Emerging economies should bridge the digital gap before it's too late

Over the past 25 years, developing nations have made huge gains in the fight against poverty. But continued progress is hardly inevitable. Indeed, if such countries don’t rethink their approach to rapid digital transformation now, the gap that separates them from developed countries could well become unbridgeable.

The good news is that technology isn’t only a threat. The digital revolution presents poorer nations with a huge opportunity to fast-track their economic development, deliver better public services, and create an inclusive economy and society. For these countries, there hasn’t been a moment as fraught with possibility since the postwar manufacturing boom that propelled the so-called Asian Tigers to prosperity.
 

But emerging economies must be proactive. They can’t simply allow technological changes to wash over them as more developed nations might, leaving citizens to adjust on their own. The benefits of technology tend to flow disproportionately to early adopters and growth is often confined to small sectors of the economy. Without careful planning, far too many others will confront job losses from automation, growing inequality and entrenched poverty.
 

What’s needed is a shared national vision for digital change and coordination between governments, companies and civil society. It all begins with ensuring access. In Indonesia, we’ve recently completed the Palapa Ring project to bring fast broadband internet infrastructure to both urban and rural citizens. While this is a momentous -- and necessary -- achievement, we must do even more. Some 80% of people in developing countries already live within the radius of mobile phone coverage, yet less than 30% have ever accessed the internet.
 

The main obstacle is cost: New, innovative business models are needed to ensure that everyone can afford to get online. For example, in the mountains of Georgia, a small community cooperative has built their own network and, in Kenya, telecommunications provider BRCK is storing useful content offline and giving people access through free WiFi hotspots.
 

Companies also need to keep the needs of marginalized groups in mind when developing digital tools, products and services. In many places, for instance, women are discouraged from accessing digital technology; one study showed that across Africa, Asia and South America, women are between 30% and 50% less likely to use the internet to participate in public life.

While changing social norms is a task for everyone, digital firms can help by designing products not just for men or the middle class. The second priority has to be ensuring that citizens have the skills they need to navigate this new digital world. 

This will require a much greater emphasis on teaching non-automatable soft skills as part of a standard school education. Moreover, the private sector must take on increased responsibility for providing on-the-job technical training. In Indonesia and Myanmar, less than 10% of companies currently offer skills training to their employees.
 

Governments and civil society can contribute to reskilling programs, too, both directly and indirectly. Next year, for example, Indonesia plans to launch a training program for 2 million workers with the cooperation of digital companies, teaching them coding among other skills. The government has also offered tax deductions to encourage companies to develop their own reskilling programs.
 

Third, policymakers must set the right conditions for innovation to thrive. A big part of this involves creating a positive enabling environment. Indonesia is proud to have spawned more tech “unicorns” such as ride-hailing pioneer Gojek than any other Southeast Asian country. Yet, here as in other emerging markets, startups still face all too many barriers, not least access to capital. Governments need to lower those hurdles where they can, while private investors and donors can help to de-risk these environments by putting forward first-loss capital, or playing the role of “aggregators” to bring in other investors.
 

At the same time, we cannot assume that existing laws will remain fit for purpose in a digital age. Flexible new regulations will be needed to keep up with the rapid pace of change. Many countries -- including Kenya, Brazil and Philippines -- are adopting the European Union’s general data protection rules.
 

But while it is tempting to import global technology policies wholesale, developing nations should be sure to tailor legislation to their specific national contexts. Global norms are forming around many digital issues, not just data protection, and coordination between regional or like-minded groups of countries will help to integrate developing-country priorities into global standards.

Finally, governments must take great care to build secure, accountable systems, so that citizens can trust that their data is protected and that the data provided by the government is transparent. Only then can they hold governments accountable and make their voices heard.
 

These are all huge tasks, especially for emerging economies already under pressure from trade tensions and slowing growth. They won’t get any easier over time, however -- or any less necessary.
 

To contact the author of this story: Sri Mulyani Indrawati at menteri@kemenkeu.go.id

To contact the editor responsible for this story: Nisid Hajari at nhajari@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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