A version of this policy brief was first published by the Centre for International Governance Innovation, copyright 2019.

Leveraging the Digital Transformation for Development: A Global South Strategy for the Data-driven Economy

The data-driven economy opens up new opportunities for technological and economic convergence for developing countries, including by leapfrogging over intermediate infrastructures of the industrial age, drawing on the vast knowledge spillovers from the Internet, taking advantage of the new markets enabled by digital platforms, and exploiting production possibilities enabled by digital technologies. However, it also throws up daunting economic policy and governance challenges as technology disrupts work patterns globally, including through the looming changes in the division of labour globally between human and machine and between the north and the south, issues which are central to the G20 work program on fostering an inclusive global trade and investment system, addressing digital divides, and supporting the development of robust policies for the nexus of data/artificial intelligence/machine learning.  This policy brief explores these issues and makes provisional recommendations for advancing the prospects for sustainable development in the global south as the digital transformation unfolds.

A version of this policy brief was first published by the Centre for International Governance Innovation, copyright 2019.

The modern knowledge-based and data-driven economy features powerful incentives for strategic trade and investment behaviour, modifies the division of labour between the public and private sectors, expands the contribution of economic rents to prosperity, and poses challenges to the effective participation of small open economies given the “winner-take-most” economics that underpins the emergence of superstar firms.  These features have contributed to the emergence of trade and technology frictions and also forced the reassessment of traditional views of economic policy.  This policy brief speaks to the G20 role in helping sustain global economic cooperation by shedding light on the policy reforms that the new economic conditions demand at the national economy level and thus focussing attention on how these can be accommodated at the international level.

A version of this policy brief was first published by the Centre for International Governance Innovation, copyright 2018.

Economic Transformation

Economic history has always been in part the story of international competition for wealth…. The Industrial Revolution gave this competition a new focus — wealth through industrialization — and turned it into a chase. There was one leader, Britain, and all the rest were pursuers. The lead has since changed hands, but the pursuit goes on in what has become a race without a finishing line…. The rest can at best follow along and make the most of their capacities. But even these are far better off than those who are not even running. No one wants to stand still; most are convinced that they dare not. (Landes 1969, 538)

These lines, taken from David Landes’ landmark study of the first industrial revolution, published in 1969, apply just as aptly to the technological transformation currently under way. The question in the digital era is not whether to participate but how best to participate effectively. Central to this participation are the enabling conditions and supporting policies that governments create within which the application of technological advances to real-world problems, and the fruits from entrepreneurship, are maximized and distributed. This was the case during the first industrial revolution, when differing conditions in, for example, IP laws, the strength of guilds and laws relating to the ownership of land have been cited as explaining the relative success and failure of the first, early and late industrializers. In the post-World War II era, this discussion mutated into what came to be known as industrial policy, which, in its wider forms, goes beyond a focus on manufacturing to include “any type of selective intervention or government policy that attempts to alter the structure of production toward sectors that are expected to offer better prospects for economic growth than would occur in the absence of such intervention” (Pack and Saggi 2006, 267-68).

Challenges facing women in STEM are also reported. While agencies, such as UNESCO (2017) and the World Bank (2020), report that the engagement of women in STEM across MENA countries is high (relative to more developed countries) few women graduates pursue STEM careers. Thirteen of 15 countries with the lowest rate of female participation in the workforce are Arab countries (World Bank, 2020). This reflects ‘lost’ economic opportunity and return on investment from STEM education. In recognizing the importance of STEM credentials as the foundation for employment in the digital economy, associated challenges are twofold. First, is a need to imbed enterprise education in STEM curricula to help students develop entrepreneurial attitudes, skills and competencies, and to improve their abilities to meet ‘real life challenges’. Second, entrepreneurship education within STEM disciplines will encourage women to pursue business startup as a career option, and enhance their ability to scale and growth their businesses. Such measures will contribute to women’s economic empowerment and economic growth across the MENA region.

To this extent, this Policy Brief addresses the lack of:

1. Formalized enterprise curricula in MENA educational and training systems
2. Enterprise education within STEM disciplines within most MENA states
3. Small business support services beyond startup within most MENA states
4. Small business support services for startups operating within MENA’s STEM sectors
5. Mentors and role models for women STEM entrepreneurs in MENA states.

The policy brief informs an issue of significant importance to the G20 economies, and in particular, MENA states by advancing strategies to:

1. Educate and train a billion people in the next decade. The focus on entrepreneurship and STEM will prepare young women for careers in the Fourth Industrial Revolution.
2. Build capacity and mobilize knowledge needed to create businesses to drive economic growth in the Fourth Industrial Revolution.