The digital revolution is transforming economies and thus livelihoods and lives, but developing countries will be left behind unless there is greater policy co-operation, says Sri Mulyani Indrawati.
RAPID technological change will define economies well into the future. Frontier technologies promise new opportunities, but will require new policy challenges.
Technological innovation has long boosted economic performance, improved efficiency, accelerated globalisation, and transformed human society. However, the digital revolution demands renewed policy co-operation at all levels of governance.
After all, the latest wave of technological change is especially broad, and it is coming quickly. It is altering how goods, services, and ideas are exchanged. And as rapidly declining costs make digital technologies even moreaffordable and accessible, they willcontinue to transform people’s lives and livelihoods.
And yet there is a danger that these gains will not reach the world’s poorest people. Three billion people could still lack internet access by 2023, and many more will not reap the benefits of digital technologies. There can be no delay in addressing digital exclusion.
Fortunately, the Pathways for Prosperity Commission on Technology and Inclusive Development, which I co-chair with Melinda Gates, has shown that developing countries can stillharness the new wave of frontier technologies for the benefit of all.
Digital technologies have unlocked new routes to prosperity throughagriculture, manufacturing, trade in services, the linking of informal and formal sectors, and domestic interconnectivity.
Low- and middle-income countries now have an opportunity to build new industries, deliver better services, and improve people’s lives.
But digital technologies can alsoentrench existing forms of exclusion, disrupt livelihoods, and provide new tools for the powerful to abuse andexploit the weak.
Developing countries in particular are starting from a difficult position, because they are already grappling with low human capital, ineffective institutions, and a difficult business environment.
Still, policymakers must not be paralysed in the face of change. Rather than becoming passive observers of the tech revolution, they must take control of their countries’ economic futures.
All developing countries and emerging economies should be able to capture some of these new opportunities.Governments have several policy options for achieving more inclusive growth. But technology alone will not guarantee success.
Policymakers must also account for local contexts and conditions, so that they can create social, political, and economic ecosystems in which technology creates jobs and drives inclusive growth.
To compete, all countries will need to prepare themselves for new and upcoming technologies, by maximising inclusiveness and guiding markets toward the right types of innovation.
Governments should start by recognising that the challenge is not just about ‘digital policy’. Rather, it callsfor a ‘whole-of-economy’ — indeed, a ‘most-of-society’ — approach. And because inclusion is the key to success, support for marginalised groups will need to be built into the policy process from the outset.
To that end, national governments should start planning for digital readiness in four areas: infrastructure, human capital, policy and regulation, and finance. These are the technicalpillars of the future economy.
At the same time, regional policymakers — particularly in the Asia-Pacific region — need to start building momentum on policy co-operation, which will be necessary for harnessing frontier technologies for the greater good.
Likewise, at the global level, cross-border issues associated with frontier technologies will have to be addressed multilaterally.
That means multilateral organisations should be developing an antenna for identifying new technological and development challenges. More must be done to mitigate technological disruptions to employment, boost investment in human capital, and ensure fair taxation in the new digital economy.
We should not underestimate the power of multilateralism. For decades, countries have been coming together in global fora to safeguard public goods and pursue collective prosperity. Nonetheless, the existing architecture for multilateralism will have to be adapted to reflect changing needs. To capture the benefits of the fourth industrial revolution, we also will have to strengthen public-private partnerships and make our economies more efficient and flexible.
With the world’s population projected to reach ten billion by mid-century, global governance will become even more complex than it is today.
For its part, Indonesia recognizes the need for policies to manage the new digital economy. In addition to addressing the impact of technological disruption and ensuring fair taxation, the key will be to put people at the centre of the agenda. Beyond furnishing workers with the right skills, we must create a digital world in which all people have a voice, and in which those who are not benefiting from change have the support they need.
As is usually the case, the challenge we face is also an opportunity. Digital and frontier technologies have enormous potential to improve government administration and the delivery of public services.
It is time for a new kind of conversation, one that involves governments, business leaders, innovators, civil-society organisations, and citizens alike. For developing countries, the task is clear: we must ride the wave of technological change, rather than wait for it to crash down on us.
Sri Mulyani Indrawati is finance minister of Indonesia and former chair of the World Bank Group’s Development Committee.