SHAPING DIGITAL TRANSFORMATION IN LATIN AMERICA: STRENGTHENING PRODUCTIVITY, IMPROVING LIVES - Pacific Alliance Forum Lima, 23-24 April 2019 ...
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Pacific Alliance Forum Lima, 23-24 April 2019 SHAPING DIGITAL TRANSFORMATION IN LATIN AMERICA: STRENGTHENING PRODUCTIVITY, IMPROVING LIVES Dirk Pilat Deputy Director, Science, Technology and Innovation dirk.pilat@oecd.org
Outline 1. Digital Transformation – Opportunities and Challenges 2. How should Policy Respond? 3. Some Implications for LAC countries
1. DIGITAL TRANSFORMATION – OPPORTUNITIES AND CHALLENGES
A wide range of new digital
technologies are emerging …
Big data
Cloud computing Internet of Things
Blockchain
Artificial
intelligence 3D printing
…, that provide new opportunities across
every sector of the economy
Public Admin. Health Retail
Agriculture Transportation
Science & Education
Manufacturing
But also creates challenges, as it is moving
faster than previous transformations …
Years until used by 25% of US population
Electricity
Telephone
Radio
Graph showing the
time Television
it took different
technologies to
Personal computer
reacch X amount of
users
Mobile phone
Internet
Smartphones
0 5 10 15 20 25 30 35 40 45 50
Challenging legacy policies and slow policy making -
may require new approaches to policy making
Source: US Census, Wall Street Journal
… and fundamentally changes
economic activity, e.g. value creation
Intangible
assets
Servicification
Challenges policies directed at capital and value creation, e.g. tax
incentives or accounting, trade policy (goods vs services), innovation
2. HOW SHOULD POLICY
RESPOND?
The need for a joined-up approach • The digital transformation affects every part of economy and society • It provides new opportunities for productivity growth and improved well-being, but also raises many challenges • A partial, siloed approach cannot address the many difficult balances that need to be resolved – e.g. openness versus privacy – or address cross-cutting issues such as security, competition and skills • Only an integrated, whole-of-government approach can maximize the opportunities and mitigate the challenges.
OECD’s Integrated Policy Framework
for the Digital Age
Seven Policy Areas:
1. Access
2. Use
3. Innovation
4. Jobs
5. Society
6. Trust
7. Market Openness1. Access: Around 38% of the population in
LAC countries was not yet online in 2017 …
A look at the online and offline population in LAC, 2017
Source: OECD (based on ITU data)… although some LAC countries have high
uptake of mobile broadband …
Mobile broadband and telephone penetration in LAC, 2015 and 2017
Source: OECD (based on OECD and ITU data)… fixed broadband networks will be
needed too
Fixed broadband networks in LAC, 2015 and 2017
Source: OECD (based on OECD and ITU data)Key policies to enhance access
• Sound competition in telecommunications
markets combined with national
broadband strategies, including for future
networks, e.g. 5G.
• Government will need to invest to reduce
specific (e.g. regional) digital divides
• Facilitate financing for private investments
in connectivity and infrastructure
• Improving regulation and access, also for
new technologies, e.g. 5G, IoT, driverless
cars – spectrum is important too.
Innovative practice: Mexico’s “Red Compartida”, a shared
wholesale wireless network2. Use: Firms are getting connected, but few
make effective use of ICTs …
Enterprises with a website or home page, 2010 and 2017(1)
2010 2017 (or 2016)
Per 100 enterprises
90
80
70
60
50
40
30
20
10
0
Note: (1) Or latest year available.… with MSMEs at the greatest risk of
being left behind
Relative internal productivity of MSMEs in Latin America and the European Union
Note: Relative internal productivity refers to the productivity of MSMEs relative to the
productivity of large firms.
Source: OECD/CAF/UN ECLAC (2019) based on Dini and Stumpo (2018).Key policies to strengthen the use of
digital technologies
• Modernise regulation – enable flexibility
and experimentation
• Foster the use of digital tools in SMEs
• Foster business dynamism to allow
successful start-ups to scale and less
successful ones to exit
• Invest in the skills needed for a digital
economy and society
• Foster investment in intangible assets that
complement digital technologies (e.g. R&D,
data, IPR)
Innovative practice: Portugal’s National Initiative on Digital
Competences3. Innovation: Little investment in R&D
or other drivers of innovation, …
Expenditure on R&D, as a % of GDP, 2016(1)
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Note: (1) Or latest year available.… such as management
Average management scores by country
Source: Bloom, Sadun and Van Reenen, 2017.Key policies to strengthen digital innovation
• Invest in research and innovation
• Foster knowledge diffusion – e.g. through
technology extension services, cooperation
between science and business
• Encourage entrepreneurship and the
emergence of new firms
• Promote competition and new, innovative
business models
• Boost innovation in sectors by engaging in
innovation-promoting structural reform
Innovative practice: “Regulatory Sandboxes”, i.e. “Project Innovate”
of the British Financial Conduct Authority4. Jobs: The risk of automation may
be higher in LAC countries …
Activities at high risk of automation (in %)
Source: AfDB/ADB/EBRD/IDB (2018), The Future of Work: Regional perspectives,
https://publications.iadb.org/en/future-work-regional-perspectives… with skills and training an
important concern …
Percent of firms identifying an inadequately educated workforce as a
major constraint
Source: OECD, based on World Bank, Enterprise Surveys… and low investment on training
Public spending on training programmes, LAC
As a percentage of GDP
Note: Year 2014 for Argentina, Brazil, OECD and Panama, 2013 for Costa Rica, Guatemala, Nicaragua
and Peru, 2012 for Dominican Rep, Honduras and Mexico, 2011 for Chile
Source: World Bank (2015), LAC Social Protection (database); OECD.Stat (2015),
http://stats.oecd.org.Key policies to foster jobs in the digital
economy
• Ensure a well-functioning labour market -
Facilitate redeployment and geographic mobility
• Use formal and informal learning mechanisms to
help workers acquire the right mix of skills
• Develop new forms of education and approaches
to adult learning – apply digital tools
• Facilitate co-ordination among education and
training institutions, employers and social partners
• Promote social and employment protection,
especially for non-standard, irregular workers
• Tackle informality.
