a long way together. We have built a strong understanding of the components of the digital finance ecosystem. We have clarified our respective roles in nurturing the growth of this ecosystem. And we have supported the emergence of a global community where complementary strengths allow us all to advance together.

ITU is dedicated to the pursuit of the Sustainable Development Goals (SDGs) adopted by the United Nations for 2030.

Digital financial services can make a defining contribution to the achievement of the SDGs.

ITU’s standards − improving digital finance

Standardization has been central to ITU work since the organization’s inception in 1865. We work at the cutting-edge of innovation. Technology is always evolving, and ITU’s work and membership evolves in line. But our basic value proposition remains unchanged: building a global community, building trust, and enabling technological advances on a global scale.

Successful standards development calls for inclusive dialogue. By bringing different industry sectors together, ITU helps to define new directions for innovation and create the partnerships required to propel this innovation.

ITU standards for digital finance serve to improve the quality of services, as well as to safeguard security and build trust. By hosting the new FIGI Security Lab for Digital Financial Services, we help regulators and the industry to build on firm technical foundations.

FIGI collaboration

Collaboration through FIGI demonstrates exactly the sort of cohesive action the world will need to fulfil the SDGs.

The initiative has supported national policy reforms to stimulate financial inclusion, working with China, Egypt and Mexico to provide valuable case studies for other countries around the world.

Through FIGI’s three working groups, we have produced a viable basis for digital ID systems to grant citizens access to formal systems of all kinds. We have studied how to incentivize electronic payment as the norm for very low-value transactions. We have also looked at how to boost users’ confidence that their money and digital identities are safe.

After earlier gatherings in Bangalore (2017) and Cairo (2019), this year’s FIGI Symposium welcomed over 1700 participants from 149 countries in an entirely online format, to discuss topics ranging from fintech for inclusion and gender equity to cybersecurity, digital ID and consumer protection. We also heard different experiences with reaching underserved and vulnerable populations during the pandemic. We approached these discussions from every possible perspective, thanks to the diversity of the FIGI community.

I would like to express my deepest gratitude to all FIGI contributors. We can all be very proud of what we have achieved together.

Although this third edition brings the initiative to completion, we have created a culture of collaboration that will sustain discussions for many years to come. The findings of FIGI’s working groups will remain, and we look forward to breaking new ground with you in our Security Lab.

Digital technologies are the unifying force at the centre of our interconnected world, even as COVID-19 raises new questions about how to live together harmoniously, both in times of crisis and times of prosperity.

I look forward to our continued work together to build a better digital future for all.

See the full FIGI video playlist.

Learn more about the ITU Telecommunication Standardization Sector here.

ESCWA

In an effort to spur the development of e-Accessibility in the region, experts reviewed in an online consultation meeting on 24 August and a regional workshop on 25 August the prototype of the Arab Digital Inclusion Platform (ADIP), recently developed by ESCWA.

Participants praised ADIP and the interactive tools developed by ESCWA to support Arab policymakers in developing or improving related policies and guidelines to empower individuals. They also commended the exchange of experiences and the opportunity to enhance cooperation.

They finally stressed the importance of using the national e-Accessibility policy templates and relevant technical guidelines to facilitate equal access to information, for a more inclusive society.

ITU

Know your customer (KYC) regulations are designed to ensure that providers of financial services know their customers’ identities, the risks attached to providing services to different customers, and that customers are using services for legitimate purposes.

KYC regulations play a key part in combatting money laundering and the financing of criminal activity.

But with more and more users taking up financial services online, KYC verification tools are also moving online to keep pace.

The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, has developed technology-neutral guidance to help governments, financial institutions, virtual asset service providers and other regulated entities determine whether a digital identifier is sufficient for KYC or due diligence purposes. Digital IDs, like any form of identification, must confirm your customers are who they say they are.

Dependable digital verification

According to FATF, reliable digital IDs can make individual customer verification easier, cheaper and more secure. They can also help providers meet transaction monitoring requirements, and largely avoid risks of human error.

“We highlight the benefits of digital ID in terms of reducing costs, increasing convenience to the consumer, but also to the private sector, whilst not compromising on security,” says Shana Krishnan, Policy Analyst at the FATF Secretariat.

With systems evolving rapidly, FATF advises governments, financial institutions and other stakeholders to understand the assurance level possible with each ID solution and then assess the reliability of any given technology and governance combination to monitor transactions and detect illicit financing.

The risk-based approach

FATF cautions against a one-size-fits-all approach to KYC, recommending a risk-based approach tailoring KYC measures to the risks associated with different customers. “A risk-based approach impacts the intensity and the extent to which customer and transaction information is required and the mechanisms we use to ensure that these [FATF] standards are met,” says Krishnan.

The best systems can simultaneously strengthen customer due diligence (CDD) and broaden financial inclusion, according to FATF.

Risk-based approaches are intended to ensure that low-income users are not excluded from accessing financial services – an overly rigid approach to CDD and electronic KYC verification could effectively exclude many would-be banking and finance customers, points out Fredes Montes, Senior Financial Specialist at the World Bank Group (which has FATF observer status).

eKYC regulation in Bangladesh

Bangladesh has adopted basic biometric fingerprint and face recognition, hosts financial services on local servers, and encourages two-factor and multi-factor authentication and e-signature use.

“The digital KYC regulation guidelines in Bangladesh recommend a risk based and threshhold approach,” explains Masud Rana, Joint Director of the Bangladesh Financial Intelligence Unit.

The government recently introduced Porichoy, which enables financial organizations, online businesses, financial technology (fintech) companies and government entities to digitally onboard their customers or partners via
an instant application programming interface.

While the national identity database is accessible only to financial institutions and government agencies, Porichoy is open to all government agencies, banks, financial institutions and fintech companies, explains Rana.

With relatively limited products and services, the country needs relatively low electronic KYC regulation. But flexibility is essential to ensure financial inclusion.

“If a person does not have an ID card or digital ID, they can obtain a certificate from the public service and can open a low-risk account,” Rana says.

eKYC regulation in Jordan

Jordan’s government has started to build a unified digital identity solution to give all citizens reliable, verifiable ID for multiple services, not only in the financial sector, explains Mohammed Al-Duwaik, Head of Digital Financial Services at the Central Bank of Jordan.

“Any government-approved identity is going to be stronger and more reliant for finanical institutions than a non-government approved one,” said Al-Duwaik.

While Jordan’s regulations also encourage a risk-based approach, “each financial insitution, given their differences, needs to understand their own products and clients,” says Al-Duwaik.

The Central Bank of Jordan allows service providers to come up with solutions for risks and then come to the regulator as needed for additional guidance. Each financial institution must make sure it knows its clients and that they have answered the relevant questions and provided suitable documentation.

Note: This article is based on a panel discussion during the 2021 Financial Inclusion Global Initiative (FIGI) Symposium.

ITU

The new millennium opened with high optimism over the industry’s resilience – and relentless progress — after the non-disruption of Y2K and the burst of the dotcom stock bubble. Renewed expansion focused on emerging markets, cutting-edge mobile technologies, and new services and applications beyond network infrastructure.

“You do not have to create new demand in the world,” said Yoshio Utsumi, then-Secretary-General of the International Telecommunication Union (ITU), at the organization’s flagship Telecom conference in 2003. “It is there waiting for you in the developing world.”

The world by then had nearly 2.5 billion fixed telephone lines – a billion more than four years earlier. More than two-thirds of these were installed in developing countries, with Africa in 2001 becoming the first major region where mobile use outstripped fixed lines.

Mobile phone subscriptions reached the one-billion mark worldwide by 2003 – a figure rising to 4.6 billion by the end of 2009. Internet use exploded in parallel, from 680 million users in 2003 to 1.8 billion, half of them with broadband access, by end-2009.

