The Development of the Digital Economy

August, 2016


The first hurdle to digital development is the challenge of limited connectivity. More people need to be brought online to enable them to participate in the digital economy. However, that is only half the job done. A lot needs to be done by countries to build the analog complements – regulations, skills, and institutions – necessary for reaping the dividends from digital. Countries should work towards developing the reasonable regulations that favor the entry of new and innovative businesses, equipping people with the right technical and socio-emotional skills to participate in the new economy and building institutions that are transparent and accountable. As recent evidence suggests, countries that earnestly work towards developing their digital economy can leapfrog to accelerate their economic growth, create jobs and provide a better standard of living for their citizens.

Digital technologies have proliferated rapidly in the last two decades, more heavily so over the last decade. Internet generation and mobile phone adoption have increased; a number of new digital tools that aid businesses, consumers and governments have been created. While the growth of digital technologies has been significant, there is still a major gap that needs to be bridged. Only 31 percent of the population in developing countries had access to the internet in 2014, against 80 percent in high-income countries. The difference in deployment and leverage of digital technologies between developing and high-income countries is still stark. This digital divide is leading to a number of lost opportunities for several developing  countries and is impeding faster growth of their economies, resulting in lower levels of job and wealth creation.

Digital technologies drastically reduce the transaction costs involved in several economic exchanges in the market. This is because they enable easy access to vast amounts of information and significantly cut down the search and information costs associated with several economic transactions. The proliferation of mobile devices and the spread of the internet has meant that governments and businesses are finding new and innovative ways to reach people with their products or services.

Read the full paper to gain further insides on dividends from digital, challenges in reaping digital dividends, policies to address major digital challenges, and assessment and development of the digital economy.