Encouragingly, ICT investment across the world, and especially amongst emerging nations, remains positive and is growing fast. This investment is made in the hope and expectation that nations will benefit economically. However, it is not without risk.
Whilst internet access is the foundation of economic growth in the digital era, economic growth is not directly driven by access alone – and certainly not at the base of the pyramid. It is driven by digital PARTICIPATION. This subtle difference is the most critical factor in shaping ICT policy away from a wasteful and even detrimental one towards an economy-building one. Here is the evidence from the UK.
The UK is the 5th economy in the world. It has over 90% high speed broadband access, 77% of its consumers shop online and 84% of people have a smartphone. Looking at its digital profile at face value, one assumes that digital access equates to GDP performance. But at the base of the pyramid, it does not.
The UK is an economy disproportionately reliant on the financial sector (which accounts for around 40% of its GDP) and its service sector capabilities. At the base of the pyramid, digital access does not equate to digital participation amongst businesses in the UK. After 25 years at the forefront of the internet revolution, it has one of the most advanced internet infrastructures and one of highest digital access rates in the world.
And yet only 10% of business sell online in the UK, according to the Office of National Statistics, and only about 2% of small UK businesses have a high-performing website according to the Federation of Small Businesses. In fact, it is estimated that every 1% increase in digital PARTICIPATION amongst SMEs in the UK has the potential to contribute £30billion to the UK economy annually.
Therein lies some important national lessons. Whilst internet access will rapidly increase economic activity in countries, it will result in a significant outflow of capital to companies and countries better equipped to sell to their citizens online unless nations directly empower their businesses to participate in global trade.
Technology has a significant role to play in accelerating development. Digital access and access to ICT infrastructure is important. But it is not enough to drive economic growth in countries. Digital access opens countries up to the world. But on its own, it turns citizens into online consumers, ideal targets for companies and nations with the know-how to capitalise on digital channels.
As new entrants to the global digital space, their businesses are less technologically mature. Many poorly-informed advisers will suggest leaving their businesses to the natural forces of the market. This is ill-advised. Looking at the experience of the UK and other advanced economies, we estimate that left to their own devices, it will take well over 20 years for businesses and communities in emerging nations to take advantage of their nations’ internet infrastructure investment to boost grassroots economic performance, given that 99% of them are at the foot of the technology curve. And as technology accelerates humanity into the 4th industrial revolution, the digital gap between businesses in emerging nations – most of which are small businesses – and those from advanced economies will widen and, as a result, so will the trade disparity.
Emerging nations investing in ICT infrastructure should aim to compress the technology maturity curve of their small businesses and digitally disadvantaged communities and short-cut their road to selling online. In other words, they must create an alternative path to effective online presence for technology-poor businesses in their country. They should strive to put this priority on a par with their ICT investment if they are to maximise and accelerate the return on their investment.