Broadband and Wi-Fi were the rising stars as the industry sought to overcome high spectrum prices, overcapacity, and price-slashing amid fierce competition.

Satellite services complemented optical fibre and broadband as voice, data and video continued to converge. Wireless local area networks and prepaid services offered possibilities to close the digital divide in rural, remote and low-income areas.

Information and communication technologies (ICTs), observed microfinance pioneer and Grameen Bank founder Mohamed Yunus at Telecom 06, could “offer an opportunity unprecedented in all of human history to end poverty” – but only if women and marginalized communities were enabled to tap into the benefits of market forces.

Services soar

New services spurred growth as technologies reached into practically all aspects of everyday life. Third-generation (3G) networks, mobile devices with built-in digital and video cameras, and innovative Internet apps heralded the era of consumer services. With it came industry calls for lighter-touch regulation to let innovation flourish; along with increased industry collaboration to harmonize standards and boost access through globally interoperable services.

Financial services came to be combined with mobile devices – a key breakthrough for inclusive finance in emerging economies.

Front-runner Kenya’s M-PESA mobile banking services, launched in 2007 by national telco Safaricom with global giant Vodaphone, attracted 7 million customers in its first two years, transforming lives in rural communities.

The growth of mobile broadband services put the spotlight on cybercrime – identified by Telecom delegates as a threat needing global solutions in the borderless world of international data flow.

Tech for good – and for all

High-profile speakers at Telecom 03 envisaged an information society founded on inclusion, non-discrimination, and gender equality, where technological progress would enhance individual well-being.

“The vast potential for this industry to bring about social and economic progress is within our reach,” enthused Carly Fiorina, chief executive at Hewlett Packard (HP) at the time.

But efforts were needed to spread the benefits to everyone.

Switzerland’s President Pascal Couchepin called the digital divide “a blemish on this new millennium”, adding: “Access to information for everyone is at the very heart of development.”

Reaching out to Asia

ITU Telecom World 2006 headed to Hong Kong – the first time the global event took place outside Geneva, ITU’s headquarters city in Switzerland. The change of venue paralleled the industry’s shifting geographic focus, with China by then becoming the world’s largest market for fixed and mobile telephony.

Telecom 06 stressed the importance of education – including digital literacy – to eliminate poverty and bring opportunity to all. Cisco increased the funds to for its Training Centre Initiative for Developing Countries, first launched with ITU in 2002 and active in 56 nations worldwide.

Nicholas Negroponte, Chairman of the One Laptop per Child association and a partner in ITU’s Connect the World initiative, urged the public and private sectors to work together to put low-cost laptops into the hands of children in developing economies.

 

A girl holding a low-cost laptop at ITU Telecom World 2006

Telecom 06 features education as a tool to bridge the digital divide

 

At ITU Telecom World 2009 back in Geneva, then-United Nations Secretary-General Ban Ki-moon reinforced the wider impact of education: “Connected schools can become connected community ICT centres. They can provide a vital link to marginalized and vulnerable groups. They can become an information lifeline for women, indigenous people, persons with disabilities and those living in rural, remote and underserved areas.”

Sustainability centre-stage

Telecom 09 also featured discussions on how ICTs could serve to mitigate climate change. Mobile technologies, for example, could supply critical information to farmers in Africa on the frontline of the environmental crisis, while smart tech could save energy and cut harmful emissions from industry, transport and households everywhere.

The ICT industry was urged to examine its own performance on power consumption, recycling, e-waste, and renewable energy use.

The ongoing dichotomy – between technology as part of the problem and a key tool in any solution – remains high on the agenda at ITU Digital World 2021.

In this blog series marking the 50th anniversary of ITU Telecom, we look back at five decades of change for the industry, the specialized international agency, and the flagship conference and exhibition series. In the next episode, ITU Secretary-General Houlin Zhao will review his personal and professional experiences over the last decade.

This year’s edition, ITU Digital World 2021, takes place online between September and December. Explore the full event calendar and register now.

UNCDF

The European Union (EU) and UN Capital Development Fund (UNCDF) have launched a project to digitize the payment processes of credit unions in Timor-Leste and strengthen the digital financial services ecosystem in the country.

 

UNCDF will provide grant funding and technical support to the Secretary of State for Cooperatives (SECoop), the government body responsible for supervising and regulating cooperatives in Timor-Leste, to carry out these activities.

The project aims to provide credit unions with a digital payment platform to channel savings, loan disbursements, and loan repayments safely and conveniently to its members. The Covid-19 pandemic has only emphasized the need for these facilities.

SECoop has contracted Telemor Fintech, owned by Timor-Leste’s largest mobile network provider, to develop the mobile phone-based platform that will support credit union members to transact more efficiently.

This will also allow members to access a wide array of other digital financial services, including bank-to-wallet transactions, phone top-ups, account balance checks, bank transfers, bill payments and more. Moreover, it will also help develop a culture of digital and financial literacy in Timor-Leste and improve users’ access to information.

“I am really excited to launch this new initiative in Timor-Leste. It shows that government and private sector can really work hand in hand to reduce the risks of spreading COVID-19 as credit union members will be able to transact at home, using their mobile phone and thus don’t need to move around to make deposits or withdrawals.” said Bram Peters, Programme Manager, UNCDF Pacific Digital Economy Programme.

This project is part of a new programme titled ‘Digital Finance for resilience in African, Caribbean and Pacific countries’ (DF4Res) and is funded by the European Union. One of the main objectives of this initiative is to enable the development of innovative digital solutions that can bring financial services closer to low-income households and marginalized communities in Timor-Leste.
Regular impact assessments will be conducted to inform project activities and showcase accomplishments and lessons learned, while ensuring knowledge transfer among partners, donors, and other similar initiatives across the world.

In this remarks the Ambassador of the European Union to Timor-Leste said “Digitalization is a priority of the EU and a strategic element of our new Multi Annual Programme with Timor-Leste, that will cover the period from 2021 to 2027. Digitalization will be key in the development of the private sector and in the training of young people, but also a fundamental tool in the management of natural resources, management of public finances and of social services. ”

About European Union
The European Union (EU) is a unique economic and political union between 27 European countries that, together, cover much of the continent. The predecessor of the EU – The European Coal and Steel Community – was created in the aftermath of the Second World War and was built on the understanding that countries that trade with one another become economically interdependent and therefore more likely to avoid conflict. In Timor-Leste the EU is the second largest donor of development aid (grant funding). The EU is committed to support Timor-Leste 2011-2030 Strategic Development plan, which aims to transform Timor-Leste into an upper-middle-income country by 2030 based on rapid, inclusive growth enabling it to improve infrastructure, worker skills, education, training and health systems, and combat poverty and malnutrition. The EU assistance focuses on green and sustainable economic recovery and development, rural development, good governance for sustainable development and gender equality.

About UNCDF
The UN Capital Development Fund (UNCDF) makes public and private finance work for the poor in the world’s 47 least developed countries. The UNCDF’s mandate and instruments intend to offer “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. UNCDF’s financing models work through two channels: financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, providing them with the tools they need to climb out of poverty and manage their financial lives; and by showing how localized investments – through fiscal decentralization, innovative municipal finance, and structured project finance – can drive public and private funding that underpins local economic expansion and sustainable development.

WBG

Digital revolution has never been just about discovering breakthrough technologies. Countries like USA and China, leading the innovation in this field, account for almost two thirds of new IT patents and computer related technologies registered every year.[1] Yet, for most countries in the world, including Vietnam, the future will not be determined by their drive for innovation but rather by their capacity to make the most of digital technologies developed elsewhere.

