2024-10-18 19:32:00
At GITEX GLOBAL 2024, Huawei presented an important article entitled “The Digital Dividend – ICT Maturity Fuels Economic Growth“:
Digital transformation is a must
Our physical and digital worlds are increasingly intertwined, driven by breakthroughs in AI, 5G-A and cloud computing. This convergence, called the fourth industrial revolution, is transforming the economy at an extraordinary pace and accelerating global growth. Digitalization and intelligence are expected to account for 70% of total global economic growth in the next five years[1]. From smart cities that optimize their energy consumption to AI-powered medical diagnostics, the impact is already changing the way societies function. More than 170 countries have recognized these opportunities and developed national strategies focused on AI-driven digital transformation.
The connection between technological progress and economic growth is a well-trodden path. From the steam engine to the assembly line, each industrial revolution has redefined our economic landscape. However, the current digital revolution is having an outsized impact due to the rapid pace of innovation and the profound impact on the way companies are transforming their business operations.
The new one Global Digitalization Index or GDIco-created with IDC, measures the progress of this digital transformation across countries and shows the clear connection between a country’s ICT maturity and its economic prosperity. Above all, the study shows how strategic investments in digital infrastructure significantly accelerate economic growth and how countries with different levels of digital maturity can use this change to advance their economies.
The Landscape of Digital Maturity
The GDI 2024 report, building on the previous Global Connectivity Index, was created in collaboration with scientists and experts and covers 77 countries, representing 93% of global GDP and 80% of the world’s population. He divides the countries into three groups: frontrunners, adopters and starters. Each cluster reflects a different stage of digital maturity, with frontrunners such as the US, China and Singapore leading the way in both ubiquitous connectivity and digital fundamentals. Adopters like Spain and Malaysia are rapidly expanding their digital capabilities, and newcomers like Vietnam are laying the foundation for their digital future.
What is particularly notable is the growing investment gap in digital infrastructure. From 2019 to 2023, the ratio of investment growth in digital infrastructure between frontrunners, adopters and starters is 18:3:1, with an average annual increase of $7.2 billion, $1.1 billion and $400 million, respectively US dollars. This discrepancy is not just a number, but a powerful indicator of the different economic developments in these countries, because the study shows that every $1 investment in digital transformation has a return of $8.3 for digital economy of a country brings.
The effect of the digital dividend
At the heart of the report’s findings is an important revelation: for frontrunner countries, each one-point increase in GDI represents a $945 increase in GDP per capita. This economic impact is 2.1 times higher than for countries participating in the rollout and 5.4 times higher than for countries starting the rollout. This is the effect of the digital dividend in action.
But what is the cause of this effect? The answer lies in the dynamics of the ecosystems of mature digital economies. In frontrunner countries, we see advanced digital ecosystems where technologies such as AI, IoT and cloud computing work seamlessly together.
These ecosystems promote network effects, where the value of digital services increases exponentially with each new user or connection. Furthermore, the accumulation and intelligent use of data is driving innovation at a pace unheard of in less digitally mature economies.
Take the Chinese port of Tianjin, where the integration of 5G, cloud, AI and green energy has resulted in a smart, carbon-free terminal. This digital transformation has resulted in a 50% reduction in container turnaround time and a 17% reduction in energy consumption compared to traditional terminals. It is a microcosm of how digital maturity increases economic efficiency and sustainability.
The interaction of digital investments
The effect of the digital dividend is so strong because it reinforces each other. Digital technologies do not exist in isolation – they build on each other and complement each other. The introduction of 5G networks, for example, not only improves connectivity but also enables edge computing, real-time AI applications and IoT deployments at scale. This compounding effect creates a virtuous cycle of innovation and growth.
Furthermore, as these technologies continue to develop, they generate huge amounts of data. In digitally mature economies, this data becomes a new factor of production, powering AI systems that further accelerate innovation and productivity gains. It’s a self-reinforcing cycle that explains why digitally advanced nations can derive so much more value from incremental improvements in their GDI scores.
Bridging the divide: a call to action
The digital dividend effect is both a challenge and an opportunity. For starter and adopter nations, it emphasizes the urgent need to accelerate digital transformation to avoid falling further behind. However, it also offers a roadmap for leapfrogging development stages, identifying four key enablers for the smart world: ubiquitous connectivity, digital foundations, green energy, and a supportive policy and ecosystem that ensures any digital development is sustainable and resilient.
Start-ups must prioritize building a robust connectivity infrastructure – both fixed and mobile. Research shows that countries that excel in both areas (with fixed broadband speeds of more than 150 Mbit/s and mobile broadband speeds of more than 80 Mbit/s) experience significantly higher per capita e-commerce transactions, resulting in a unlock greater digital economic potential.
Indonesia, a “starter” country in the GDI, recently completed its national fiber optic development initiative, providing access to the Internet to nearly 6 million people in 57 cities and districts and an additional 16.4 million people. Indonesia’s 4G network covers more than 94 % of cities and villages, and the country’s Internet penetration rate is 79.5%. This coordinated development has enabled Indonesia to become the largest e-commerce market in Southeast Asia in 2023 a volume of $82 billion and over 15 unicorn companies have been founded. By 2030, the country’s digital economy is expected to exceed $210 billion.
Users need to focus on both connectivity and digital fundamentals. Investments in data centers, cloud services and AI capabilities can help these countries accelerate their path to digital maturity. Mexico’s data center expansion plan is an example of this approach. The country plans to build 73 new data centers by 2029, adding to the 15 that already exist. This initiative is expected to increase the national GDP and create 68,198 direct and indirect jobs. Such targeted investments in digital infrastructure demonstrate how adopter countries can leverage technology to promote economic growth and job creation in key sectors.
For frontrunners, the challenge is to maintain their lead. This requires continued investment not only in cutting-edge technologies, but also in the development of talent and strategies required to take full advantage of these innovations. Our data shows that the proportion of STEM graduates is similar across all clusters (around 25%), while Frontrunners turn 95% of these graduates into ICT professionals, compared to just 15% in starter countries.
The future of the digital economy
Looking ahead, new technologies such as quantum computing and advanced AI systems promise to further amplify the effect of the digital dividend. These technologies have the potential to solve complex problems in areas ranging from drug discovery to climate modeling and create new opportunities for economic growth.
Furthermore, the role of digital infrastructure in ensuring economic resilience cannot be overstated. The COVID-19 pandemic has shown that digitally mature countries are better able to adapt to disruptions and sustain economic activity through remote working, online education and digital services.
The decisions we make today to invest in our digital future will determine the economic development of nations in the decades to come. The effect of the digital dividend shows us that there has never been as much at stake in the race for digital maturity as there is today – but also never before as much has been gained.
[1] 1 World Economic Forum (WEF)
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