Digital divide: Opportunities for economic growth

It is well-established that digitalisation and better digital inclusivity lead to greater economic growth and development. Better digital connectivity results not only in more opportunities for citizens to access different services such as health and financial services but also increases the ability to generate trade and improve employment prospects. According to the World Bank’s report on digital development, nearly three billion people in the world remain offline, while over 40% of the global population does not have access to mobile broadband. Mobile technologies generated more than $4.5 trillion in terms of economic value addition, which is approximately 5% of global GDP. Unfortunately, there is a major divide between the developed and the developing world, where poorer segments in the latter risk being left further behind as they remain digitally disconnected.

According to the World Bank’s World Development Indicators, the South Asian region lags behind the East Asian Pacific region in terms of digital connectivity. While the former reported 82 mobile cellular subscriptions per 100 people in 2021, the latter reported 128 subscriptions. Further, while only 2.4% of the South Asian population is connected using fixed broadband, this surges to almost 30% in the East Asian and Pacific region.

Additionally, while 72% of the East Asian population uses the internet, this drops to 43% in the South Asian region. Relatively, Pakistan performs poorer than its South Asian counterparts. Only 21% of the population uses the internet, fixed broadband connectivity is at 1.3%, and mobile cellular subscription is at 82%. However, it is interesting to note that Pakistan was ahead of the curve till the mid-2000s when both the mobile cellular subscriptions per 100 people and the percentage of population using the internet exceeded the average for the South Asian region. While the others made significant investments in their digital infrastructure in the past decade, Pakistan lagged behind.

The World Bank’s Enterprise Surveys published survey results for Pakistani firms recently. Over 56% of the surveyed manufacturing firms own a website in Pakistan, 37% of the smallest firms with less than 20 employees own a website, while more than three-quarters of the largest firms, with more than 100 employees, own a website. Further, the firms located in smaller towns are less likely to own a website than firms located in larger cities. In comparison, over 62% of the firms in India own a website. As expected, smaller businesses are less likely to own a website than their larger counterparts as well as businesses located in smaller towns in India.

However, firms located in more developed countries are more likely to own a website and be better connected with their clients. Lack of connectivity creates significant challenges for firms, particularly for smaller businesses that could otherwise access e-commerce platforms.

The results for the 2023 wave of the UN Global Survey on Digital and Sustainable Trade Facilitation were recently announced. Pakistan scored 70.97%, outscoring Bangladesh and Sri Lanka, which scored 64.52% and 60.22% respectively. However, India is the regional leader, with a score of 93.55%. The best performing indicator for Pakistan was paperless trade, driven by the recent introduction of the Pakistan Single Window. Pakistan outperformed not only the regional average of the South and Southwest Asian region but also the larger Asia-Pacific region in terms of its paperless trade facilitation. A single window that can effectively connect all the various stakeholders involved in cross-border trade is an essential component of the trade facilitation infrastructure. It is crucial that the investment in the digital infrastructure complements the inroads made in digital trade facilitation.

However, Pakistan must make further attempts to improve cross-border paperless trade facilities by integrating with certification authorities in other countries and improving paperless collection of payments made across borders related to trade.

It is essential that Pakistan improves its quality of digital infrastructure to ensure not only better connectivity for its citizens but also to improve the economic potential. As discussed earlier, better digital connectivity can enhance the standard of living as it provides better access to not only basic services but also access to important information that can aid various commercial aspects within the economy.

The writer is the Assistant Professor of Economics and Research Fellow at CBER, Institute of Business Administration, Karachi

Published in The Express Tribune, July 24^th, 2023.

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