To become a digital powerhouse, Vietnam will need to offer the conditions that will enable its local operators to adopt and adapt new global digital technologies. So far, the country has done a good job. Today, it compares well to peer and aspirational comparators in penetration of mobile phones (figure 1) and its citizens and enterprises are well connected to the Internet. Its digital infrastructure is quite modern, covering all provinces, and funded by forward looking national telecommunication companies. It also hosts several world leading IT firms such as Apple, Samsung, Intel, etc… This demonstrates Vietnam’s competitiveness and offers a unique platform for local firms and developers – the model adopted by Japan and Korea in the 1970s and 1980s, and more recently by China.

The latest edition of the World Bank’s Taking Stock report argues that Vietnam will need to do more if it wants to become a digital powerhouse envisioned in the socio-economic development strategy adopted by the Party in February 2021. The emphasis should be on three market failures that will require smart interventions by the government. As a reminder, a market failure prevents an optimal result that could have been achieved given the available resources.[2] The social task then becomes to correct the failure which means Vietnam needs to ensure the development of a digitally skilled labor force, the emergence of a dynamic and agile local private sector, and good but secure access to information.

The first intervention is to ensure the availability of a labor force with digital skills (figure 2). This is central because up to one third of existing jobs in Vietnam are at risk to be lost in a five-year span due to digitalization.[3]  While digital transformation will create new jobs, those will require a new set of skills. One can expect the labor market to adjust gradually as the excess demand for skilled labor will lead to higher relative wages. This will in turn incentivize workers and firms to further invest in education and training. However, international experience has demonstrated that workers may not have the information or the financial resources to invest in longer education paths., In addition, firms may be reluctant to train workers who could bring their new skills to competitors. At the current pace, it might take 25 years for Vietnam to catch up with the number of students registered at the university in Thailand today. In successful countries, the government has acted to address the market failure by (i) removing legal obstacles to labor mobility; (ii) providing information to workers on labor market trends and demands to inform their decision making ; (iii) improving the quality of technical/vocational education programs; and (iv) supporting financially firms and workers in their efforts to acquire sets of new skills.

Vietnamese are using cell phones but have limited digital skills

Vietnamese are using cell phones but have limited digital skills. Source: World Bank’s Taking Stock, August 2021

The second intervention aims at guaranteeing that the domestic private sector remains dynamic over time as the innovation cycle is very short in the digital economy. To keep the private sector agile and motivated to adopt new technologies, the government should act to preserve competition when some markets are almost naturally dominated by digital champions because of their know-how, network externalities, and economies of scale. Such concentration is already observed in the fixed broadband market and rises sharply in social media (with the dominance of Facebook) and other digital subsectors, including e-commerce, fintech, digital financing, and data management. The reduction of barriers to entry and the strengthening regulations is often a necessary policy to avoid abuses. Concurrently, at the other hand of the spectrum, the authorities should support local startups and small and talented investors who face financing constraints by offering them alternative funding options as done successfully in several countries, including Singapore.

The third and last intervention by the government is to facilitate access to data and information. This is a public good by definition as the benefits of sharing information largely exceed the cost of collecting it. The government can improve access to information by developing inter-operability across its databases and through open data initiatives – which consist of sharing online public data in a user-friendly manner. The government can also encourage the private sector to collect and share data as new digital tools and platforms have eroded the monopoly of the State. All these efforts should also consider data and data-users privacy and security.

Vietnam would need to correct these three market failures urgently to set the country on the path to achieve its ambitious digital economy goals. However, it will also be important to be careful not to create new government failures as well-intended but misguided government interventions could exacerbate rather than address initial market /incentives distortions. For example, resources could be spent on public training programs that are not aligned with the needs of the market. They can also protect companies from competition unduly discouraging them to develop over time. As a principle, the government’s interventions need to be designed and implemented in close collaboration with the private sector and with maximum transparency to avoid their capture by either vested public or private interests.

[1]  Source: https://www3.wipo.int/ipstats/index.htm

[2] For more details, see https://www.britannica.com/topic/market-failure

[3] See Cameron, A., T. H. Pham, J. Atherton, D. H. Nguyen, T. P. Nguyen, S. T. Tran, T. N. Nguyen, H. Y. Trinh, and S. Hajkowicz. 2019. Vietnam’s future digital economy: Towards 2030 and 2045. Brisbane: CSIRO.

WIPO

2020 was a monumental year. As COVID-19 has gripped the world, altered economics, and transformed daily lives, one thing is certain: we have all leaned on mobile usage to connect, work, learn, play and escape. At the height of the pandemic our mobile usage has sky-rocketed — accelerating mobile adoption by 2 to 3 years. In 2020, we saw more time spent, apps downloaded, and consumer and advertiser spend than ever before — to the tune of over 3.5 trillion hours on Android phones, apps downloaded, 218 billion new app downloads, $143 billion spent through the app stores and $240 billion spent on mobile ads. Top markets driving growth in app store spending included China, United States of America (U.S.), Japan, South Korea, the United Kingdom and Germany. Meanwhile, emerging markets were among the top drivers of apps and games downloads, particularly China, India, the U.S., Brazil, Indonesia, Russia, Mexico, Turkey and Vietnam.

While mobile adoption records of the past were shattered, this was not a new trend. Instead, COVID-19 was a catalyst to existing trends in consumer behavior towards a mobile-first world. In 2020, the average time spent per user on mobile jumped 20% to 4.2 hours per day, equating to over a quarter of all waking hours. In the US, time spent on mobiles surpassed time spent watching live TV by 8% in H2 2020. Time spent on mobiles crossed generations, In the U.S., Gen Z, Millennials and Gen X/ Baby Boomers spent 16%, 18% and 30% more time per user year-on-year in their most-used apps.

 

 

The pandemic drove growth in at-home industries, as consumers sought connection and entertainment while stuck at home during COVID-19 lockdowns. Mobile games reached new heights, topping $100 billion in consumer spending in 2020, and record levels of downloads from a surge in demand as consumers turned to the portable gaming consoles in their pocket to pass time. Even while at home, consumers turned to their small screens to stream content, spending 40% more time in video streaming apps in 2020 than 2019. Social media apps continued to command nearly 50% of all time spent on mobiles, and innovative video playing apps like TikTok saw standout growth across the world; 325%  per user on average. In terms of average monthly time spent per user, TikTok ranked in the top 5 and grew faster than nearly every other app analyzed,  surpassing even Facebook. TikTok is on track to hit 1.2 billion active users in 2021.

Demand for at-home fitness, exercise and mindfulness apps spurred growth in mobile’s share of wallet, with 30% year-on-year growth in consumer spending to $2 billion. Medical app downloads grew 50% year-on-year due to demand for COVID-tracing and socially-distant telehealth apps. Economic uncertainty propelled the adoption of finance apps during the first waves of COVID-19 and throughout 2020 as consumers turned to mobile apps peer to peer payments, banking, investing and monitoring the stock market. Led by video conferencing apps like ZOOM, Google Meet and Microsoft Teams, time spent in business apps surged in 2020, up 275% year-on-year in Q4 2020, globally. Similarly, school closures amidst lockdowns and social distancing measures spurred significant growth in Education apps, like Google Classroom, Seesaw Class and Kahoot!. Mobile commerce had a breakout year as consumers turned to mobile apps for grocery and food delivery, socially distant shopping and innovating contactless pickup options. Outside of China, an early adopter of mobile shopping, global time spent in shopping apps grew 45% year-on-year. While the travel industry was hit hard by COVID-19, we saw local stays, outdoor exploration apps and micro-mobility platforms see strong growth in 2020 — as consumers sought local getaways, outdoor past-times and alternatives to public transport.

 

 

2021 and Beyond

During COVID-19, social distancing policies and lockdown measures were instituted to flatten the infection and death-toll curve and curb the spread. Consumers turned inward and settled into their homes — where mobile was the portal to the outside world. In 2021, we expect “at-home” activities to continue to dominate the landscape — with mobile solutions taking over a greater share of our lives in facilitating these activities. Time spent in key “at-home” categories is expected to top 1.3 trillion hours on Android phones alone in 2021.

