Digital technologies and data.

By Angel Gurría. 

Secretary General at OECD – OCDE

Digital technologies and data have transformed  the way we live, interact and work, enabling “local” to go global with the swipe of a finger. Internet applications such as WhatsApp, starting with only a few employees, revolutionized the way people connect with each other around the world, making it possible at a lower cost than ever before. Amazon can offer consumers a wider range of goods than traditional retailers can, delivering them within a few hours. Many firms now use LinkedIn or other similar platforms to reach a targeted set of candidates when recruiting from the global marketplace. A teenager can take a stand against climate change in Sweden and, thanks to social networks, her message can mobilise millions around the world and influence government policies.

     While the transformational nature of digital technologies is without doubt, the debate is still on about exactly how these technologies are influencing the economy, which role they play in driving productivity. In the 1980s, Nobel-prize winner Robert Solow famously quipped, “We see computers everywhere but in the productivity statistics”. The paradox of rapid technological change vs. slow productivity growth still holds true today. OECDanalysis suggests that the aggregate productivity slowdown currently underway in our economies masks a widening gap across sectors between the most productive, leading firms, and the less productive, smaller firms, who are lagging behind. This means that to harness the digital transformation, countries and regions need to prioritise the diffusion of technology towards less productive firms – especially SMEs – and the necessary investments in education, skills, organisational changes, process innovation and new business models.

   This debate on productivity is particularly relevant for Latin America and the Caribbean (LAC). Over the past decade, marked by the global financial crisis, the region registered a decline in annual labour productivity growth rates from 2.2% in 2008 to about 1.6% in 2018. A new OECD report on Shaping Digital Transformation in Latin America: Strengthening Productivity, Improving Lives highlights the opportunities and challenges that the digital transformation brings for the region. There are certainly success stories in LAC to highlight. For example, some countries such as Uruguay and Costa Rica have moved closer to the OECD average of 100 mobile broadband subscriptions per 100 inhabitants. However, much progress remains to be made. At the end of 2017, 237 million people were not yet connected to the Internet.

   If properly leveraged, digital transformation could offer a new opportunity for the region to achieve the level and scope of economic development envisaged in the 2030 Sustainable Development Goals. With the right policies, LAC countries have a great potential for catching up and for inducing relatively fast and impactful changes. For example, in less than three years, the 2013 telecommunications reform in Mexico brought tangible benefits to citizens, including a 43% reduction in mobile phone costs, and a reduction in the price of mobile service packages ranging from 61% to 75%. Similarly, Colombia’s Live Digital Plan reduced digital divides by offering free internet connectivity in public spaces and expanding networks in rural areas.

    To promote catching-up that has a durable impact on productivity, the region should focus its attention on two key target groups: youth and SMEs. There are more than 154 million young people aged between 15 and 29 in the LAC region, many of whom are connected to the internet and own a smartphone, but who often lack the skills to benefit from new digital opportunities. According to OECD PISA results, between 23% and 70% of young Latin Americans enrolled in school do not acquire basic-level proficiency in reading, mathematics and science as part of their general education. Investment in general education is key to equip everyone with the competencies needed to make the most of the digital transformation. Technical and vocational education can provide a second chance to those who drop out of secondary school or leave without adequate skills. Programmes such as Jóvenes con más y mejor trabajo in Argentina, ProJovem in Brazil, Jóvenes en Acciónin Colombia and ProJoven in Peru, prove that comprehensive intervention has yielded positive results on youth employability, earnings and job quality. Finally, bridging the digital gender divide, including by empowering more women to choose careers in STEM fields, is a key opportunity to foster greater gender equality in the labour market and build a more inclusive digital world.

    Micro-, small- and medium-sized enterprises (MSMEs) dominate the business sector in LAC countries, accounting for 99.5% of all firms and for 61% of formal employment, but generating only 25% of total production. The use of digital technologies is linked to improved management of operations and costs by SMEs. Digital tools also provide SMEs with access to new suppliers and customers in local and international markets, creating new trade relations. They can also make it easier for SMEs to have access to talent, skills and a wider range of financing instruments. However, SMEs face particular challenges in the adoption of effective ICT use, particularly in the case of productivity-enhancing applications. This is due to the lack of key capabilities and to the low investment in complementary assets. SMEs also encounter specific obstacles in managing digital security and privacy risks. Public policies can play a key role in facilitating digital adoption by SMEs. As such, comprehensive national digital strategies should give significant attention and priority to SMEs.

    The Third Ministerial Summit on Productivity of the LAC Regional Programme: Harnessing the Digital Transformation to Boost Productivity in Latin America and the Caribbean, which will take place in Bogota, Colombia on 25 October 2019, aims to build on and support on-going efforts to make the most of the digital economy in the region. We are proud to continue to support the LAC region by monitoring trends, forecasting developments and sharing experiences on innovative practices that can help strengthen the capacity of policy-making institutions to harness the digital transformation for inclusive growth.

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