KEY ISSUES FOR DIGITAL TRANSFORMATION IN THE G20

usinesses or co-operatives of local residents (PPPs are discussed in more detail in Chapter 2 on
infrastructure).
There have also been some cases in which governments have largely financed new infrastructure, such as the
national wholesale fibre networks in Australia and Singapore, although private investment provides the largest
contribution in most G20 economies, such as in Canada, India and the United States. Regulatory frameworks
should be reviewed to ensure that they are appropriate for the levels of investment necessary to achieve their
policy goals. Regulators should promote an optimal level of investment and robust competition in high-speed
networks and services. Spectrum is another area where consideration could be given to focus less on
generating revenue for governments and more on establishing an accurate market value.
Additionally, a role that is best placed with governments and international organisations is strengthening the
collection of internationally comparable statistics on the use of digital infrastructures, particularly global data
traffic flows. Better understanding of the evolving state of fixed and mobile broadband across the world will
lead to better, more targeted policy actions by governments. A call to the G20 to work with international
organisation such as the OECD and the ITU could advance this work.
The availability of financing for innovative and new business models is influenced by a range of policies (OECD,
2015g). Framework policies are one important factor that affects the financing of innovation: significant
benefits arise from increased access to seed and early-stage financing, as well as from increased efficiency in
the judicial system. Promoting effective and predictable insolvency regimes to ensure creditor rights can
strengthen the confidence of a broad range of investors in SME markets. In addition, taxation, product market
as well as employment protection legislation, policy-induced barriers to exit (e.g. excessively strict bankruptcy
laws) are found to impact the financing opportunities for companies. Reducing such barriers will accentuate
competitive pressures, encouraging inefficient firms to exit, and channel resources to firms that are best able
to make use of the resources. While such measures are typically implemented with other policy objectives in
mind, their unintended implications for innovation have to be taken into account. Types of policies that could
be considered include:
Supply-side interventions: A number of countries have had grants, loans and/or guarantee schemes in
place for many years, for example increasing tax incentive programmes. These include front
(investment) and back (capital gains) end incentives for investments in young firms. There has been a
noted increase in the use of equity instruments, particularly in co-investments funds and fund-of-funds
which seek to leverage private investment (Wilson and Silva, 2013). The work on identifying effective
approaches for the implementation of the G20/OECD High-level Principles on SME Financing can provide
evidence on common and innovative policies to sustain the financing of innovative start-ups and SMEs.
Demand-side interventions: The demand side is often overlooked in favour of supply-side actions. Many
entrepreneurs and business owners lack financial knowledge, strategic vision, resources and sometimes
even the willingness or awareness to successfully attract sources of finance other than traditional debt
instruments. Developing human capabilities and social capital is critical to success of early-stage
ventures, as well as to enhancing digital financial inclusion, as advocated by the G20 High-level Principles
for Digital Financial Inclusion. Initiatives to create a more entrepreneurial culture are also vital as in
many countries the fear of failure is higher than perceived opportunities. There has been growth in
programmes such as incubators, accelerators, business angel networks and matchmaking services in
several countries (Wilson et al., 2013). G20 could share best practices and facilitate connections
between these programmes across countries.
Addressing regulatory and administrative barriers: Regulatory and administrative barriers to seed and