Mobile usage has taken center stage in our lives — ingraining new app habits and permanently shifting the consumer landscape to a mobile-first world. Our new ways of living – and the greater demand for mobile solutions that come with it – means that we are likely to see app developers creating innovative solutions and performance improvements. By using App Annie data, the Global Innovation Index (GII) is keeping track-record of this in its mobile app creation indicator. Look out for the GII 2021, to be launched in September 2021 on how countries are performing in app creation.

ITU

Despite the growing demand for information and communication technology (ICT) professionals, women still trail their male counterparts in terms of pay, leadership roles, and representation in the digital sector.

The World Economic Forum’s Global Gender Gap Report 2021 suggests that only 14 per cent of those working in cloud computing, 20 per cent of engineers, and 32 per cent of data and artificial intelligence professionals are women.

These disparities are concerning, not least because technology-related careers arguably dominate today’s job market.

Moreover, the underrepresentation of women means their voices are absent from decision-making when it comes to designing our digital society.

 

Breaking barriers

Many of the causes of the imbalance stem from social norms, stereotypes, and values cultivated in childhood and adolescence. Barriers blocking gender equality in the technology sector arise early in life, with the lack of visible female role models in the ICT field playing a key part.

A report from UNICEF and the International Telecommunication Union (ITU), Towards an equal future: Reimagining girls’ education through STEM, finds that globally, only 18 per cent of girls in tertiary education are pursuing science, technology, engineering and mathematics (STEM) studies — compared to 35 per cent of boys.

In a similar vein, only 3 per cent of female students would consider a career in technology as their first choice, according to the joint report.

As we move further into the information age, women and men need to be equally represented as shapers of our increasingly digital world. One way to inspire and empower girls and young women is to showcase success stories.

The Talking Tech: Girls and Women in ICT interview series , for example, helps to counteract the ‘othering’ of girls and women in the sector.

Today, there is nothing they cannot achieve in this fast-evolving field.

 

Overcoming othering

The term ‘othering’ describes a pattern of exclusion and marginalization based on attributes such as race, age, gender or disability, which may differentiate the individual from perceived norms in a given context. In the workplace, othering can bar those outside the dominant culture from access to opportunities. Launched In April 2020, Talking Tech challenges the gender stereotypes that contribute to women’s minority status in the technology sector.

Sixteen months on, the series celebrated the milestone of 100 interviews, with over 200 tenacious girls and women challenging stereotypes and sharing their stories of personal and professional growth.

 

Intergenerational interviews

The intergenerational interview series supports the Girls in ICT Day initiative and the EQUALS Global Partnership. Run by ITU with the United Nations International Computing Centre (UNICC) and the UN Secretary-General’s Envoy on Youth, it enables aspiring ICT professionals to interview and be interviewed by role models who are leaders in their field.

Participants range from experts in artificial Intelligence (AI) to electronic sports (esports), astronauts to leaders of UN agencies, and ambassadors to corporate executives. In the interviews, women and girls from around the world share achievements and challenges, exchange advice and network with one another – all to inspire others with evidence that every girl can fulfil great potential in the ICT sector.

 

Evidence of empowerment

One young aerospace engineer – Inspired by her Talking Tech experience – launched her own podcast, in which she interviews professionals in the space sector. Another young woman called her interview for the series a “mind-changing experience for career-starters like myself”.

Not only does Talking Tech engagement help girls and young women build confidence. It also provides valuable networking opportunities – essential to build a career in today’s interconnected world.

In some cases, interviewers have been hired or offered internships at the interviewee’s companies. For interviewees, Talking Tech sometimes marks the beginning of a mentorship.

“I love the video,” one executive said after an interview session. But even more, she welcomed “the process of getting to know [my interviewer] and her objectives,” and was “looking forward to a long relationship with her as she navigates her career and life.”

The organizers feel gratified by such positive outcomes.

“We could not be prouder of this community of over 200 ladies committed to supporting one another,” said Anastasia Bektimirova, part of the Talking Tech team at ITU. “Envisioning how many more minds have been inspired and growth opportunities have been triggered by the project is deeply gratifying and shows how digital initiatives and partnerships can make a tangible, positive difference in people’s lives.”

WBG

Just before the coronavirus (COVID-19) pandemic struck, just over half of the world’s population approximately (51%) had access to the internet compared with just 30% in Western and Central Africa. With the strict lockdown implemented during the pandemic, many services were only available to people across the region through the internet.

Ever since, the need for universal, affordable, and safe high-speed connectivity has increased exponentially. West African countries will not be left behind and will need to deepen reforms and attract the necessary investments for increased digitalization of services, an essential condition for strong, resilient, green economic growth and quality job creation.

The stakes are therefore high and the region is showing tremendous potential and opportunities. Although the challenges are not to be underestimated, this potential allows us to hope that West and Central Africa will accelerate the digitalization of its economy. What will it take? Three important steps:

Four Challenges 

First, we must tackle the digital divide to provide access, usage, and affordability of the internet. Many West and central African countries have been facing four main challenges: low network coverage and quality, high operating costs, barriers to market entry, lack of competition, and high operating and investment risks.

Providing financial services via mobile phones can be difficult when only 40% of West Africans own a cell phone. This underlines the existing disparity between “the haves” and the “have-nots” when it comes to access and affordability of devices, the internet, and digital tools. This disparity also disproportionately affects rural populations, women, and vulnerable groups in the region. And there are significant differences across Africa.

While people in the Central African Republic pay more than 20% of their average earnings for 1GB of mobile broadband data, Egyptians only pay 0.5%.

In Senegal, only 26% of small firms use smartphones, compared with 65% in Brazil. During a pandemic, access to a smartphone not only connects people via messaging, but it can be a useful tool for businesses and economies.

Government Regulation

According to a World Bank/UN Broadband Commission report, it is estimated that the cost of closing this digital divide by 2030 in Africa alone will be US $100 billion.

This is why we must increase investments and attract the needed operators and strategic partners by mobilizing private capital, addressing capital risks, and building strategic alliances between governments and private operators.

We must also support the design and implementation of policies and regulations that de-risk and promote private investment in digital infrastructure. These two levers will help address the issues of affordability and make connectivity productive.

As digital infrastructure improves, there is a need for both the public and private sectors to promote and incentivize internet uptake by developing systems and applications that allow people to do meaningful transactions online, such as applying for government services, opening bank accounts, and applying for credit.

Unlocking New Opportunities with Digitalization 

Second, we must build ‘digital stacks’. Our research estimates that half a billion people in Africa lack an official ID, making it difficult for them to access key services and thus being denied the opportunities being created by digitalization.

Identification systems in some countries in West Africa are not yet inclusive and trusted. Current manual, paper-based approaches for identifying their population makes it hard for governments and the private sector to improve how their services are delivered and to reduce fraud and waste.

Digital IDs aligned with the ten Principles on Identification for Sustainable Development offer a solution to this, providing the opportunity to expand and transform delivery of healthcare, education, financial, and other key services, especially for rural populations, women, and the most vulnerable groups.

The good news is that many African countries are well on their way to developing these processes, and many are doing so with technical and financial support from the World Bank and our Identification for Development (ID4D) initiative.

Reliable Data

Digital IDs are one of three components of “digital stacks,” along with digital payments and trusted data platforms. A digital stack allows people and businesses to prove and verify their identity securely, make and receive payments fast and easily, and share and verify personal data, such as credit histories and academic qualifications.

Together, these functions unlock significant social and economic benefits and accelerate the transition to digital economies, societies and governments.

To succeed in the digital transformation agenda, we must work together to empower Africans with greater agency over their personal data and help governments ensure that cash transfers programs and services reach the right beneficiaries, reduce fraud and fiscal leakages.

