Emerging Market Trends 2021: Digital Transformation
The onset of the pandemic in 2020 resulted in a global acceleration in the adoption of digital platforms and services. This push has solidified in 2021 as it has become clear – in both emerging and developed economies – that digital is the new normal.
As different countries and regions have moved in and out of lockdown in response to successive waves of Covid-19, many businesses and institutions have incorporated a flexible and “blended” approach, combining online and in-person methods of operation.
Most developing countries have started to adapt to this accelerated digital transition, which is already bearing fruit in many cases.
In Egypt, for example, the initial digital shift led to a surge in demand for ICT services and highlighted the need to expand both hard and soft infrastructure.
The government responded with a series of initiatives. The Ministry of Communications and Information Technology’s CREATIVA, a network of knowledge and innovation centers, received 300 million Egyptian pounds ($19.1 million) in March to fund the second phase of its project , which focuses on the development of an integrated system of technological innovation.
Saudi Arabia has also stepped up its commitment to its integrated digital agenda, enshrined in the country’s development strategy, Vision 2030.
Vision 2030 has helped advance digital transformation in all aspects of daily life, from e-government services to digital financial solutions and work-from-home options.
Fintech and financial inclusion
Turning to Latin America, Peru is benefiting from the impact of increased digital innovation in key sectors such as mining, agriculture and financial services.
Digitization is also helping to expand financial inclusion in the country – an effect seen in many economies around the world.
For example, in Morocco, financial technology (fintech) is advancing rapidly: the country has embraced its efficiency and low costs as a means to boost financial inclusion, with government and the private sector deploying fintech tools for payments.
Indeed, developing a fully digital financial environment is an important objective in Morocco’s strategy to assert itself as a leading financial center in the region – a transformation that has been accelerated by the pandemic.
Trinidad and Tobago is another emerging economy that has embraced fintech as a path to competitive advantage and financial inclusion.
The country has taken important steps to leverage its digital economy, such as the inauguration of a ministry dedicated to digital transformation in July.
Indonesia is also strengthening its fintech ecosystem. Launched in August 2020, the Digital Finance Innovation Roadmap and Action Plan 2020-2024 aims to ensure stable digital financial services; extend financing to micro, small and medium enterprises; and enable affordable, convenient and scalable inclusive financial services.
E-commerce is here to stay
The global rise of e-commerce over the past two years is closely linked to the rise of digital payment methods.
This happened in markets where e-commerce was already established, as well as in those that were previously more hesitant.
In Latin America, for example, before the outbreak of the virus, e-commerce penetration was relatively low, with adoption hampered by the region’s large unbanked population, complicated logistical connections, and general lack of trust in online methods.
This situation has changed dramatically, with retail e-commerce in the region estimated to have grown by almost 40% in 2021.
A number of local businesses have capitalized on the shift in demand, including online marketplace Mercado Libre, which allows individuals and businesses to buy, sell, advertise and pay for goods on its online platform.
Another is PIX, a Brazilian digital wallet that attracted over 110 million users in its first year, after going live in November 2020.
In Africa, Covid-19 has also resulted in a marked increase in e-commerce, despite ICT infrastructure barriers. It’s a trend that looks set to continue: a United Nations Conference on Trade and Development report released in March found that more than 40% of shoppers in four major African countries planned to cut back on their supermarket purchases. in the future by buying food, clothing and electronics online.
Indeed, the ecosystem of African technology startups is increasingly recognized for its dynamism. Large tech clusters have emerged in Lagos, Nairobi and Cape Town, while in Algeria the recently appointed minister for the knowledge economy and start-ups is spearheading a campaign to increase innovation digital.
Digital Growth Industries
Accelerating digitalization has opened up a variety of smaller potential growth industries that some emerging economies seek to support.
One is the post-pandemic rise of so-called digital nomads – a term for workers who can work remotely and move around relatively freely.
A number of emerging markets have sought to capitalize on this phenomenon and attract digital nomads through a series of incentives and special visas.
In mid-2021, Dubai was ranked the second most attractive destination for digital nomads in the world, after Melbourne, Australia.
Another area of growth for emerging economies is cybersecurity.
In Mexico – a country that is consistently ranked as one of the countries with the most cyberattacks in Latin America – cybersecurity is an industry with considerable potential.
The rise of these and other fields is increasingly reflected in university curricula as higher education institutions seek to fill gaps in the job market.
A good example of this is Middlesex University Dubai, which, in addition to existing courses in areas such as data science, network management and cloud computing, this year launched new courses in both electronic engineering, in Cybersecurity and Penetration Testing, which trains students in the field of network security.
Bridging the ICT gap
Another significant growth opportunity associated with digitization relates to the physical infrastructure that supports it.
Many emerging economies have inadequate ICT infrastructure, which limits their ability to take advantage of the opportunities emerging from digital transformation.
The overall penetration rate of Internet users worldwide is 53.6%, according to the UN’s International Telecommunications Union. In advanced economies, this figure is 87% but rises to 47% in developing countries.
Although many low-income communities – in both rural and urban areas – lack reliable and affordable internet access, there are many examples of emerging markets that have successfully implemented programs to expand Internet access.
For example, the Microsoft Women’s Digital Inclusion Partnership, launched late last year, aims to increase the number of women with internet access worldwide. The program will invest in ICT infrastructure in rural areas in Colombia, Ghana, Guatemala, India and Kenya.
In the United Arab Emirates, 5G connectivity is being rolled out by Abu Dhabi-based ICT giant Etisalat, in partnership with Swedish multinational telecommunications company Ericsson.
5G is an integral part of the UAE’s Industry 4.0 initiative, announced in October, which is the cornerstone of the government’s roadmap to ensure the economy remains vibrant over the next half-century.
Initiatives such as these should help close the digital infrastructure gap and ensure that emerging markets can leverage digitalization to drive economic growth.
This opinion piece was produced by the Oxford Business Group.