Even before the COVID-19 pandemic hit, many developing countries were already starting to see digital technology less as
a threat (job losses on a mass scale) and more of an opportunity (to transform economies and to grow in a way not seen since the manufacturing boom lifted millions out of poverty in Asia). Now policymakers are looking to technology to support economic recovery with a new sense of urgency. As Ethiopian Prime Minister Abiy said recently: “While policy responses to mitigate the short term impact of the COVID-19 shock are critical, equally important is to ensure that the economy achieves speedy recovery and continues to attract increased FDI into key export sectors…The COVID-19 shock has also put the spotlight on the digital economy and the importance [of] digital transformation.

But how can countries get ahead with this seemingly gargantuan task: after all less than a quarter of people in low-income countries have ever used the internet? Even countries that have digital strategies can struggle to implement. And perhaps most importantly, we know that the pandemic is going to increase poverty and exacerbate inequalities, so how can digital transformation happen in a way that closes rather than feeds a digital divide?

The Pathways for Prosperity Commission spent two years looking at precisely this question: how can developing countries foster digital tech to deliver inclusive growth. We set out our findings in a Digital Roadmap. Of course we hadn’t predicted a pandemic, but COVID-19 only makes the lessons more compelling.

First, digital foundations are essential. This doesn’t mean countries should wait for the perfect enabling environment, but there are some elements that must be in place for digital products and services to foster the widespread adoption and innovation necessary to maximise returns to inclusive development. These are: physical infrastructure (electricity and internet access), foundational digital systems (digital ID and finance) and investment capital. Foundational digital systems, in particular, make huge differences for local innovation. For instance, without a system for processing digital payments, entrepreneurs cannot develop platforms and digital markets to enable trade and exchange. But even here there may be some workarounds for governments looking to rapidly reform in the wake of COVID: for instance absent a fully comprehensive digital ID system, countries can at least link the datasets that they have to ensure maximum interoperability.

Significantly, most of the other elements of the Digital Roadmap are political rather than technical.

For instance, a key lesson from our engagement with governments is that economy-wide benefits of digitalisation can be fully realised only when the process is owned by a range of line ministries and ideally led from the top. ICT ministers have a vital role to play, but co-ordination from the president’s office or a planning ministry across finance, health, education and social welfare departments will deliver far greater benefits.

Next, the use of digital technologies will not automatically lead to the inclusion of the poor and marginalised. Making technology a force for inclusive development requires deliberate steps to ensure that benefits reach everyone. Someone counterintuitively, the digital divide is not defined by infrastructure: 80% of people in developing countries already live under a cellular internet signal. It’s not additional construction that will make internet access affordable to someone in extreme poverty.

Instead, increasing take-up will require new business models to serve the poorest. Governments can use their regulatory levers (such as the allocation of broadcast spectrum licenses) to encourage network operators to pursue greater inclusion, and the operators themselves can explore differentiated pricing models. For instance, Poa! Networks of Kenya offers access in blocks as small as one hour for $0.10, providing options for those who cannot afford standard data packages. M-Kopa has developed a small, eight-watt solar panel system that it sells to families for an initial deposit, followed by daily payments of US $0.50 for one year. Their solar cells have reportedly been installed in more than 600,000 households across Africa – most of which are in extreme poverty and estimates suggest this will save households, on average, around US $750 spent on fuel for lighting over the course of four years.

People also need to trust the process. For very good reasons, in many countries publics at large, and civil society specifically, fears that with technology may come economic disruption or security threats. Governments need to talk to citizens to understand likely usage – particularly for those living at the margins of society, who have most to gain and whose needs are least understood, a process which in itself will build trust. In our final report, we talked about governments establishing a digital compact with a range of stakeholders, but it doesn’t need to be an elaborate process, just
a matter of consulting people – not unlike the old PRSP process, or the dialogue phase of the Digital Economy Kits: a three-step process Pathways to determine priority actions that we’ve developed and implemented in a range of countries (South Africa, Ethiopia, Mongolia, Benin, Malawi and Bangladesh to date).

A vital element of the trust agenda will be rapidly establishing guidelines around the collection, usage and storage of all kinds of data, but frontloading personal – such as health – data, where some kind of informal consent will also be needed.

But other – new – forms of regulation will be needed too. Traditional regulatory processes are not dynamic or responsive enough to govern complex and fast-moving technological changes. Again, rather than trying to develop the perfect rule in a post-pandemic situation (which may anyway be outdated before it is even implemented), decision- makers could create interim guidelines, paired with rapid feedback loops and a commitment to iterative fine-tuning. approach is to explicitly limit the scope of a rule – either with a ‘sunset clause’ that gives the rule an expiration date, or by only applying the rule to a specific geography or sub-market as an experiment. Regulatory sandboxes, which allow firms to test new products on a small pilot scale before being subject to the full regulatory regime, are examples of this approach. Similar mechanisms have been used in the energy sector in Singapore, drone regulation in Malawi, and fintech products in the United Kingdom.

The IMF has said that the downward revision to growth prospects for emerging market and developing economies over 2020–21 (2.8 percentage points) exceeds the revision for advanced economies (1.8 percentage points). Now more than ever, developing countries need to embrace digital technology to grow their way out of a recession. Done thoughtfully (which is not incompatible with working at pace), this growth can be centred around digital platforms and supply chains which offer opportunities and benefits, such as access to services, for the poorest and most marginalised – making sure that, by design, they benefit rather than being further impoverished by digital transformation.

This article is an extract taken from the Parliamentary Network publication ‘Just Transitions’. You can download a pdf version of the full document here.