This needs “whole-of-country” strategies, with strong leadership and coordination at the policy-level. It also needs the definition and implementation of common standards to ensure interoperability at the technical level, a strong data protection, and cybersecurity frameworks.

Finally, we must think boldly with regional and continental approaches. While continuing to drive digitalization efforts at the national level, West African countries must look beyond their own borders. I believe that success in the digital economy requires economies of scale and network effects far beyond what any individual country can muster on its own.

Time for a Single Digital Market in Africa. 

Our research in East Africa shows that a more deeply integrated and competitive digital market among the six East African Community (EAC) countries alone would generate up to a US$2.6 billion boost in GDP and 4.5 million new jobs in the subregion.  The potential of an integrated digital market in West Africa and at the continental scale is even greater.

To make this vision a reality, we need to support countries in modernizing and harmonizing telecoms and data policies and regulations to promote regional scale investments in broadband and cloud infrastructure and widespread access to relevant digital content and services – including in lagging areas. It will also require streamlining and harmonizing business registration and digital taxation policies, and enabling fast, low-cost, and reliable cross border digital to unlock digital trade and e-Commerce.

But none of this can happen overnight. A digital transformation in Africa will require greater leadership and collaboration from Governments, the Private Sector and Civil Society. We are working closely with sub-regional, continental and international partners, such as the African Union Commission (AUC), the Regional Economic Communities, and Smart Africa.

The COVID-19 pandemic shows a unique opportunity to reverse inequality and promote strong economic growth.  Accelerating Africa’s digital transformation can be a part of this reality. It will require closing the digital divide, building digital stacks, and achieving a Single Digital Market. We need to act now.

IDB

TWENTY WOMEN-LED STARTUPS WILL BE SELECTED TO PARTICIPATE IN THE CUSTOMIZED LAC WOMEN FOUNDERS ACCELERATOR PROGRAM

 

IDB Lab , the innovation laboratory of the Inter-American Development Bank, joins Google in LAC Women Founders Accelerator , an acceleration program for STEM startups led by women in Latin America and the Caribbean.

WeXchange , an IDB Lab platform that fosters the growth of women technology entrepreneurs in the region and Google, in collaboration with Centraal, the entrepreneurial hub in Mexico, have designed a highly customized, ten-week-long virtual program to help entrepreneurs from the region expand their networks, access mentors and investors, and receive training on key topics to develop their startups.

Startups with at least one female co-founder or one woman on their leadership team, with technology as a key component of their business, and with headquarters and operations in at least one Latin America or the Caribbean country, may apply.

The application period is open until September 12, 2021.

The 20 selected startups will participate in a program that includes workshops on technology, digital marketing, leadership, business culture, and fundraising, beginning with a specific diagnosis of each startup and the unique challenges it faces. The entrepreneurs will also have numerous one-on-one mentoring sessions with investors and experts from Google, WeXchange/IDB Lab, and Centraal’s networks.

The program will include a Demo Day, during the ninth edition of the WeXchange annual forum, that will take place, virtually, on December 1st and 2nd, 2021. During this event, the entrepreneurs will have the opportunity to pitch their companies in front of a group of venture capital investors from the region. This year´s forum is being made possible thanks to the support of the Women Entrepreneurs Finance Initiative (We-Fi).

“IDB Lab’s strong commitment to gender diversity and inclusion in the entrepreneurial ecosystem, is one of the cornerstones of the IDB Group’s Vision 2025, with which we seek to drive recovery and inclusive growth in Latin America and the Caribbean. This unprecedented alliance between WeXchange, Google, and Centraal will allow us to provide relevant tools to women entrepreneurs in STEM who are developing innovative solutions to solve great challenges, thus contributing to the probability of success of their startups and the development of the region,” said Irene Arias, CEO of IDB Lab.

“We are excited to extend the reach of Google for Startups Accelerator through this collaboration with IDB Lab and Centraal. Strengthening diversity in entrepreneurship is part of our mission and carrying out this program in Latin America will allow us to support women who are creating companies addressing the great challenges of our region. The talent is here, and we want to contribute to its growth and development”, said Francisco Solsona, Lead of Google Developers LATAM.

“Our goal is to empower and strengthen the creation of Latin American startups led by women. We not only want to celebrate their work and successes but, above all, to have an impact on the entrepreneurial ecosystem of the region, so that women entrepreneurs think beyond their borders, and we see more and more startups operating throughout Latin America,” explained Rogelio Cuevas Ruiz, from Centraal and part of the organizing team.

For more information visit the WeXchange website.

 

About IDB Lab

IDB Lab is the innovation laboratory of the Inter-American Development Bank (IDB) Group, the main source of financing and knowledge for development focused on improving lives in Latin America and the Caribbean. IDB Lab’s purpose is to drive innovation for inclusion in the region, mobilizing financing, knowledge, and connections to test private sector solutions in early stages with the potential to transform the lives of vulnerable populations due to economic, social, and environmental conditions. Since 1993, IDB Lab has approved more than $2 billion in projects deployed in 26 countries in Latin America and the Caribbean.

About Google

Google is a leading global technology company dedicated to improving the ways people connect with information. Google’s innovations in Internet search and advertising have made its website one of the leading products on the Internet and its brand is one of the most recognized in the world. Google is a trademark of Google Inc. All other company and product names are trademarks of the companies with which they are associated.

About Centraal

Centraal is a link and catalyst to promote innovative projects of startups, companies, and multiple organizations. Their goal is for entrepreneurs and game changers to transcend, develop value projects and strengthen the organizations and people who work to solve the problems that positively transform the world.

UPU

An interactive session held on the sidelines of the 27th Congress highlighted the findings of a new study on promoting innovations on postal financial services.

Opening the session, UPU Financial Inclusion Manager Saleh Khan noted the important role posts could play in national development dialogues as trusted providers of secure, modern and expansive financial services.

“We recognize the need for Posts to offer customer-centric, inclusive postal financial services to remain relevant in society and to customers,” he said.

He explained that the new study, conducted with MicroSave Consulting, drew upon inputs from mobile network operators and fintechs, posts, regulators, funders, digital financial services agents and think tanks to provide policymakers and posts with a concrete set of recommendations for digital financial services innovations.

In presenting an overview of the study’s key findings, MicroSave Consulting Senior Manager for Private Sector Development Justus Njeru reassured participants that posts have a competitive advantage in the digital financial services sphere due to their large client base, trust, expansive physical network and experience.

“If we can build on [these factors], then the Post would be able to give a broader range of citizen-centric services to its customers,” he added.

Mr. Njeru noted that posts should be focusing on developing their credit, savings, investment and protection services as customers are now interested in more than money transfer and bill payment services.

In addition to reviewing highlights of the study, the session also invited inputs from postal and private sector experts.

Egypt Post’s General Manger of Quality Control, Nermin Hassan, shared the Post’s own success story on increasing financial inclusion through innovations in postal digital financial services. She noted that the Post now holds more than 25 million savings accounts and provides the most extensive domestic money transfer network in the country. The Post released its first mobile app in 2019 in response to the increasing use of mobile wallets – now numbering 16 million across the country. It is now operating a sought-after micro-finance portal connecting customers with loan providers. The Post’s goal is “not to leave anyone behind,” she said.

Speaking on the upcoming mega-trends, Amina Tirana, an Equity and Inclusion Fellow with Visa’s Economic Empowerment Institute, highlighted contactless payments, mobile direct payments, seamless payments, and cryptocurrencies. However, she noted that integration, interoperability and security should be considered prerequisites to developing these services.

MicroSave Consulting Digital Financial Services Specialist Juliet Ongwae recommended posts harness the Big Data available to them to keep their sights on changing customer needs and desires.

The full study conducted by the UPU’s Financial Inclusion Programme will be released in September.​

IDB
  • Streaming entertainment service partners with Bank to promote the development of 21st century skills, including in the digital and creative economy in Latin America and the Caribbean.

