Democratic and Economic Development in the Digital Era

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New opportunities in the interconnected world

In the last decade, new information and communications technologies (ICTs) have become less expensive and more accessible for people around the world. According to the International Telecommunications Union, more than 3 billion people1 (nearly 47 percent of all the people on earth) now use the internet. Likewise, by the end of 2016, the total number of mobile broadband subscription was expected to reach 3.6 billion.2 This growing global usage of ICT has made it easier for citizens and organizations to access information and share data, conduct business online, and virtually network with others. Rapid technological advances, in turn, are poised to have a profound impact on democratic and economic development around the world.

“Civic tech” is an example of how technology is improving democracies around the world. One key source of citizen frustration globally is the perceived lack of responsiveness to people’s needs and concerns by their elected officials. ICT tools can be leveraged to alleviate this disconnect, make citizens more directly engaged, and governments more accountable. FixMyStreet, for instance, is a crowdsourced website for reporting to local authorities on problems with public service delivery, such as road repairs or street lighting, used in countries as diverse as Malaysia to Ireland.3 Another example is BudgIT,4 a Nigerian social enterprise that uses ICTs to track and publish public budget and spending, presented as infographics, enabling citizens to easily engage with the government on local public service issues. Similarly, Marsad Majles, a project by Al Bawasla, a Tunisian civil society organization, tracks and disseminates online how parliamentarians vote and work on drafting new laws.5

ICTs are also linked to accelerated economic growth in developing countries. A World Bank study in 2011 cited that a 10 percent increase in mobile penetration in developing countries correlated with 0.8 percent increase in economic growth.6 For instance, mobile finance like Kenya’s M-PESA7 has helped spur financial inclusion rates – the percentage of Kenyans with any sort of access to formal financial institutions – from less than 25 percent in 2006 to 67 percent in 2013.8 Moreover, M-Shwari, a partnership between Commercial Bank of Africa and Safaricom that offers a combination of savings and loans via M-PESA,9 has given over 9 million Kenyans access to finance with nearly $20 million in daily transactions.10

E-commerce is also becoming a powerful driver of economic growth, inclusive trade and job-creation in the developing world, according to the United Nations Conference on Trade and Development (UNCTAD).11 Business-to-consumer (B2C) e-commerce in particular is quickly expanding in developing countries, especially in Asia and Africa, with the volume of international postal deliveries of small parcels having risen by 48 percent between 2011 and 2014 and the share of developing countries as senders rising from less than 30 percent to more than 40 percent.12 This trend of e-commerce expanding in emerging markets is expected to continue as internet connectivity, mobile phone access, and availability of reliable shipping services increase.

New challenges of the digital era

Technology, however, is also challenging most societies. While social media played a significant role to mobilize and empower citizens during the Arab Spring,13 for instance, the same tools are also used by autocratic leaders to disseminate rumors or quash dissent.14 One of the more publically noted online propaganda wars is currently happening in Ukraine, where Russia has utilized significant resources, such as internet trolls and fake news, to stifle pro-democracy online discourse. A report from the New York Times Magazine in 2015 noted that some of the hundreds of paid Russian trolls were required to produce 15 blog posts and 150 to 200 comments each day.15

Recognizing that the internet is now one of the most valued ways for people to connect, authoritarian states and declining democracies are also increasingly closing the space for an open internet and communications. In Burundi, for instance, when the ruling party announced that President Pierre Nkurunziza would run for a third term, it ordered the shutting down of mobile messaging services to prevent protests. Such politically motivated internet shut downs are costing countries over $2.4 billion a year.16

Democratizing the digital economy

Societies will continue facing challenges as they become more digitized. At the same time, unprecedented opportunities for advancing democratic and economic development arise in this new digital era.

As access to the internet and new technologies expands, so will the chances for people to fully engage in their countries’ democratic and economic lives. One way to take advantage of the new digital reality is to preserve and expand the freedom of digital commerce. The digital economy spurs inclusive growth by making it easier for small and medium enterprises (SMEs) to do business with others, within their countries and beyond. Online marketplaces like eBay are already creating inclusive economies by enabling SMEs from emerging markets to export at large volumes. According to the eBay Public Policy Lab report,17 eBay was the primary export platform for SMEs trading online in Chile, Colombia, South Africa, Indonesia, and Thailand. Analysts predict that this trend will continue: the value of the cross-border e-commerce is anticipated to grow from $230 billion in 2014 to $994 billion in 2020.18

Yet, the full potential of digital commerce will only be realized if businesses of all sizes can equally access and participate in the global digital economy. This outcome can only be achieved if governments, companies, and civil society work together to create local entrepreneurship environments conducive to online commerce. Creating such environments requires action on multiple fronts19: general business regulation and digital regulatory frameworks, access to finance, ICT infrastructure and services, logistics and trade facilitation, payment solutions, and development of e-skills among companies and consumers.

