Digital development: opportunities and challenges

Digital development: opportunities and challenges

Around the world, and especially in Africa, rapid digitisation and the spread of new technologies are ushering in a new era of economic disruption. This trend has ignited a global debate about the implications for labour markets and the future of work. So far, the future of work discussion has focused mainly on advanced economies and on industrial jobs, which raises questions about its relevance for low-income countries in general and Africa in particular.

The rapid spread of digital technologies is disrupting production and trade, generating both opportunities and challenges for sustainable development. Based on a set of guiding questions received from member States, this note discusses the implications of digitalization and frontier technologies, notably in the areas of productivity, trade, employment and inequality. It concludes with a few policy recommendations for consideration by the Trade and Development Board, in particular the need for a holistic approach to policymaking at the national level, continued dialogue on possible regional and global solutions in key policy areas, improvement of women’s access to opportunities offered by the digital economy and more concerted efforts to assist countries in their quest for digital readiness.

As more and more people use new applications and devices more intensively and for more activities, and Internet-of-things devices and services proliferate, data have become a critical development resource. The ability of countries to access, collect and refine digital data increasingly determine the effectiveness with which frontier technologies can be deployed to support the Sustainable Development Goals. Indeed, digitalization and frontier technologies not only create new opportunities for doing business, they also bring about a number of challenges and risks.

Displacement from digital technologies is expected to be minimal in Africa but the potential benefits are large as these technologies can help increase productivity.

Digital technologies and platforms can reduce transaction costs for businesses and facilitate access to new customers, both in domestic and foreign markets. For example, suppliers that rely more on e-commerce may be able to cut delivery costs, especially for digitally provided content. Further, digitalisation can enhance the productivity of enterprises and offer new opportunities for entrepreneurship, innovation and job creation. It can help businesses to overcome barriers to expansion and enable them engage in peer-to-peer collaboration in innovation. 

In addition, new cloud-based solutions can reduce the need for investing in information technology equipment and corresponding in-house expertise. E-commerce can facilitate the scaling-up of such enterprises by providing financing opportunities and the means to build verifiable online transaction records that may help to attract new customers and business partners. Digitalisation also plays a central role in extending the reach and impact of frontier technologies, many of which show great potential to enable the achievement of the Sustainable Development Goals. 

Artificial intelligence, big data, cloud computing, machine learning and algorithmic decision-making are all powerful instruments of change. The roll-out of digital technologies also poses challenges, costs and risks. Uneven access to affordable digital technologies and limited capacities to make effective use of them can lead to an inequitable distribution of benefits. In particular, it may bypass people with limited education and low levels of literacy; people in rural areas; people with limited capability or rights to connect; and micro-, small and medium-sized enterprises.

There is concern that the widespread use of new technologies, automation and online platforms will lead to job losses, growing income inequality and a greater concentration of market power and wealth. It may also have negative impacts on the bargaining power of users, consumers and workers and result in the loss of privacy. Finally, frontier technologies raise legal, regulatory and ethical challenges regarding the growing decision-making power of devices.

The displacement from digital technologies is expected to be minimal in Africa but the potential benefits are large as these technologies can help increase productivity.

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