Netflix has joined the Inter-American Development Bank’s (IDB’s) 21st Century Skills Coalition in Latin America and the Caribbean, leveraging its expertise to help address skills shortages in the region’s entertainment industry and to develop new opportunities to improve education and increase job creation and growth.

The 21st Century Skills Coalition is a multi-sector partnership that supports a new generation of education and training policies in the IDB’s 26 borrowing member countries. Bringing together the public and private sectors, the Coalition’s work supports the development of transversal skills that are critical for success in the rapidly changing 21st-century labor market.

Netflix will be sharing its broad experience and expertise, collaborating with the Bank to generate knowledge and better identify the competencies required to boost the region’s creative industries, or “orange economy.” The organizations will also support development of skills in film and entertainment.

“This partnership with Netflix will help the region’s youth press play on new opportunities. Together, we can leverage Latin America and the Caribbean’s creative talent and potential, giving workers 21st-century skills and tools to thrive, and giving local economies a jumpstart,” said IDB President Mauricio Claver-Carone. “In supporting job creation, small businesses and digital-skills development, this collaboration furthers the fundamental goals of Vision 2025, our blueprint for post-pandemic economic recovery and growth.”

In 2019, approximately $5.7 billion was invested in audiovisual production in Latin America and the Caribbean, driving the creation of more than 1.6 million direct and indirect jobs. A forthcoming IDB-Netflix study, “Behind the Camera: Creativity and Investment for Latin America and the Caribbean,” will highlight the challenges and untapped opportunities available to take this and related industries to the next level.

Launched by the IDB in October 2019, the 21st Century Skills Coalition now counts 45 public- and private-sector partners with the addition of Netflix.

About the IDB

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public- and private-sector clients throughout the region.

About Netflix

Netflix is the world’s leading streaming entertainment service, with over 209 million paid memberships in over 190 countries enjoying TV series, documentaries and feature films across a wide variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments.

ITC

Between 20 July and 28 September 2021, the International Trade Centre (ITC) is holding several weeks of training to build the capacity of BSOs and businesses in Côte d’Ivoire to better prepare them for participation in online trade fairs and business to business (B2B) events. The training is part of ITC’s United Kingdom Trade Partnerships Programme (UKTP) in Cote d’Ivoire and funded by the UK Foreign, Commonwealth and Development Office.

The COVID-19 pandemic has caused unprecedented disruption to trade activities throughout the world. It also has had a strong impact on trade promotion dynamics. Trade fairs, an indispensable means of trade promotion, have been cancelled or switched to an online mode. Stakeholders, including micro, small and medium-sized enterprises (MSMEs) and business support organisations (BSOs) such as chambers of commerce, trade associations and other institutions, must adapt to this new reality.

The restricted movement during the global pandemic has hindered the organisation of trade fairs, a necessary means for MSMEs to promote their products in international markets. Trade fairs have significant advantages in terms of trade promotion, as they allow companies to have direct exposure to international buyers and suppliers as well as government agencies, media, and influencers in one place. They also allow them to exchange information with other businesses, analyse the competitiveness of their products compared to others, expand their network through face-to-face communication, and raise the visibility of their brand.

BSOs play a particularly important role in the organisation of trade fairs. They can inform exporters of legal requirements, organise networking events and communicate with the media. They are also better placed to promote a national or sector branding effort and contribute to the attraction of investment.

However, MSMEs and BSOs are not always aware of the challenges and opportunities related to trade fairs and are often unfamiliar with the new reality of virtual engagements.

Therefore, UKTP Cote d’Ivoire is organising a “Training of Trainers” workshop which aims to increase the capacities of BSOs so that they can support their members in making the best out of both physical and virtual trade fairs.

Through 13 sessions, including technical knowledge as well as “soft skills”, the BSOs will learn how to advise Ivorian exporting companies/cooperatives to utilise trade fairs as a platform, where they can move ‘from contacts to contracts’, with the overall goal to increase exports to UK and EU markets. Training the trainers is an approach that ensures the sustainability of the project as it builds stronger institutional capacity among MSMEs over the longer-term.

One of the participants, Casimir Kouakou from the Chamber of Commerce and Industry, said that the “training reinforces my skills in accompanying businesses wishing to participate in trade fairs. I really enjoyed the module on the trade fair selection process and the module on planning and budgeting for participation in fairs.”

The ability to navigate these trade fairs is becoming a more important skill in the new global trading environment. Trade growth is likely slow to 4% in 2022, with the total volume of trade remaining below the pre-pandemic trend1. New waves of infection could easily undermine economic recovery, and future disruptions are likely to have a more damaging effect on the most vulnerable people, pushing an estimated additional 130 million people into extreme poverty2.


1 World Trade Organization, “World trade primed for strong but uneven recovery after COVID-19 pandemic shock”, available at: https://www.wto.org/english/news_e/pres21_e/pr876_e.htm, accessed on 03-08-2021.

2 UNCTAD, 2020, “Impact of the COVID-19 Pandemic on Trade and Development: Transitioning to a New Normal”.

WBG

Washington DC, August 16, 2021The World Bank announced today the launch of a new Cybersecurity Multi-Donor Trust Fund under the broader Digital Development Partnership (DDP) umbrella program.

Digital transformation is accelerating in many countries, offering new opportunities for economic growth and enabling low- and medium-income countries to leapfrog development through increased productivity and improved service delivery across key sectors, including finance, health, education, and agriculture.

Embracing technological transformation has increased cyber risks and threats to digital infrastructure, services, and data, which rely on increasingly connected systems.

As digital transformation becomes essential to the functioning of states, economies, and societies, cybersecurity solutions must keep up. A partnership approach can help build trust, improve awareness, and deliver the technical solutions that countries require.

“COVID-19 has highlighted the vital role digital technologies and applications play in a resilient development agenda. It keeps people, businesses, and public services connected. As governments are rapidly scaling up their investments into digital technologies, cybersecurity has become a pressing concern to ensure a safe and secure digital transformation for all,” said Boutheina Guermazi, Director of the World Bank’s Digital Development Global Practice. “Fostering safe digital inclusion is of paramount importance for the World Bank’s work in helping countries reduce poverty, tackle inequality, and accelerate economic growth.”

The new fund aims to better define and systematically roll out the cybersecurity development agenda, helping to ensure a more substantial reflection of cybersecurity considerations across World Bank programs and financing. The work program will support the development of global knowledge on cybersecurity solutions for low- and middle-income countries. It will fund country maturity assessments, offer technical assistance, and support training and capacity development for cybersecurity staff in World Bank client countries.

The launch of the Trust Fund is made possible with donor contributions from Estonia, Germany, Japan, and the Netherlands.

“It is essential that basic cybersecurity elements are integrated into all digitalization projects in development cooperation,” said Mari Tomingas of the Cyber Diplomacy Department of the Ministry of Foreign Affairs of Estonia. “As a highly developed digital nation, we continue to share our expertise, and we are very happy about the launch of the new associated trust fund.”

“Cyberattacks are becoming more complex and sophisticated across the world,” said the representatives of Japan’s Ministries of Foreign Affairs and Internal Affairs and Communication, Narichika Konno and Atsushi Umino. “Effective communication through digital technologies is a public good and can be best achieved if low- and middle-income countries are included in the effective protection of critical digital infrastructure. The importance of capacity building in matters of cyberspace is therefore increasing rapidly.”

“There is widespread agreement in the international community that significantly more cybersecurity capacity building is needed to help low- and middle-income countries become more resilient against attacks and take full advantage of the development opportunities of the digital economy,” said Felix Kroll of the Cyber Foreign Policy and Cyber Security Coordination Staff of the German Federal Foreign Office.

