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Towards a Thriving Digital Economy in South Asia

Hartwig Schafer and Christine Zhenwei Qiang

When walking around the streets of Kathmandu, you will notice stickers with quick response (QR) codes at stores and restaurants. People can pay businesses by scanning these ubiquitous QR codes with one of the many financial services apps available on their smartphones. This system, set up a few years ago, saw widespread use by businesses and consumers in Nepal during the COVID-19 pandemic, when social distancing meant that people wanted contactless modes of payment. Today, one can use QR codes to make purchases at a large grocery store in Nepal or buy something from a local handcart vendor.

Three thousand miles away, digital innovations are also sweeping across the Maldives: Odiapp, a simple yet powerful application allows people to buy tickets online for transportation on boats that connect the country’s hundreds of islands together. Odiapp helps citizens plan trips better and reduce travel costs, while also helping transportation providers plan schedules and routes efficiently, reducing both fuel consumption and emissions.

South Asia has much to gain from such digital innovations—provided some fundamental bottlenecks are cleared to pave a new way forward—points out a new report by the World Bank titled South Asia’s Digital Opportunity: Accelerating Growth, Transforming Lives.

Opportunities Abound, Gaps Remain

Clearly, digital technology can transform lives and grow economies. But the full potential of digital transformation across South Asia remains untapped. About a billion people across South Asia are still not connected to the Internet and smart phones remain unaffordable for millions of people. These gaps hit hard when the COVID-19 pandemic caused schools to close, and classes had to shift online. The UNICEF estimates that at least 38% or 147 million schoolchildren across South Asia were unable to access remote learning during the COVID-19 pandemic. World Bank surveys in Nepal found that barely one percent of families benefited from mobile based educational services during the school closures.

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The full potential of digital transformation across South Asia remains untapped. Credit: Mahima Manandhar, World Bank

Also, despite its abundant promise, it is true that not everyone across the region is able to take advantage of the opportunities that digital can bring. Job creation in the digital economy might be limited, as many people—especially women and persons with disabilities—do not have the skills required to access those jobs. There are also gaps in the digitalization of economic activities across the region due to difficulties that businesses—especially those that are small, rural, or women-owned—face in accessing finance, adopting e-commerce technologies, or acquiring essential employment skills.

Getting Digitalization Right for South Asia

South Asia’s Digital Opportunity: Accelerating Growth, Transforming Lives identifies three cross cutting recommendations across countries and topics:
First, be deliberate about inclusion. Only a third of the people in the region subscribe to mobile internet services; women in the region are 36 percent less likely to use mobile internet than men; and very low levels of digital literacy limit the use of innovative services in rural areas or lower-income households. Such gaps and the resulting economic divides widened during the COVID-19 pandemic. Digitalization efforts need to be made for all, everywhere. Closing gaps in the use of technology—among rural, female, social minorities, persons with disabilities, the elderly, and the poor—will be key to boosting shared prosperity in the global digital economy.

Second, countries will need to strengthen the institutions charged with promoting and regulating the digital economy. Countries across South Asia will need to mobilize private capital to ensure that everyone, everywhere is connected in addition to motivating innovation by private and civil society actors. Regulatory frameworks would need to evolve through engagement with the private sector and civil society, providing certainty while also ensuring competition and innovation.

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Credit: Mahima Manandhar, World Bank

Third and finally, governments will need to accelerate efforts to put in place and operationalize enablers and safeguards to promote trust in the digital realm. As more systems come online, and more data is digitized, their protection also comes with new challenges and risks. However, more than half of the countries in the region lack a data governance institution, while six of eight countries have no specific personal data protection laws. To address these risks, robust data protection and cybersecurity frameworks will be critical, along with appropriate oversight and accountability mechanisms and support for their full operationalization in the public sector as well as for businesses.

Let’s also not forget how the tremendous benefits of digitalization can boost regional trade across South Asia. Countries can work together to boost digital trade by improving cross-border telecommunications infrastructure and having shared rules and standards that will support data flows for financial services or e-commerce.

Realizing the Potential of Digital Development

The World Bank is supporting countries across South Asia to attain these objectives through a range of engagements and interventions that boost inclusive and green digital connectivity; safe and open digital public infrastructure; and the use and benefits of digital content and services. For instance, the newly-approved Digital Nepal Acceleration Project will boost digital inclusion by expanding access to affordable connectivity and devices for people in rural areas, and by investing in building the digital skills of women and persons with disabilities. In the Maldives, a new World Bank project will help strengthen regulatory institutions for digital connectivity and data regulation, while also modernizing the digital public infrastructure—including the country’s ID ecosystem—to facilitate trusted transactions and improve public service delivery both online and offline. The project will also explore how digital technologies can help the Maldives monitor climate change and adapt to its effects. And the Enhancing Digital Government and Economy project seeks to develop Bangladesh’s digital industries, aiming to create 100,000 jobs with a special focus on women’s employment, and training 100,000 youth to be active participants in the country’s digital workforce.

Similar engagements across South Asia are also supporting countries transition to green, resilient, and inclusive economies. Combined with the growing capacities of its people and the private sector, digital opportunities for the region are significant and their impact on economies and societies can be transformational.

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