Hyper-connectivity has become the new engine of the digital economy, which is a key driver to innovation and growth around the world.
With the amount of connected devices rising to 16 billion between 2010 and 2016, and expected to rise to 29 billion by 2022, along with increased bandwidth, security and stability of mobile data networks, the digital economy is a key element, if not the driving force, changing the way we do business worldwide. According to McKinsey, digital flows of data and information now exert a larger impact on GDP growth than traditional trade in goods and services (Source: McKinsey), with approximately 12 percent of the global goods trade conducted via international e-commerce. Digital technology offers the opportunity to small businesses worldwide to use e-commerce platforms to connect with suppliers and customers in other countries and reach new markets, supporting economic growth everywhere. Individuals can now learn, find and work globally, without leaving their home.
All over the world, digitization and the digital economy has enabled businesses to increase productivity and spur innovation. In recognition of this fact, developed country governments are making digital economy policy a top priority, working to empower their businesses and citizens with the tools, education and resources necessary to reap the full benefits of the digital economy.
While this is happening, and despite the demonstrated contribution of the digital economy to productivity and economic growth, the Caribbean ranks low in indices which proxy for participation in the digital economy, for example, indexes that measure the amount of data inflows and outflows from the Caribbean to the rest of the world, particularly when compared to GDP (See for example the MGI connectivity index in the McKinsey study). This may be due, in part, to the prevailing atmosphere in the region where, as Diane Edwards, President of Jamaica Trade and Invest (JAMPRO) said in her opening remarks at the second day of the Compete Caribbean Regional Policy Dialogue, held in Jamaica, “The Caribbean is still playing catch up to the 20th Century, still concerned about internet penetration and broadband costs, when the world has moved on to smart houses, streaming video, big data, artificial intelligence, household robots and workplace automation.”
Certainly, Caribbean firms differ substantially in terms of their usage of digital technology. Though many businesses advertise and promote their offerings online, e-commerce, especially end-to-end sale of goods or services online, is still exceedingly low. This was highlighted by Sylvia Dohnert, Executive Director of Compete Caribbean during her presentation on Firm-Level Productivity and Innovation. One of the region’s crucial difficulties is the difficulty that SMEs face to establish merchant accounts, which are both expensive to maintain and time-consuming to set up. If a small business is unable to establish a merchant account, there is very little recourse, as services of third-party processors like PayPal and Stripe are only available to those firms with bank accounts abroad.
In this difficult context, distributed ledger technology may bring tangible solutions. Bitt.com is an innovative Barbadian company that is using blockchain technology to develop a digital wallet that can allow individuals and firms to exchange money digitally in a secure and seamless manner. Their product is expected to launch December 2017. If this technology fulfills its promise of allowing firms to dramatically reduce the difficulties of making e-payments in the region, it could open a new future for e-commerce and GDP growth in the Caribbean.
At a much broader, economy-wide level, and beyond digital transactions, Caribbean countries would do well in discussing with their citizens and stakeholders a digital economy policy that could propel the economies of the region forward. A digital economy policy includes those policy or regulatory changes that encourage investment and competition in the digital space. A non-exhaustive list of some of the important aspects covered by a digital economy policy are: 1) ensuring free flow of online information; 2) ensuring trust and security online by, for example, strengthening consumer privacy protection and supporting cyber-security; 3) encouraging innovation and emerging technologies by, for example, protecting intellectual property, facilitating open data and standards for inter-operability; 4) ensuring access and skills by supporting broadband coverage and accessibility, as well as digital literacy.
See the following links for a presentation on the role of public policy in the digital transformation of firms (view the PDF, watch the video) delivered by Claudia Suaznabar during the 2017 Regional Policy Dialogue hosted by Compete Caribbean on the Digital Economy in the Caribbean.