“All of our economies, including those of rapidly-digitizing lower- and middle-income countries, increasingly depend on good cybersecurity to grow and thrive,” said Elizabeth Vish of the Office of the Coordinator for Cyber Issues of the U.S. Department of State. “We believe the international community will be more secure, stable, and prosperous when a broad range of states has the capacity to defend their own networks.”

“Malicious code—whether you call it a software bug, a virus, malware, ransomware, botnet, or phishing—presents a risk that is globally interconnected and potentially devastating to digitally dependent societies. Addressing this risk requires collective action. Cybersecurity should be a key pillar of any development conversation,” said Kanwaljit Singh of the Bill and Melinda Gates Foundation.

Progress will require partnership and collaboration between and among partners, also involving other international institutions and organizations.

“Cybersecurity must become an integral part of the digital agenda. Synergies are crucial, and the activities to be carried out should be taken up broadly through development financing programs,” said Michael Thijssen of the Task Force Cyber Policies of the Ministry of Foreign Affairs of the Netherlands. “Partnerships such as the Global Forum for Cyber Expertise (GFCE), NGOs, and research institutes can help ensure a broad stakeholder process. We are looking forward to great results to be supported through the new trust fund over the years to come.”

WBG

The COVID-19 crisis has hit the Latin America and Caribbean (LAC) region harder than any other region in the world and has brought the need for a resilient and inclusive recovery into sharp focus. Greater digital access—in support of distance learning, digital cash transfers, telemedicine, and online public services—is the cornerstone of this agenda and requires both an ambitious policy and regulatory agenda as well as increased infrastructure investments. This is particularly important as the region gears up for 5G auctions and continues its 4G expansion.

The case for digital access is clear. Digitization boosts social and financial inclusion as well as learning and health outcomes.  Almost half  of LAC’s adult population is currently unbanked. Around 170 million students across the region were affected by school closures during the pandemic. And 71% of countries experienced disruptions to the delivery of care for noncommunicable diseases during the first months of the COVID crisis.

But the challenges are substantial: poor and uneven coverage, coupled with high data and device costs, continues to hamper digital access .

Today,  less than 50% of LAC’s population has fixed broadband connectivity, and only 9.9% has high-quality fiber connectivity at home. While 87% of the population lives within range of a 4G signal, actual usage and penetration remains low (37%).  And only 4 out of 10 rural Latin Americans have connectivity options compared with 71% of the population in urban areas.

Data plans and internet-enabled devices are not affordable for the region’s poor. On average, a measly 1GB data plan costs 2.7% of monthly household income in LAC (or 8-10% for the bottom quintile in some countries), well above the International Telecommunication Union’s 2% affordability threshold. In addition, the cheapest basic smartphone available costs between 4 and 12% of average household income in much of the region, and as much as 31-34% for people in Guatemala and Nicaragua or even 84% for people in Haiti.

With these cost burdens weighing disproportionately on vulnerable populations, uneven digital access could give rise to new forms of inequality in what is already the world’s most unequal region.

Addressing the digital divide

Tackling the digital divide is imperative and will require policy actions to reduce cost, expand access, and incentivize greater private-sector and citizen participation, especially in four areas.

  • First, LAC governments should pursue inclusion through service provision and legal and regulatory reform. This may include rolling out foundational digital identification systems for all citizens to allow secure and trusted access to public and private platforms; promoting infrastructure sharing among network operators and access to “dark fiber” owned by governments, utilities, and others; increasing competition in a highly concentrated market of mobile operators to stimulate innovation and investments by promoting open access, technology neutrality and greater security options; attaching network build-out obligations for underserved areas to 4G and 5G spectrum licenses; and streamlining administrative and approval processes. On average, LAC countries with clear, predictable regulations attract almost 50% more investment in ICT (and 64% more when coupled with good institutions).
  • Second, policymakers should consider, direct or indirect financial incentives for both digital customers and operators as appropriate. On the demand side, subsidizing internet costs for the poorest and reducing taxes and customs duties on low-cost internet-capable devices can help bring down prices that exclude the poor. On the supply side, governments can use minimum subsidy concessions or temporary investment tax incentives to induce network operators to extend service into underserved regions. Similar initiatives could also encourage private firms and investors to scale up other digital infrastructure such as local data centers. LAC is currently home to only about 4% of the world’s data centers and total data center capacity in the region is estimated to be smaller than the capacity installed in Northern Virginia.
  • Fourth, digital expansion should not operate in a connectivity silo. Complementary measures such as digital skills training, need to be accelerated. Only 5-15% of adults in most LAC countries have medium or strong computer and problem‑solving skills in technology‑rich environments (vs 29.7% in OECD countries). Digital capacity building is beneficial to students and workers, as well as policymakers and regulators seeking technical expertise in digital infrastructure and related areas (data privacy, cybersecurity, digital tax, etc.).

Digital transformation holds tremendous promise for LAC but unlocking its many benefits will require a concerted effort . Multilateral institutions can help.

The World Bank, for instance, is helping provide some 1,300 public institutions with broadband connectivity in Haiti and assisting the Colombian government with policy and regulatory improvements for expanded broadband access.

While most LAC countries will continue to focus on the pandemic response in the near future, now is the time to seize the digital opportunities that will enable to region to unlock a greener, more resilient and more inclusive future.

UNIDO

Embedding digitalization as part of the wider industrialization strategy can enable developing country firms to climb up the value chain ladder.

 

It has been well-established in economics literature that a country’s economic long-term growth depends not only on how much it exports but also what it exports.1 Increases in product sophistication advance the technological frontier of a country and improve its growth performance, enabling the country to climb up the export value chain, thereby driving economic development.2 Product upgrading has emerged as a key strategy for capturing higher value addition in global value chain (GVC) literature as well.

Linking into GVCs can be an important driver of product upgrading; firms benefit from access to cheaper and better quality imported inputs, and learn from the knowledge and technology embedded in imported intermediates, as evidenced in the case of Indian firms.3 They also have higher incentives to innovate as a result of access to international export markets, as the case of Italian firms demonstrates.4 A firm involved in both importing and exporting products can create cost complementarities, which can have a positive impact on product scope, the introduction of new products and product sophistication.5 Some studies propose combining the top-down approach of upgrading in GVCs with the bottoms-up approach of technological capabilities.6 The internationalization of Italian firms, for instance, did not necessarily lead to good performance, as both international presence and innovation efforts in terms of product, processes and technologies are essential elements of global competitiveness. Firms that achieve gains in terms of profit and growth are those that invest in R&D, codified knowledge, design and innovative information and communications (ICT) solutions.7

Digitalization and upgrading in GVCs

Digital capabilities can be thought of as a subset of wider technological capabilities for acquiring, absorbing and adapting technology. This can include capabilities in terms of ‘hard’ digital infrastructure, such as investments in computers, Internet of Things (IoT) sensors, routers and other physical ICT infrastructure, and ‘soft’ digital infrastructure, such as the use of software, cloud-computing, intellectual property, networking capacity, etc. Overall, investment in digital capabilities can open new opportunities for developing country firms to reduce their production and transaction costs8. Emerging case studies have unearthed different channels through which digital technologies are impacting product upgrading.

