José Luis Irigoyen is Senior Director for Transport and ICT at the World Bank Group
The World Bank Group has long promoted digital solutions to development problems, and never more so than now, as traditional development paths are being disrupted globally by digital technology. While digitisation brings both risks and opportunities, innovative technology is vital to achieving the Sustainable Development Goals (SDGs) as well as the Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity.
We know that digital technology is having an impact. Markets are becoming more efficient and participation is increasing across economies, which are transitioning to the digital space thanks to advances in cloud computing, big data analytics, artificial intelligence and machine learning. Connectivity is increasing, with the number of connected devices comprising the Internet of Things estimated to double to over 20 billion by 2020. This is leading to an exponential growth in data – around 90% of data today was created over the past two years. The World Bank is promoting data-driven development to harness this potential, such as in more affordable public transportation and disaster risk management.
Digital technologies are creating economic opportunities. Suppliers and buyers in the global economy can now interact directly regardless of their size or location. For example, Chinese companies selling on Alibaba typically reach around 100 export destinations, more than twice the average of their offline competitors. The value of businesses trading on global e-commerce sites such as Alibaba could top $6 trillion over the next five years.
While the population’s access to bank accounts and services in many developing countries remains very low, a significant expansion of mobile money services could provide every citizen with a digital bank account. In Somalia, for instance, while only 15% of the adult population uses banking services such as Hawala, around 72% use mobile money. Where mobile money or online banking has been used, it has shown to promote self-employment opportunities. Ensuring universal access to digital financial services is thus a definite option for countries to leapfrog into the digital economy.
Globally, four billion people do not have access to broadband
In addition to boosting trade, technology improves governance, anti-corruption measures and transparency. Governments in developing countries are using data and technology for fiscal management, enhanced accountability, people management, procurement and the delivery of public services. For example, the World Bank has worked with Moldova to provide easy, around-the-clock access to government documents and around 80 public services, resulting in greater transparency and efficiency.
Yet the real significance of digital development for the SDGs is likely to lie in helping to achieve many of the targets. Target 3.8, for instance, on achieving universal health coverage, 5.B on promoting women’s empowerment, 10.C on reducing the transmission costs of migrant remittances, or 16.9 on providing a legal identity for all. It is the enabling function of digital technologies that make them so valuable.
The World Bank’s 2016 World Development Report on Digital Dividends identified three broad ways in which ICTs, and especially the internet, facilitate and could indeed be transformational for broader development.
First, by promoting the inclusion of disadvantaged groups within society such as by facilitating the provision of a digital identity to all or by allowing disabled persons to work from home. Second, by boosting efficiency, such as through reducing transaction costs using e-commerce. Third, by using ICT to promote innovation, such as the development of mobile money and ride-sharing platforms. The delivery of these “digital dividends” is dependent on complementary skills, leadership, institutions and policies/regulations – highlighting that the digital phenomenon is cross-cutting and could impact most aspects of the economy and society.
It is clear, however, that the digital revolution has not touched everyone. The lack of reliable and affordable connectivity infrastructure remains a critical challenge. Broadband internet is still in its infancy in sub-Saharan Africa, where internet users represented only 22% of the population in 2016, compared to 44% worldwide. Globally, four billion people do not have access to broadband. The longer those countries and their citizens remain excluded from the online world, the greater their missed development opportunities.
Artificial intelligence and automation risk the creation of a new class of digital poor
Furthermore, the digital revolution presents societies with a whole new set of challenges ranging from the disruptive effects of technologies such as automated jobs and employability, to digital exclusion and inequality, cybersecurity, data privacy and regulatory issues. Technology, artificial intelligence and automation are already replacing some low- and mid-skill jobs, risking the creation of a new class of digital poor who will find it hard to catch up with the rest of society unless new interventions and policies are introduced.
Disruptive technologies will confront societies with impacts for which they are mostly unprepared. At the same time as digital skills become vital, a whole generation in some developing countries will have difficulty participating in the economy. It is thus essential to create the right “analogue” foundations for digital solutions to be effective, such as better access to education to empower people with digital skills, health to enable them to work effectively and infrastructure to connect them. These foundations also include adequate regulations so companies can leverage digital technologies to compete and innovate, as well as accountable institutions so governments can respond to citizens’ needs.
The World Bank supports its client countries in developing their communications infrastructure and digital platforms, leveraging private sector resources to strengthen the foundations of the digital economy. Earlier this year, the World Bank in collaboration with the International Finance Corporation launched the Digital Infrastructure Initiative (DII), which will conduct 50 country diagnostic studies to identify gaps and investment needs in broadband communications infrastructure. Last year, we also launched the Digital Development Partnership (DDP), a platform open to both the public and private sectors to share knowledge and expertise on broadband, digital platforms and cyber security.
The Bank is also working with DG CONNECT – the European Commission Directorate-General for Communications Networks, Content and Technology – through the Connected Communities Initiative (CCI), a digital inclusion programme that has already helped secure funds to extend affordable internet access in underserved areas of Croatia, The Netherlands, Portugal, Slovenia and Spain.
We are incorporating the digital transformation into all aspects of our work with the goal to shift the development paradigm, helping to secure and share the gains of the digital revolution, while anticipating and managing the potential downsides.
This article is from the Development Policy Forum discussion paper ‘International development and the digital age’, in which international tech and development experts consider how to use new technologies to achieve the Sustainable Development Goals and generate ‘digital dividends’ for the developing world. The discussion paper will also build on the Policy Insight debate ‘Making the digital revolution work better, faster for development’, which was held on 7 November in Brussels.
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