The Center for International Private Enterprise (CIPE) is well positioned to work with local private sector organizations to facilitate and help create an inclusive digital economy. CIPE has partnered with local private sector actors around the world for over 30 years to foster democratic and market-oriented reforms. At its core, CIPE’s work has involved inclusive advocacy to foster better business environments. Examples of such initiatives include supporting public-private dialogue in Moldova20 to develop legislation that would support SME growth, or working with the Pakistan Software Houses Association for IT and ITES (P@SHA) to ensure that the national reform priorities include recommendations from IT sector companies.21 As the new digital era brings new issues into focus, CIPE will continue working with business organizations around the world to promote the principles of transparency, open competition, and rule of law in the online space. Since introducing a set of uniform global trading rules on e-commerce may not fully meet e-governance needs, governments increasingly need to engage in public-private dialogue with their own constituencies to come up with policy solutions that fit local needs. That is where CIPE’s experience can be constructively leveraged.22

CIPE’s work in the digital space

CIPE is currently expanding the focus of its work to help private sector partners become active participants in the digital economy, push for open data and transparency online, and improve governance using ICTs. CIPE is already delving into these areas,23 for instance by working on global trade facilitation24 and supporting business associations to use mobile tools for policy advocacy. Going forward, CIPE will continue to intensify these efforts in three ways:

  • Data access and security: There are both risks and opportunities for the private sector associated with open data and big data, especially in compliance and due diligence work. Business and governments in emerging markets, and companies that work with partners abroad, need to understand the importance of striking a constructive balance between protecting citizens’ privacy and expanding access to data.
  • Digital freedom and regulatory reform: Preserving an open internet conducive for freedom of expression and online commerce is a crucial value. Stakeholders around the world must work together to foster a community of open internet supporters and engage internet freedom reformers globally.
  • Applications of technology for democratic development: While new technologies such as blockchain have the potential to revolutionize governance and business transactions, they need to be well understood and carefully applied. Input from the private sector around the world is necessary to shape regulatory environments in ways that promote responsible innovation.

Democracy and digital economy can mutually reinforce

Democratic values play an important role in the globalized digital economy for several reasons. Societies everywhere increasingly face the question of how to ethically and productively manage massive amounts of data. Jaw-dropping 2.5 quintillion bytes of data are produced every day—so much that 90 percent of the data in the world today has been created in the last two years alone. Governments, companies, and civil society have an opportunity to leverage big data to develop innovative solutions and services to improve e-governance and encourage civic engagement.25 Many organizations are already using open data to improve educational services26 and build smart cities.27 Increased data volumes and flows across borders will also require international cooperation between governments and companies (telecoms and internet providers in particular) to improve privacy and security28 of personal data. Likewise, just as Facebook and Google are starting to curb disinformation29 on their platforms, online businesses will be expected to responsibly manage their content in a fair and transparent way. Ethical governance and usage of data, therefore, will be an important point of policy discussion for all stakeholders in the digital economy.

Another reason for applying democratic values to the digital economy is to build and promote competitive e-commerce environments. As more businesses large and small use online marketplaces such as eBay, Amazon, and Etsy to trade, and as global shipment becomes more cost effective, demand for e-commerce will increase. Countries should take advantage of this trend and create conducive environments for online commerce to flourish by keeping an open and transparent internet, and providing equal opportunity for all businesses30 to access the internet easily and affordably. In policy terms, this can translate into establishing clear laws governing the internet, or regulations guaranteeing equal access to lawful content and services without interference.

Finally, countries must also embrace the new entrepreneurship ecosystem31 models and help high-tech startups obtain mentorships, finance, and guidance on how to accelerate growth and create jobs. As an increasing share of local populations can find employment and opportunities in digital economies, citizens will be less prone to be swayed by anti-democratic political rhetoric or the pull of violent extremism.

All these steps can support both strengthening of democracies and growth of digital economies. CIPE, along with other international and local stakeholders, is ready to advocate democratic and market values from a 21st century perspective. Despite challenges, an open, competitive digital economy that facilitates democratic participation and is inclusive for all citizens and businesses offers a promising vision of the future.

Maiko Nakagaki is a Program Officer for Global Programs at the Center for International Private Enterprise (CIPE), where she oversees projects involving technology for democratic and economic development, youth and women entrepreneurship, and public private dialogue. Prior to joining CIPE, she worked for the International Finance Corporation (IFC) in Cairo and at an international development consulting firm based in Washington, DC. She holds a master’s degree from Johns Hopkins School of Advanced International Studies (SAIS) and a bachelor’s from Mount Holyoke College.