Digital technologies reduce the product development timeline and costs, which can lead to digital engineering and subsequent improvements in pre-manufacturing stages, such as R&D and design. For example, Panessar Interiors, a Kenyan furniture manufacturing firm, is using auto CAD design software, which enables the creation and presentation of 3D designs for customers, allowing for easy revisions and changes to designs and the customization of doors and drawers.9

The digitalization of manufacturing increases firm efficiency and cost savings which can be reinvested into improving product quality and moving into more sophisticated product lines. For example, Hyundai Motors India Limited and Mahindra and Mahindra initially specialized in the manufacturing of commercial and utility vehicles, but later developed capabilities to serve the passenger car segment by investing in digital technologies, which enabled the production of higher output without major changeover costs, faster delivery time, and higher quality.10

Digital technologies reduce the costs of exchange and trade through intermediation by digital platforms, including business-to-business (B2B) and business-to-consumer (B2C) e-commerce. Firms can now more easily source inputs online and at more competitive rates. For instance, in Cambodia, e-commerce has enabled the shift of production from cereals towards higher value-added products such as fresh mangoes and cashew nuts.11

Market-related sales data can be used for product design and development, which may help firms enter into new products and sectors in a targeted manner. Firms that control these data and possess the required analytical capabilities can identify the heterogeneity of demand patterns both between and across developed and developing country markets and are thus able to undertake targeted product development accordingly.12

In addition to digital capabilities, suppliers’ managerial capabilities also matter for reaping the benefits of the digital economy. Digitalized products tend to involve very complex knowledge that is highly tacit in nature and difficult to codify into standards and blueprints.13 When knowledge is tacit, passive learning by suppliers (i.e. by using capital goods or through technology embedded in FDI) may not be sufficient to acquire technical knowledge, and in such cases, suppliers will need to make increased investments in skills development.

Evidence from Indian manufacturing

India makes for an interesting case – numerous initiatives have been taken by the government to digitally transform India under the ‘Digital India’ programme. While India ranks high in terms of digital services exports compared to other countries, it lags behind not only developed countries, but also many developing economies in terms of digital preparedness in manufacturing trade, including in its traditional export sectors.14

Whether digital capabilities and skills development are driving product upgrading in Indian GVC firms is explored using panel data of manufacturing firms from Prowess database for the period 2000/01–2014/1515. GVC firms are defined as those that simultaneously import and export intermediate goods, while Hausmann et al.’s PRODY index is used to calculate product sophistication.16 Higher product sophistication gains from linking into GVCs are evident for Indian manufacturing GVC firms (figure below). The average annual growth in firm-level product sophistication is significantly higher in GVC firms (two-way traders) than in non-GVC firms (domestic firms and one-way traders).

Growth in product sophistication across GVC and non-GVC firms (2001–2015), in %

Note: Using the t-test, we find that that there is a statistically significant difference in the means of growth in product sophistication across GVC and non-GVC firms at 5 per cent. Growth is calculated as change in log product sophistication. The average sales-weighted firm product sophistication index is constructed by matching product-firm data in Prowess with trade data in UNCOMTRADE.
Source: Author, constructed from Prowess.

An empirical analysis of the sub-set of GVC firms finds that firm-level digital capability has a positive and significant effect on product sophistication, on average and all else equal, implying that as GVC firms spend a larger share of their sales on software, technology and communication assets, their product sophistication rises. Hence, by investing in digital capabilities, firms can upgrade to more sophisticated product lines that capture higher value added in GVCs. The share of skilled labour is also found to have a positive and significant impact on firm sophistication, suggesting the important role a well-skilled manufacturing workforce plays in producing more sophisticated goods.

Indian GVC firms that belong to more concentrated industries are producing more sophisticated goods, indicating that manufacturing industries that are more concentrated generate larger profits for firms, which can be reinvested to create more sophisticated product lines. Interestingly, younger Indian GVC firms are more sophisticated; while older Indian firms are likely to hold greater market power and the ability to innovate, it is the younger firms that have more incentives to innovate and remain competitive. The survival and growth of younger firms may depend more heavily on product innovation and the manufacturing of more sophisticated goods. No significant impact of foreign shares or foreign acquisition is found on firm-level product sophistication, perhaps due to cost-saving strategies pursued by foreign investors in India. Yet they invest in Indian firms to produce less sophisticated, low-cost goods, which are then exported to the foreign investor’s home country.17

Indian GVC firms that are digital leaders, i.e. that have both a digital capability index and skill level above the median industry level have a 4.5 per cent to 5.5 per cent higher product sophistication, on average and ceteris paribus, compared to digital laggards, i.e. firms in which both the digital capability index and skill level is below the median industry level. Product sophistication among digital leaders has in fact remained consistently higher than among digital laggards (figure below).

 

Product sophistication index in GVC firms

Note: Digital leaders are categorized as firms with a digital capability index and skill level above the median industry level. The digital capability index is constructed using Principal Component Analysis on the share of the firm’s software, technology and communication assets in its total sales. Skill level captures the share of managerial remuneration in total labour compensation.

Source: Author, based on Prowess data.

  • Karishma Banga is Research Fellow, Digital and Technology Cluster at the Institute of Development Studies.

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

 


References

  1.   Jarreau, J. and S. Poncet (2012). Export sophistication and economic growth: Evidence from China. Journal of development Economics, 97(2), pp.281-292.
  2.   Hausmann, R., J. Hwang, and D. Rodrik (2007). ‘What You Export Matters’. Journal of Economic Growth, 12(1): 1–25.
  3.   Goldberg, P.K., Khandelwal, A.K., Pavcnik, N. and Topalova, P. (2010). Multiproduct firms and product turnover in the developing world: Evidence from India. The Review of Economics and Statistics92(4), pp.1042-1049.
  4.   Bratti, M. and Felice, G. (2012). Are exporters more likely to introduce product innovations?. The World Economy35(11), pp.1559-1598
  5.   Lo Turco, A. and Maggioni, D. (2015). Imports, exports and the firm product scope: evidence from Turkey. The World Economy38(6), pp.984-1005
  6.   Pietrobelli, C. and Rabellotti, R. (2011). Global value chains meet innovation systems: are there learning opportunities for developing countries?. World development39(7), pp.1261-1269.
  7.   Chiarvesio, M., Di Maria, E. and Micelli, S. (2010). Global value chains and open networks: the case of Italian industrial districts. European Planning Studies18(3), pp.333-350.
  8.   Banga, K. (2021). Digital Technologies and Product Upgrading in Global Value Chains: Empirical Evidence from Indian Manufacturing FirmsThe European Journal of Development Research.
  9.   Banga, K., and D. W. te Velde (2018). ‘How to Grow Manufacturing and Create Jobs in a Digital Economy: 10 Policy Priorities in Kenya’. Report. London: Overseas Development Institute.
  10.   Ray, S., and S. Miglani (2018). Global Value Chains and the Missing Links: Cases from Indian Industry. New Delhi: Routledge India
  11.   ITC (2018). What Sells in E-Commerce: New Evidence from Asian LDCs. Geneva: International Trade Centre.
  12.   Mayer, J. (2018). ‘Digitalization and Industrialization: Friends or Foes?’. Research Paper 25. Geneva: UNCTAD.
  13.   Andrews, D., Criscuolo, C. and Gal, P. (2016). The global productivity slowdown, technology divergence and public policy: a firm level perspective. Brookings Institution Hutchins Center Working Paper24.
  14.   Banga, R. (2019). ‘Is India Digitally Prepared for International Trade?’. Economic and Political Weekly, 54(5).
  15.   At the country level, the existing literature has proxied the extent of digitalization through different indicators, including robot density, e-commerce growth, digital servicification of manufacturing and internet penetration. At the firm level, particularly for Indian manufacturing firms, data on the use of digital technologies, robotics, and e-commerce are not available. Therefore, the study measures digital capability at the firm-level, using information on (1) communication and transport infrastructure; (2) technology assets, which refers to gross plant, machinery, computers, and electrical installations; and (3) software assets of the firm.  
  16.   Hausmann, R., J. Hwang, and D. Rodrik (2007). ‘What You Export Matters’. Journal of Economic Growth, 12(1): 1–25.
  17.   Eck, K., and S. Huber (2016). ‘Product Sophistication and Spillovers from Foreign Direct Investment’. Canadian Journal of Economics, 49(4): 1658–84.
  18.   Foster, C., M. Graham, L. Mann, T. Waema, and N. Friederici (2018). ‘Digital Control in Value Chains: Challenges of Connectivity for East African Firms’. Economic Geography, 94(1): 68–86.

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