After the pandemic storms, digital trade offers LDCs rays of sunshine

Originally published by the OECD Development Matters blog on 13th June 2023

The dark storm of the coronavirus pandemic came with a silver lining: new ways of providing services and doing business by leveraging e-commerce and other digital opportunities. Video conferencing apps enabled lessons or work to be accessed remotely; mobile apps delivered food, groceries, and medicines at the click of a button.

But silver linings don’t shine bright for all. Gaps in technology, infrastructure and skills, especially in Least Developed Countries (LDCs), highlighted the need to help entrepreneurs grasp the possibilities of digital transformation.

With funding from the Enhanced Integrated Framework (EIF), the United Nations Conference on Trade and Development’s (UNCTAD) E-commerce and Digital Economy Program has conducted many rapid e-trade readiness assessments to identify policies that need to be adjusted to boost e-commerce. 

As a result, several countries are investing in infrastructure, such as building e-commerce platforms in Cambodia and Senegal, while also developing skills and payment solutions. Such initiatives require partnerships with key agencies and institutions, and need financial resources to be mobilised through public-private partnerships. 

An example from Cambodia

Prior to EIF’S catalytic investment into postal services for small parcel e-commerce in Cambodia, weak logistical infrastructure and poor coordination among stakeholders, coupled with the slow implementation of a national single window, were holding back digital opportunities. The low density of the Cambodia Post network was also a limiting factor, as less than 5% of the country’s e-commerce traffic was handled by postal services, in stark contrast to a global average of 70%.

The EIF’s investment allowed the government to mobilise up to USD 1.2 million through Swisscontact [1]. This enabled it to scale up the initiative, synchronise the postal and customs interface, and build capacity for micro-, medium-, and small-scale enterprises (MSMEs) to carry out small parcel e-commerce. 

The results are clear to see. The Cambodia Trade marketplace has now registered 132 MSMEs and created 4 363 jobs, including 2 374 for women. To further support the development of digital skills, an MSMEs Incubation on Business Digitalisation initiative has been rolled out. It provides training on digital technologies and e-commerce to 101 MSMEs, of which 38% are women-owned/led and 68% are in rural areas. 

While international assistance is valuable, it is also important to leverage leadership and expertise from local networks. This helps entities fast-track the delivery of assistance, adapt to local needs and connect with grassroots stakeholders, while also building trust, aiding sustainability, and consolidating successes. 

Keys to success

Navigating the digital frontier can be daunting, but with the right tools and training, it can be conquered. From the many stories of positive change that we have heard, we are able to make out the contours of what drives success.

Upskilling. Women entrepreneurs and MSMEs repeatedly point to the need to upgrade digital skills to harness the vast potential of digital trade and gain the confidence they need to take their businesses to new heights. In 2022, beneficiaries from skills training reported that an improved understanding of digital marketing and business planning helped them identify and seize business opportunities.

Peer support. Women entrepreneurs in Uganda, Ethiopia and Rwanda emphasise the importance of peer learning and expanding their networks. In Burundi, young women entrepreneurs and farmers attended a series of tech-related workshops to expand their digital skills. As a result, they improved their ability to build online marketplaces and sell products such as fruits, fabric, clothing and household equipment. They also went on to share their insights with 420 young women at a school in Bujumbura.

A multi-sector and ecosystem approach. The EIF has contributed to the establishment of trade capacity in Ministries of Trade, which also serve as Aid for Trade (AfT) coordination platforms. These platforms are helpful for mobilising resources and/or leveraging existing initiatives to build digital trade capacity and enhance knowledge-sharing among national stakeholders, and between countries. 

In Lao People’s Democratic Republic, for example, a National Implementation Unit (NIU) in the Department of Planning and Cooperation under the Ministry of Industry and Commerce has been established. It plays a crucial role as a hub for implementing and coordinating all AfT projects channelled through the ministry. By bringing together various stakeholders such as line ministries, private sector entities, and development partners, the unit fosters collaboration in support of the country’s national trade strategy.

Match technical and financial skills. This helps businesses track and match evolving customer needs and trends. Apart from the need for training in digital marketing and business planning, entrepreneurs list access to financing as a perennial key challenge. Private sector financial institutions have a role to play in designing financial products that enable efficient access to resources.  

In summary

We have seen significant progress in the adoption of digital trade in LDCs, but these countries need further support to strengthen their capacities. After the thunderstorms of the pandemic years, digital trade offers rays of sunshine. Innovative thinking, engagement, and solid technical and financial partnerships will be essential to help reduce the digital divide and maximise its benefits and successes in LDCs.

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[1] Swisscontact is a non-profit organisation, promoting inclusive economic, social, and ecological development to make an effective contribution towards sustainable and widespread prosperity in developing and emerging economies.