Authorized Authorized

ACCELERATING GROWTH
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varies with barriers to competition across sectors in
the same country. Business process outsourcing in
the Philippines has few entry barriers, and firms use
digital technology intensively—the retail sector on
the other hand faces substantial restrictions to entry
and is dominated by incumbent firms, with few of
them offering e-commerce.
Harnessing the full growth potential of digital
technology is thus predicated not just on investments
in skills (chapter 2) and infrastructure (chapter 4) but
also on reforming regulatory barriers by overcoming
vested interests to encourage all firms to compete by
investing in these new technologies (chapter 5). This
also involves overhauling regulatory regimes in the
digital economy, especially in sectors where online
and offline firms increasingly compete, such as retail,
transportation, printing and publishing, lodging,
and finance. The initial entry of internet firms into
these sectors promotes competition and can disrupt
traditional monopolies. But internet firms can be
prone to anticompetitive behaviors by exploiting
scale and network effects. So the regulators need to
level the regulatory regime to guarantee free market
entry and prevent market shares from becoming too
concentrated. The greater digital adoption therefore
needs to be accompanied by unified standards, full
interoperability, and competition across platforms
and contracts.
The goal is to have firms’ use of the internet promote
competition, which encourages more firms to
use the internet. But that will not happen if vested
interest groups are strong enough to capture regulators
and create new barriers to competition and
technology adoption. A level playing field for business
was always important—digital technologies
have made it an imperative.
Connected businesses
The adoption of broadband internet has increased for
firms in all country income groups. Almost all firms
in high-income OECD countries (with at least five
employees) used a broadband internet connection
between 2010 and 2014, with usage rising from 79 percent
in 2006–09 to 92 percent in 2010–14 (figure 1.2,
panel a). The increase between the two periods was
even stronger for lower-income countries. The share
of firms in lower-middle-income countries using
broadband internet rose from 39 percent in 2006–09
to 68 percent in 2010–14. The share in low-income
countries in 2010–14 is still fairly low (38 percent), but
with some notable exceptions.
Figure 1.1 A framework for the internet and economic
growth
Overcome
information barriers
INCLUSION
International trade Capital utilization Competition
RISK: DIVERGENCE AND MONOPOLY POWER
Source: WDR 2016 team.
DIGITAL
TECHNOLOGIES
Augment
existing factors
EFFICIENCY
More than 90 percent of firms in high-income
countries, and 46 percent in low-income countries,
used electronic mail (e-mail) to communicate with
clients between 2010 and 2014 (figure 1.2, panel b). The
differences are greater when the internet is used for
more demanding business activities. For instance, 42
percent of firms in upper-middle-income countries
had a website, and 30 percent purchased goods or services
online. Only 14 percent of firms in low-income
countries purchased goods or services online, and
only 11 percent delivered them online.
Developing countries such as Vietnam have
invested heavily in the rollout of (broadband) internet
infrastructure in recent years. As a result, the share
of manufacturing and service firms in Vietnam using
the internet for business activities rose to 71 percent
in 2007 and 86 percent in 2011. Internet access was up
almost uniformly across all provinces (map 1.1). 2
But many advanced digital technologies have not
yet diffused widely, even in high-income countries.
Almost all European firms with at least 10 employees
use a personal computer (PC) and broadband internet.
About 80 percent have a website, and 60 percent use
supply chain management software that is integrated
with the ICT systems of customers or suppliers outside
of the firm (figure 1.3). But less than 20 percent
Generate
economies of scale
INNOVATION