• Develop an adaptation agenda – build confidence
in society’s ability to change and people to benefit
Innovative practices: The French Compte Personnel de Formation;
Job Security Councils in Sweden5. Strengthening trust is also a
challenge
This requires comprehensive national strategies
for privacy, security and consumer protection.
The 2016 OECD/IDB Broadband Policies for Latin
America and the Caribbean: A Digital Economy
Toolkit found that many LAC countries did not
yet have such strategies in place.Key policies to ensure trust
• Digital security should be approached from a
strategic, economic and social perspective
– Improve awareness
– Flexible approach to digital security governance
– Ensure security and resilience for critical
infrastructures and essential services
– Responsibility is shared among all stakeholders
• Promote privacy protection
– Develop national privacy strategies and ensure
interoperability of privacy frameworks
• Protect consumers online
• Support SMEs in ensuring trust in the online
environment
Innovative practice: “IT Security in Industry” in Germany, helping
SMEs improve their digital security6. Market openness: Key to benefit from
the new opportunities for trade
Intra and extra-regional participation in GVCs
Panel A. Backward GVC participation Panel B. Forward GVC participation
Intra - regional backward participation Extra - regional backward participation Intra - regional forward participation Extra - regional forward participation
35 25
30
20
25
20 15
15 10
10 62%
69% 58%
62% 49% 40% 5 50%
5 46%
30% 22% 24% 16%
5% 9% 7% 9%
0 0
1995 2011 1995 2011 1995 2011 1995 2011 1995 2011 1995 2011 1995 2011 1995 2011
European Union Latin America North America SouthEast Asia European Union Latin America North America SouthEast Asia
Note: Shading identifies the share of linkage which is from the region.
Source: Cadestin, et al. (2016) based on OECD Trade in Value Added Database.Policies to foster market openness
• Foster the interoperability of regulatory
approaches across countries, e.g. as
regards data flows and payment
systems
• Approach market openness holistically,
e.g. as regards goods and services
• Ensure open markets – tackle physical
barriers and adjust to digital trade
• Ensure sound competition - consider
whether adjustments to competition
policy need to be made
Innovative practice: Denmark’s tech ambassador7. Society: Can LAC countries make the digital transformation work for everyone? • The digital transformation is an opportunity that needs to be shaped by policy – people-centred policies will be key • Ensuring access for all – people, firms and regions – can create opportunities for all to participate and benefit, e.g. from better access to finance, education and health. • Investment in education and skills can help people adjust to the new opportunities linked to digital transformation. • Policies for innovation and entrepreneurship can drive new growth and create new job opportunities. • Competition policies, market openness & business/SME policies are crucial to avoid winner-take-most outcomes and spread the benefits to consumers. • But there is a risk of some groups and regions being left behind – Social and regional policies will be important.
3. KEY POLICY ISSUES FOR LAC
COUNTRIESSome key policies to benefit from digital
transformation in LAC countries
1. Access: Ensure the rolling out of broadband networks to every
citizen, region and firm to ensure nobody is left behind. Competitive
telecom markets and national broadband strategies are key.
2. Use: Facilitate the diffusion of advanced technologies and
knowledge, notably to SMEs and lagging regions; Ensure that
regulatory frameworks are adapted to the digital age.
3. Innovation: Foster innovation and entrepreneurship by enabling
new business growth and investing in the future.
4. Jobs: Invest in education and support skills development to ensure
nobody gets left behind; Foster social dialogue.
5. Trust: Privacy, security and consumer protection require attention.
6. Market openness: Market integration in the LAC region would help
create scale for digital firms; need to ensure sound competition;
Facilitate e-commerce and digital trade.Digital transformation may also require new
approaches to policy making
• Review policies to identify whether those based on analogue
concepts still work: e.g. physical locations, physical movement
• Avoid narrow, specific regulations or rigid standards that may
quickly become obsolete – rather set broad principles (lines
on the road);
• Use experimental policies and iteration, e.g. through
sandboxes, to facilitate risk-taking and innovation.
• Revisit policies frequently to ensure that they remain “fit for
purpose”; don’t be satisfied with regulate and sit, rather
iterate;
• Improve understanding of the digital transformation with
government (CTOs, geeks for/in government)
• Use data and digital technologies for better policy making
and regulationOECD’s work on policies for the digital
age in the LAC region
OECD Telecommunication Reviews:
– Mexico (2012 and 2017)
– Colombia (2014)
– Brazil (ongoing, to be finalised in 2020)
Regional Reviews:
– OECD/IDB Broadband Policies for LAC:
A Digital Economy Toolkit (2016)
• OECD Going Digital Reviews:
– First one launched on Sweden (2018)
– Colombia (2019)
– Brazil (ongoing, to be finalised in 2020)Thank you
Contact: dirk.pilat@oecd.org
OECD Going Digital website:
http://oe.cd/goingdigital
OECD Going Digital Toolkit Portal:
http://www.oecd.org/going-digital-toolkit
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