Developing economies most likely to benefit from the digital revolution

Information and communication technologies (ICT) have the potential to foster entrepreneurship, boost productivity, reduce transaction and information costs, and increase workers’ efficiency and flexibility. Countries such as South Korea, Israel, and Estonia have based their national competitiveness on ICT products and services, according to the World Economic Forum’s 2015 global information technology report.

Advanced economies benefit most from ICTs, the World Economic Forum’s Networked Readiness Index 2015 suggests. Singapore tops the index. Scandinavian and European countries make up just over half of the top 20. The US is ranked seventh.

But developing economies are catching up. In 2013, high-income countries had two times as many mobile phone subscriptions per 100 population than low-income countries, up from a ratio of 18 times in 2005.

In developing economies, ICTs can help address a lack of infrastructure and improve access and productivity in sectors such as agriculture, health, education, and finance – provided the potential is harnessed properly.

In Kenya, 39% of the population uses the internet. That’s only about half the penetration as in high-income countries belonging to the Organisation for Economic Co-operation and Development (81% penetration in 2013), but Kenya’s internet penetration is five times as high as the average rate among the 25 low-income countries studied.

Kenya ranks 86th of 143 countries on the Network Readiness Index.

Among developing economies, Middle Eastern countries do the best job of leveraging ICTs. Four of them make the top 10 tech-ready developing economies.

Uptake varies in the BRICS. Brazil’s drop to 84th, down 15 spots from 2014, was one of the largest in the study and is attributed to institutional weaknesses such as high levels of taxation and bureaucracy. Higher ICT usage and better affordability helped Russia move up nine ranks to 41st place. India, which has clusters of technological excellence, is the lowest-ranked BRICS country at 89th because it isn’t leveraging ICTs for the benefit of the entire population. China, which remained at 62nd, faces the challenge that rural areas are not embracing ICTs enough. And South Africa dropped five spots to 75th because of the poor quality of its ICT-related infrastructure.

“ICTs can transform our world,” the report reads. “Yet only widespread and systematic use of ICTs by all stakeholders – individuals, businesses, and government – can trigger such transformation.”

Related CGMA Magazine content:

“CGMA Interview: Leveraging Technology:” The CFO of the largest civil engineering construction company in India talks about how his company leverages technology to run the business with an increasingly open workforce.

“CEOs Rank Technology as Most ‘Transformative’ Trend:” Technological advances provide big opportunities for business transformation, according to a new global survey of CEOs. Evaluating Big Data risks and using innovation strategies can help businesses capitalise on these opportunities.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.