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30 WORLD DEVELOPMENT REPORT 2016 Figure O.21 The quality of complements and technology rises with incomes Complements 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 LBR BDI MWI TRANSFORMING BEN ETH LSO SWZ SLE MOZ MLI HTI NZL AUS DNK SWE NLD IRL BEL USA GBR EST SVN ISL LUX DEU CYP FRA LTU LVA JPN PRT KOR MYS MLT AUT BRB ARE CZE CHL HUN QAT ISR MUS ESP POL SVK GEO HRV ROU ITA TTO CRI BGR SYC GRC MKD URY PAN JOR BWA SRB ARM GUY ALB RUS LKA UKR MEX KAZ ZMB SLV TUN MNG TUR KGZ THA COL GHA RWA ZAF BLZ PHL PER MAR SAU BHR SEN VNM ARG CHN BRN UZB IDN DOM TJK GAB IRN KWT NIC NAM KEN GTM TZA ECU BRA CMR BGD LAO NPL IND GMB HND EGY PRY PAK BOL DZA MRT NGA ZWE AGO YEM LBY KHM CAN FIN NOR CHE SGP TRANSITIONING I VEN 0.1 0 EMERGING E 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Technology High-income Upper-middle-income Lower-middle-income Low-income Source: WDR 2016 team. For more details see figure 5.3 in the full Report. Data at http://bit.do/WDR2016-FigO_21. Note: Technology is measured by the Digital Adoption Index (DAI). DAI is based on three sectoral subindexes covering businesses, people, and governments, with each subindex assigned an equal weight: DAI (Economy) = DAI (Businesses) + DAI (People) + DAI (Governments). Each subindex is the simple average of several normalized indicators measuring the adoption rate for the relevant groups. Similarly, complements is the average of three subindicators: starting a business; years of education adjusted for skills; and quality of institutions. of internet use, they require effective competition regulation and enforcement—including easy firm entry and exit; a greater focus on advanced cognitive and socioemotional skills that are augmented by technology; and effective e-government delivery systems for provider management and citizen engagement. Countries in advanced stages of the digital transformation need to tackle some of the most challenging tasks. They need to find ways to facilitate “new economy” competition, to ensure lifelong learning and respond to the changing nature of work, and to use the internet for most functions of government and for more participatory policy making. Regulations that promote competition and entry Digital adoption by firms varies among countries, and there are reasons for it to be slow. Most fundamentally, adoption requires knowledge about the technology, access to it, and knowledge of how to best apply it. But the most important driver is competitive pressure, as firms adopting new technology
OVERVIEW 31 Figure O.22 Policy priorities for countries that are emerging, transitioning, or transforming EMERGING TRANSITIONING TRANSFORMING REGULATIONS that promote competition and entry Remove barriers to adoption Competition regulation and enforcement Platform competition SKILLS to leverage digital opportunities Foundational skills and basic ICT literacy Prepare for careers instead of jobs Facilitate lifelong learning INSTITUTIONS that are capable and accountable Mobile phone– based services and monitoring e-government delivery and citizen engagement Participatory policy making and digital collaboration Note: ICT = information and communication technology. raise productivity and those who don’t fall behind. This highlights the critical role of a country’s business climate. It includes laws and regulations that ensure easy entry and exit of firms, and an open trade regime that exposes companies to foreign competition and investment. There is a political economy dimension to this as well—special interests influence regulators to keep markets closed to competition. This lessens the need for firms to reach for the technological frontier. Where banks are heavily regulated and protected from new market entrants, they have less incentive to invest in efficiency-boosting technology that might also help them serve customers better or reach new ones. But competition policy and enforcement are complex, and many low-income countries lack capacity to design and implement them effectively. Lower the barriers to digital adoption In countries where the digital economy is still emerging, the priority is to facilitate connectivity and develop the foundation for effective competition regulation. Although 74 mostly middle- and high-income countries have unilaterally removed tariffs on ICT capital goods, computers and smartphones are still treated as luxury goods in some countries, including Turkey, where taxation adds almost half to the price of mobile handsets. 33 Djibouti’s tariff on computers is 26 percent. Many countries treat their telecom firms as cash cows. Where firms may have limited knowledge about how the internet can improve their business, benchmarking exercises and information programs can be effective. And to allow more innovative companies to enter markets easily, countries need to improve firm registration and create greater market transparency to reduce price collusion, market sharing, and rigged public procurement. E-government systems such as online business registration and e-procurement systems can simplify these processes and produce more openness. Increase competition through effective regulation and enforcement State control in economic sectors, barriers to entrepreneurship, and restrictions on trade and investment reduce the incentives for firms in protected sectors to use digital technologies. Most countries have a competition authority, although many were set up fairly recently and enforcement varies, especially when the state or politically connected firms benefit from market restrictions. Moreover, the internet makes it easy to deliver services online from anywhere in the world, so how trade in services is regulated becomes increasingly important. Ethiopia, India, and Zimbabwe have the greatest restrictions on service trade, but many other countries restrict specific services such as legal or accounting tasks. Countries can increase the competitiveness of their economies and encourage greater use of digital technologies by gradually reducing market distortions while building up effective competition enforcement. This applies as
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Page 5 and 6: A World Bank Group Flagship Report
Page 7 and 8: Contents xiii xv xix Foreword Ackno
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Page 22 and 23: xx ABBREVIATIONS GDP GIS GNI GPS GS
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Page 26: Inclusion Efficiency Innovation
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ACCELERATING GROWTH 81 regulatory b
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ACCELERATING GROWTH 85 71. Cirera,
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ACCELERATING GROWTH 87 Economic Per
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ACCELERATING GROWTH 89 Washington,
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AGRICULTURE 91 Figure F1.1 Introduc
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CHAPTER 3 Delivering services Have
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e-HEALTH 191 Figure F3.1 Sequencing
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4. Sectoral policies 5. National pr
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SECTORAL POLICIES 201 Box 4.1 Polic
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SECTORAL POLICIES 223 the internet
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SECTORAL POLICIES 225 Protecting pe
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SECTORAL POLICIES 227 grown since t
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SECTORAL POLICIES 229 Box 4.9 Tech
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SECTORAL POLICIES 231 Box 4.10 Isra
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SECTORAL POLICIES 233 US$74 million
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SECTORAL POLICIES 235 has been clas
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SECTORAL POLICIES 237 Kende, Michae
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THE DATA REVOLUTION 245 Figure S5.1
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THE DATA REVOLUTION 247 A journalis
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NATIONAL PRIORITIES 249 • Rising
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NATIONAL PRIORITIES 251 schools, ho
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NATIONAL PRIORITIES 271 • Explore
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NATIONAL PRIORITIES 275 identify gh
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