Individuals and Businesses around the globe are benefiting from the wide set of opportunities the internet is creating. However, these benefits are not shared equally, in that individuals with high incomes, high skills and in specific geographic locations reap the economic gains disproportionately. Countries or regions that are more endowed with these characteristics are more advantaged in terms of digital dividends, which explains one factor into the ever-rising inequality between and within countries.
The new World Bank regional report; “Reaping digital Dividends” suggests on the other hand that this doesn't have to be the case. It argues that digital dividends can reduce poverty and produce shared economic growth in the Europe and Central Asian region (ECA), if the right policies are implemented. The report also states that because the internet is the main driver of technological change, States must effectively adapt to its disruptions to achieve efficiency gains.
Some of the ways to adapt after process and product innovation produces displacement effects in the economy is to allow the spread of new technologies by supporting those who lose their jobs to find another, rather than protecting jobs in the first place and limiting innovation. Moreover, to target bottom-up technological progress by improving access to the internet and big data rather than top-down monitoring of information.
The report illustrates for example that ECA countries in western economies hold less shares or e-commerce sales in GDP than the USA and Japan, not because of weak internet access or imagination, but rather a lack of confidence in the financial system, high levels of cyber security and strong regulations. In comparison, the report highlights a different set of reasons in the eastern part of the region, namely Central Asia and the Caucasus. Landlocked countries with distributed populations face higher costs for internet expansion, as weak internet relations with neighboring countries make them susceptible to internet transit provider's high price demands. Turkmenistan, for instance only endows three connecting fibers, while Armenia's borders with many of its neighbors are completely cut-off due to obliterated political ties. In particular, over 80% of Kyrgyzstan, Armenia and Georgia spend 10% of their household income to afford basic mobile plans.
Nevertheless, the report describes that despite key challenges, ECA countries occupy an important position to reap digital dividends. Governments in the east can implement the successful policies the new EU members put in place, to improve or even outperform the richer economies of the west in terms of internet access. Their closeness to China can also foster strong e-commerce possibilities and relationships. Moreover, improved internet infrastructure in terms of speed and cost can lower the disadvantages of barely populated regions. Russian-speaking countries can even take advantage of economics of scales in content development or online freelancing.
On the other hand, governments in the west can attract important ICT intensive investments from their high level internet infrastructure, which could lead to the long over due creation of the Googles and Facebooks of Europe. They can also capitalize on digital technologies to include older workers into the labor market which would bring about a dynamic market that would otherwise fall fatal to aging population phenomenons.
The report highlights the importance of International Connectivity. Concerning the connection between Europe and the Middle East, the report talk about Europe-Persia Express Gateway, which is a terrestrial cable linking Europe with the Middle East, which was achieved in 2012. It goes from Frankfurt, across Eastern Europe then to Russia, Azerbaijan then through Iran to the Persian Gulf then to Barka, in Oman. It offers an alternative to the Red Sea route for linking Europe to Asia.
