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Maximizing the Benefits of the Internet Economy

7 June 2016
by Guest author

Digital economy ministerialMinisters, the business community, civil society, labour and the Internet technical community will gather in Cancún, Mexico on 21-23 June for an OECD Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity. Today’s post is by Daniel Sepulveda, US Deputy Assistant Secretary, Department  of State

The open Internet combined with today’s emerging technologies has launched the information revolution and is powering the global digital economy.  Everyone has a stake in that development, both as individuals and in the organizations in which we serve and affiliate ourselves.  In multiple venues, governments, academia, industry, civil society, and others gather regularly to ask and discuss what the global digital economy means for them and how we can best maximize its benefits for everyone.

The June 2016 OECD Ministerial Meeting on the Digital Economy in Cancun, Mexico is an important opportunity to continue that dialogue, build on the previous OECD Ministerial meetings in Seoul and Ottawa, and showcase the work of the OECD and its constituencies.  The meeting will feature high-level discussions that will help inform the current debate and present new ideas and perspectives for the participants to consider when they return home and chart their own paths to developing robust and productive local, national, and regional digital economies.

If you have an interest in the digital economy and the future of the Internet, this is an event you will want to attend.

We need to preserve the Internet as an open, secure, interoperable, and reliable platform, which serves as the backbone of the global digital economy.  Its ability to enable the transfer of data and information across borders and between people and things is our best hope for global economic and social development.  The question before policymakers and stakeholders is how to maximize their own economies’ ability to participate in and benefit from the digital economy.

We’ve identified three elements necessary for growth: (1) we need to connect everyone in the world to the Internet; (2) we need to digitize every sector of our economy and every service that is delivered to people by their governments or industries in every sector; and (3) we need to invest in providing everyone with the digital skills necessary to use that access productively.  The question for any public policy under consideration is how it will contribute to or detract from those goals.

Getting people connected is the first imperative.  It creates opportunities for budding entrepreneurs in developing economies to start businesses and escape poverty.  It makes workers more productive and enables employers to increase pay commensurately, leading to a higher standard of living.  It creates more high-skilled, high-paying jobs, and improves an economy’s competitiveness in the global marketplace.  It increases economic opportunities in rural and poor regions, and enables public services to reach the often underserved populations there, while also linking them to the mainstream economy as untapped markets.

It has taken only two decades for 40 percent of the world’s population to begin using the Internet.  By contrast, it took a century for electricity to reach that mark.  So we are doing well but must do more.  With that in mind, the U.S. Department of State and its partners in the public and private sectors recently launched the Global Connect Initiative (GCI) to catalyze multi-stakeholder efforts to bring an additional 1.5 billion people online by 2020.  We are working with our international partners to change the mindset of connectivity as a luxury and make it clear that broadband connectivity infrastructure has to be a vital element of national development plans, on the same level as water, power, and transportation, and prioritize funding accordingly.  For those deployment plans to work, public policy has to encourage investment, provide certainty for firms, and enable innovation.

Beyond connecting people, we need to digitize all sectors of the economy so that each of us as individuals or nations can become better at whatever it is we do best.

Experience has shown that the most successful models for the digitization of the economy feature accountable and responsive public institutions with transparent processes, free competition, “light touch” market regulations, and predictable policies over the long-term, so that investors can be assured their investments will be secure and relatively free of risk.

By contrast, economies where telecommunications markets are controlled by monopolies fail to compete in the global digital economy, and countries which impose data localization requirements or impose ICT domestic production requirements raise operational costs for businesses and institutions using ICT and increase the barriers to entry.  This is also true for policies that apply separate tax regimes to digital products.  These activities detract from the first goal of connecting people and the second goal of enabling the use of ICTs for increased productivity across sectors.

Lastly, for the digital economy to change people’s lives, stakeholders must also invest in skills development in their educational systems, and create training opportunities for professionals to acquire and update skills relevant to emerging technologies.  Many countries have achieved impressive results by supporting the formation of industry associations, establishing partnerships with industry to train workers, supporting investment promotion activities, and developing technology parks as incubators for IT start-ups, where entrepreneurs can receive mentoring, training, and administrative support in their early phases.  Rather than creating a dedicated ICT sector in a vacuum, all parts of the economy should be incentivized and enabled to adopt ICT for productivity enhancement, and let the growing economy-wide demand drive the organic development of an ICT sector to service its needs.  Once people have developed the necessary skills to use ICT, they will be able to enhance their own productivity, create content, and become active on the Internet as both consumers and producers.

The digital economy is still very early in its development, and it is as yet unclear whether all users will be guaranteed safe and equal participation in the future.  Our goal, as members of the OECD, should be to craft policies that reflect stakeholder input and serve the global public interest, while continuing to support the growth of the digital economy.  The OECD, with its rich history of collecting and analyzing data to draw evidence-based conclusions is just the right organization to support us in seizing these opportunities.

I look forward to seeing you in Cancun.

Useful links

OECD Digital Economy Outlook 2015

OECD work on Innovation in science, technology and industry

One Response
  1. Dr Anth0ny Ablong permalink
    June 8, 2016

    The future of business is certainly becoming extensively digitized in many ways, yet available data show boards of directors are among the least prepared to guide their organizations through the technology challenge to be more effective. Many are fooled into believing technology only brings benefit but there are many downsides as well as many organisations have found. I would suggest that the big challenge is to understand how best to allocate the right resources, skills, and attention in an already time-scarce and hard pressed global economy in order to show improvements and profitability.
    My observations show that while the vast majority of top executives in the world’s leading organizations expect achieving digital transformation for their organisations is important but certainly not vital to the organizations for growth, sustainability, and even survivability. This observation may have some support in the results of a survey conducted by the MIT Sloan School of Management which cites that although the ‘bandied’ reasons for making the shift to digital business strongly correlates to higher revenues, profitability, and market capitalization, it is not so. It is not surprising therefore that only 38% of CEOs actually have officially slotted adapting to digital on their roster of top corporate priorities, according to the same data.
    A major downside apart from hackers and viruses is the insular nature of digital business, especially its specialized domains of technical knowledge and unique fast-emerging new operating models with each new release. This concern poses a barrier in front of most boards to cultivate and tap into the requisite proverbial ‘digital DNA.’ In effect, most organisations are still not ready for the full adoption of technology: per se, the digital transformation.

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