Endnotes:
1 Statistics confirm ICT revolution of the past 15 years, International Telecommunications Union https://www.itu.int/net/pressoffice/press_releases/2015/17.aspx
2 ICT Facts and Figures 2016, International Telecommunications Union http://www.itu.int/en/ITU-D/Statistics/Documents/facts/ICTFactsFigures2016.pdf
3 FixMyStreet.com website https://www.mysociety.org/wehelpyou/report-street-problems/?gclid=CjwKEAjwg7yqBRCu5NmlgMm6i08SJADDEudZ0bZx3tCG6TjIZHD27tLBSJF5ZXuA8l-ANs7Lu8cSMBoCY-Xw_wcB
4 Data transparency is being used to tackle Nigeria’s corruption problem one report at a time, Quartz Africa https://qz.com/899190/budgit-has-raised-3-million-in-funding-from-omidyar-network-and-bill-and-melinda-gates-foundation/
5 Marsad Majles, Al Bawsala http://www.albawsala.com/en/marsad_majles
6 2012 Information and Communications for Development: Maximizing Mobile, The World Bank https://siteresources.worldbank.org/EXTINFORMATIONANDCOMMUNICATIONANDTECHNOLOGIES/Resources/IC4D-2012-Report.pdf
7 The Future of Money, CBS http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/
8 The Kenyan Journey to Digital Financial Inclusion GSMA http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/09/MMU_2014_Kenya-Pathway_Infographic_Web.pdf
9 Top 10 Things to Know About M-Shwari, The Consultative Group to Assist the Poor (CGAP) http://www.cgap.org/blog/top-10-things-know-about-m-shwari
10 How M-Shwari Works: The Story So Far, CGAP and Finance Sector Deepening Kenya https://www.cgap.org/sites/default/files/Forum-How-M-Shwari-Works-Apr-2015.pdf
11 eTrade for All: Unlocking the Potential of E-Commerce in Developing Countries, United Nations Conference on Trade and Development http://unctad.org/en/Pages/DTL/STI_and_ICTs/eTrade-for-All.aspx
12 Information Economy Report 2015: Unlocking the Potential of E-commerce for Developing Countries, United Nations Conference on Trade and Development http://unctad.org/en/PublicationsLibrary/ier2015_en.pdf
13 Opening Closed Regimes: What Was the Role of Social Media During the Arab Spring?, Project on Information Technology & Political Islam http://collectiondevelopment.library.cornell.edu/mideast/Role%20of%20Social%20Media%20During%20the%20Arab%20Spring.pdf
14 Why Technology Hasn’t Delivered More Democracy, Foreign Policy Magazine http://foreignpolicy.com/2015/06/03/why-technology-hasnt-delivered-more-democracy-democratic-transition/
15 The Agency, The New York Times Magazine https://www.nytimes.com/2015/06/07/magazine/the-agency.html?_r=1
16 Internet shutdowns cost countries $2.4 billion last year, Center for Technology Innovation at Brookings https://www.brookings.edu/wp-content/uploads/2016/10/intenet-shutdowns-v-3.pdf
17 Small online Business Growth Report: Towards an Inclusive Global Economy, ebay https://www.ebaymainstreet.com/sites/default/files/ebay_global-report_vf_no-countries_0.pdf
18 Data: The Fuel of the Digital Economy and SME Growth, Accenture https://www.accenture.com/t20160901T103414__w__/us-en/_acnmedia/PDF-29/Accenture-Data-The-Fuel-Of-The-Digital-Economy-And-SME-Growth.pdf
19 Policy Areas, United Nations Conference on Trade and Development http://unctad.org/en/Pages/DTL/STI_and_ICTs/eTrade-for-All/eTrade-for-All-Policy.aspx
20 The Moldovan National Business Agenda Goes to the Regions, Center for International Private Enterprise Development Blog http://www.cipe.org/blog/2015/04/27/the-moldovan-national-business-agenda-goes-to-the-regions/#.WP-u1YWcHDd
21 Public Hearing of E-Crime Law – P@SHA Advocacy Efforts Start Reaping Benefits, Center for International Private Enterprise Development Blog http://www.cipe.org/blog/2010/01/07/public-hearing-of-e-crime-law-%E2%80%93-psha-advocacy-efforts-start-reaping-benefits/#.WP-vMoWcHDd
22 Could global trade rules on e-commerce do more harm than good?, Devex https://www.devex.com/news/could-global-trade-rules-on-e-commerce-do-more-harm-than-good-90062
23 Promoting Advocacy with Technology, Center for International Private Enterprise Development Blog http://www.cipe.org/blog/2016/02/23/promoting-advocacy-with-technology/#.WP-wDIWcHDc
24 Global Alliance for Trade Facilitation website http://www.tradefacilitation.org/
25 Bringing big data to the enterprise, IBM https://www-01.ibm.com/software/data/bigdata/what-is-big-data.html
26 The World’s Top 10 Most Innovative Companies In Education, Fast Company https://www.fastcompany.com/3026328/most-innovative-companies-2014/the-worlds-top-10-most-innovative-companies-in-education
27 Delivering the Smart City, ARUP http://publications.arup.com/publications/d/delivering_the_smart_city
28 Conflict of Interest: Global internet privacy trends, The World Bank http://blogs.worldbank.org/publicsphere/conflict-interest-global-internet-privacy-trends
29 Facebook and Google Step Up Efforts to Combat Fake News, The Wall Street Journal https://www.wsj.com/articles/facebook-and-google-step-up-efforts-to-combat-fake-news-1486396476
30 Open for Business? The Economic Impact of Internet Openness, Dalberg http://www.dalberg.com/insights/open-for-business-the-economic-impact-of-internet-openness/
31 Engaging with Startups in Emerging Markets, MIT Sloan Management Review http://sloanreview.mit.edu/article/engaging-with-startups-in-emerging-markets/
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