Explainer: A fact-based approach to growing digital economies in the Pacific

Recent development initiatives in the Pacific have focused on building the conditions for digital economies to thrive and benefit everyone.

But what is the digital economy and why is it important? How can it help improve living standards in the region?

The concept is almost as young as the internet – and the two are inextricably linked.

In a digital economy, economic activity is generated using digital technologies and the internet, with data as a key input for production. There is a strong reliance on interconnectedness and good infrastructure.

Some examples include online shopping or e-commerce, mobile money transactions (m-paisa and MyCash), including e-bill payments, digital banking, virtual education, smartphone apps and more.

The digital economy is transforming traditional ways of doing business.

Digital economy news website, TechCrunch, summed up the phenomena well in a 2015 blog: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

It’s important because in the Pacific, there is evidence that digital technologies can help overcome the challenges of geography and make financial services more accessible for hard-to-reach communities. They can also make it easier for small businesses to attract new customers.

This is recognised in the Pacific Islands Forum regional e-commerce strategy and roadmap, endorsed by leaders in 2021, and in the national e-commerce strategies for Samoa, Solomon Islands, Tonga and Vanuatu. E-commerce allows anyone, anywhere, to increase their income by selling goods and services online.

But despite the growing importance of the digital economy in the Pacific, there is a gap in research on the topic, which risks uninformed policymaking and programming.

To fill the gap, the UN Conference on Trade and Development (UNCTAD), in partnership with the UN Capital Development Fund (UNCDF)) and the Pacific Islands Forum (PIF), is today launching the Pacific Digital Economy Report.

The report is an initiative of the Pacific Digital Economy Programme (PDEP) that is jointly implemented by UNCDF, UNCTAD and the UN Development Programme (UNDP), and funded by the Government of Australia.

What is the Pacific Digital Economy Report (PDER)?

The PDER is a comprehensive account of how the digital economy – digital infrastructure, the internet, smartphones, e-commerce, mobile banking, digital products/services, etc. – can be used to improve livelihoods in the Pacific.

The report aims to promote digital technologies as a means of achieving development outcomes and higher standards of living: more jobs, higher incomes, innovation, efficient business processing, trade that benefits everyone, access to services, financial inclusion and so much more.

It is the first regional edition of UNCTAD’s flagship Digital Economy Report global series that is published every two years.

The report will serve as an authoritative source of information in the region as the digital economy gains momentum and digital tools become a staple in everyday life.

Why is it important?

The world is heading towards more digitally connected economies and societies like a bullet train, given the obvious benefits.

Consider global smartphone usage, for example: According to GSMA’s The Mobile Economy Report, 75% of the world’s 5.3 billion mobile subscribers in 2021 were smartphone owners.

Online shopping is also growing. Between 2017 and 2021, the number of people shopping online increased from an estimated 1.3 billion to 2.3 billion people (from 24 per cent to 39 per cent of the global population aged 15 and older). This has enormous implications for businesses and consumers, and society at large.

The Pacific has a choice: hop onto the train and capitalise on the power of digital to transform economies and societies for the better, or risk losing out on the benefits.

Pacific Islanders and businesses are already engaging in the digital economy on a daily basis. The report is concerned with preparing the region for the inevitable so that developments take place in a systematic manner and are informed by sound research.

It advocates for inclusive digital economies that benefit everyone, including women and girls, youths and people with disabilities, and doesn’t just work for the well-educated and high-income earners. .

The report is also important because these are still early days for the digital economies of the Pacific and there is still time for policymakers to make the informed decisions.

In some countries, huge global corporations are dominating the digital economy. If this is something the region does not want, a lot depends on the actions policymakers take today.

Consider the scenario of Amazon or Alibaba entering the Pacific in a big way and making it easier for Pacific Islanders to buy goods and services overseas. Would this benefit Pacific MSMES? Would this benefit rural Pacific farmers? Women-owned businesses?

It may seem farfetched because the Pacific is still in the early stages, but without deliberate thought and action about the way forward, the risk of the benefits of the digital economy going outside the region is real.

What are three major findings of the report?

1. The digital economy is beginning to emerge across the Pacific, but it risks widening existing divides. Given the risks, inclusion should be placed at the center of the digital development agenda.
2. Policies and regulations in the Pacific need to be adapted to the digital era. Policies in the region on data, competition, taxation, labour markets, trade, consumer protection and others have not been adapted to the digital economy. Hint: they should be.
3. More research is needed so policymakers can make informed decisions as they build inclusive digital economies in the Pacific. And more development partner support is needed to support the region’s digital transformation.

Who is the key audience?

The report is primarily aimed at policymakers and central banks in the region. However, there are important nuggets of information for academics and educators, journalists, researchers, the private and NGO sector, entrepreneurs, foreign investors, the general public and more.

Development partners and international organisations can also use the report to plan their interventions and programming.