Digitization is not, however, a panacea for economic woes. Rather, the closer you examine digitization, the more you discover the subtle differences in its impact across countries and sectors. For policymakers, perhaps tempted to push digitization across the board, this more detailed level of understanding is critical. It allows them to shape policies to maximize the benefits of digitization.
What is striking is that advanced economies enjoy large economic benefits from digitization, such as growth and productivity, but gain less in terms of jobs. In Germany, increased digitization provided approximately 8.7% of the rate of change in GDP between 2010 and 2011, but just 7.7% of new jobs. In some sectors, such as financial services and manufacturing, developed economies can even lose jobs.
By contrast, emerging markets have significant employment gains from digitization, but advance less in terms of output and productivity. We calculate that 94% of all the jobs created by digitization in 2011 were in developing economies—but these countries, where the vast majority of the world’s population lives, took just 71% of the increase in economic growth.
The best way for policymakers to channel digitization’s impact to their advantage is to become digital market makers. This means more involvement in the information and communication technologies (ICT) sector. Many policymakers are presently engaged in policy setting and regulatory design. By contrast, as digital market makers they will have to foster digital economic activities that benefit enterprises and society, and that have a clear competitive advantage in the global marketplace.
In the role of digital market makers, policymakers should concentrate on three areas: drawing up plans for the digitization of target sectors, promoting the capabilities and enablers required for these plans to succeed, and animating the broader ICT ecosystem to encourage the uptake and usage of digital applications.
Sector plans depend on policymakers prioritizing those economic activities that provide national competitive advantage and knowing how digitization bolsters that competitive position. That also means understanding trade-offs between productivity and jobs, and mitigating any potential reduction in employment. In recent years, as financial services and manufacturing in the U.S. became more productive, they lost jobs because they transferred support activities to Mexico. Between 2002 and 2009, the net impact of this trend was a 6% drop in employment in U.S. tradable sectors and a 15.2% growth in such jobs in Mexico. This means that as manufacturing digitizes further, its productivity will improve and jobs could be lost. In Singapore, the approach is to accelerate digitization to make key sectors more competitive, but also to enhance social protection.
Policymakers have to examine the ICT ecosystem as a whole to develop the capabilities and enablers for sector digitization plans to succeed. Looking at ICT in terms of basic infrastructure and connectivity will not suffice. Instead, by grasping the ICT ecosystem’s multiple layers, governments can decide whether they want to be developers, financiers, or facilitators of capabilities.
In areas where there are gaps in the incentive structure for private companies to invest, policymakers may have to get involved in the market as developers. In places where the risks to the private sector are excessive, the government can provide finance for capabilities. As a facilitator of capabilities, the government can regulate the ICT ecosystem and can promote digital services, such as through open data initiatives that allow developers to access non-sensitive government databases.
These three capability building roles of developer, financier, and facilitator are more effective if three enablers are in place: capital, leading edge thinking, and digital infrastructure. Venture capital is particularly important as it has a higher appetite for risk than traditional financing. Unfortunately, the Middle East currently only has a handful of venture capitalists. The region is doing better in terms of research, thanks to investments that seek to create top rank institutions. Saudi Arabia has the King Abdullah University of Science and Technology’s research centers and the technology incubator in the King Abdulaziz City for Science and Technology
The third, and final, aspect of digital market making is jump-starting and monitoring the ICT ecosystem so that government agencies, enterprises, and consumers adopt digitization. To achieve this policymakers have to be able to measure the effect of their policies, which is a challenge as there is no accepted standard. They will need to agree on how to measure digitization so that there is consistency across sectors. Evidence-based successes will encourage consumers and citizens to adopt digital technologies.
By understanding the varied effects of digitization, policymakers can use digitization to acquire national competitive advantage. This is particularly important for the Middle East as it seeks to create jobs, broaden the economic base, and bring more women and young people into the economy. Policymakers cannot sit back. They must actively build digital markets if their countries are to enjoy the rewards of digitization.
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Autor(en)/Author(s): Bahjat El-Darwiche and Milind Singh
Quelle/Source: Forbes, 19.07.2013
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