How can developing countries seize returns from the fourth industrial revolution?

Without action, one out of every four people living in LDCs will be offline due to the lack of digital skills

The digital trade landscape is evolving faster than ever before. This is despite the announcement of slower growth in trade in 2019, with World Trade Organization economists predicting a move from 2018’s three per cent to 2.6 per cent.

Digital trade, on the other hand, has been growing annually by 13 per cent, reaching the US$29 trillion mark in 2017, according to UNCTAD.

Over the past 20 years, international trade has been transformed by information and digital technologies in ways previously unimaginable. This transformation is made up of three components: digitally enabled trade like e‑commerce; data flows; and digital technologies like artificial intelligence (AI), blockchain and 3D printing.

Following discussions at UNCTAD’s ecommerce week in Geneva in April and ahead of the launch of the Digital Economy Report 2019, let’s delve deeper to explore what industry 4.0 can do for least developed countries (LDCs) and what people are saying about it.

What are the challenges for LDCs?

LDCs have yet to realize the full potential of digital trade. That much is clear. The challenges they face include accessing new technologies and the costs associated with such access, as well as obtaining the skills required to manage new platforms and tools.

Enhanced Integrated Framework (EIF) Executive Director Ratnakar Adhikari said, “Out of nearly one billion people living in LDCs, 800 million people remain offline. While in Bhutan, Cambodia and Myanmar the cost of 1 GB of data is lower than two per cent of the average monthly income, people living in a number of African LDCs, including the Central African Republic and the Democratic Republic of Congo, as well as Haiti, have to pay almost half of their average monthly income for the same quantity of data.”

Digital development

At an ecommerce week panel, Madagascar Minister of Industry and Trade Solo Andry Lantosao Rakotomalala said, “The few statistics available speak for themselves about the extent of the work to be done. In 2017 only six per cent of households in Madagascar owned a computer, and in 2016, the contribution of the ICT sector to GDP was merely 1.6 per cent."

He added, “We should therefore promote open and informed public debate and regional and international peer‑to‑peer exchanges to improve strategies and synchronize international assistance aimed at helping achieve national development goals. We should also adopt and implement national strategies for digital development, building on the results of factual studies such as e‑trade readiness assessments.”

E-trade readiness assessments for LDCs ranging from Nepal to Zambia and the Solomon Islands have already been completed, and the findings are being used to inform trade strategies so countries know where they should target their activities and what obstacles lie ahead.

Centring data

Having the data available from research like e-trade readiness assessments means that international support can go to the right places.

François Xavier Ngarambé, Ambassador of Rwanda to the WTO, said, “Data must be at the core of that transformation, both at the national and international levels. Indeed, it is crucial that data flows and data localization be regulated in such a way as to share economic benefits while preserving security and privacy where necessary.”

In 2017 only six per cent of households in Madagascar owned a computer, and in 2016, the contribution of the ICT sector to GDP was merely 1.6 per cent.

Solo Andry Lantosao Rakotomalala, Madagascar Minister of Industry and Trade

Digital technologies have expanded rapidly over the last five years in Rwanda, with 4G coverage reaching 95 per cent of the population, and the mobile penetration rate is at 76 per cent. In late 2018, Rwanda became the first African hub in an Alibaba-led global trading platform, and other efforts are being made to foster delivery systems and overcome other obstacles that lie in the way of ecommerce.

Ngarambé said, “Given the complexity and cross‑cutting nature of the process, developing appropriate policies, standards, laws and rules will require a multisectoral approach with effective coordination between the different Ministries at the national level and between States and inter‑governmental agencies at the international level.

"Ecommerce being one component of the digital economy, international rules governing data in all its aspects are a prerequisite for the development of rules governing ecommerce, more specifically rules governing online‑shopping. The latter undertaking obviously falls within the purview of trade negotiators at the WTO but can be led successfully only after the former has been completed under the leadership of digital transformation experts.” 

Right investments

We know the specific needs of LDCs like infrastructure, skills, good policy and training, but currently only two per cent of aid for trade flows are going to strengthening the digital sector in LDCs.

EIF Deputy Executive Director Annette Ssemuwemba said, “Donors need to be part of the equation and make recommendations on how to better integrate the policy recommendations of the e‑trade readiness assessments into technical assistance programmes to optimize resources and maximize the impact of e‑commerce initiatives.”

She said, “Investing in country‑specific legal and regulatory gap analysis for the development of ecommerce is essential. Raising awareness of e‑commerce and ways to harness it for development among various stakeholders should be a priority for LDCS. Let's showcase ecommerce gains, create a positive perception and more opportunities.”