Digital economy & Industry 4.0

Digital economy and Industry 4.0 permeate all aspects of society, including the way companies and governments work but also how people communicate and live their lives. The emerging digital economy has the potential tocreate economic growth and improve social welfare. Therefore, it is critical that policy makers create an environment for digitalization to flourish. B20 calls on governments to seize to the opportunity of digital transformation and Industry 4.0 with holistic enabling policy and regulatory frameworks based on 7 key pillars (digital skills, Industry 4.0, global connectivity, MSMEs, digital trade and data flows, financial technology and cybersecurity).

1. Digital Skills. Digitalization, automation and other technologies are fundamentally changing the nature of work. It is essential that governments focus on policies and investment in human capital and education to prepare the workforce for the future of work. In order to achieve a digitalized world, digital literacy and technical digital skills need to be fostered, no matter what job, what position or what industry today’s children will be working on, they will require a certain level of digital skills. Governments, first of all, need to work together with businesses to assess the current and future digital skills gap and minimize that gap by investing in education programs, ensuring digital skills are an integral part to the curriculum, and also by helping to reskill and upskill the existing workforce. It is essential that education programs be accessible to both genders and address the digital skills gender gap.

2. Industry 4.0. Manufacturing practices are beginning to be transformed by the use of digital technologies. This fourth industrial revolution will make it possible to gather and analyze data across multiple devices, enabling faster, more flexible, and more efficient processes to produce higher-quality goods at reduced costs, leveraging technologies such as autonomous robots, big data and analytics, additive manufacturing and the cloud. Governments should support the creation of an Industry 4.0 ecosystem to foster best practices and use cases sharing, enable collaboration between public and private institutions and encourage innovation. Role of the Government will be bringing together and creating alignment between all key stakeholders, matching new technology users and suppliers, equipping initiatives with greater public weight and supporting them financially. These developments will need an unprecedented degree of integration among systems and across borders, creating the need for developing international standards that allow an international coordination and cooperation.

3. Global Connectivity. Connectivity is a prerequisite for digitalization and while the number of people “online” has improved during the last decade, there is still 50 percent of the global population “offline”.(1) Given the enormous impact that connectivity has on a nation’s GDP and welfare, it represents a relevant topic in every policy-maker’s agenda. It is key then that governments encourage and facilitate private investment in infrastructure. The needed investments, focused on unserved areas, will allow consumers to have affordable connectivity while extending its coverage. To expand broadband connectivity, countries will also need to maximize spectrum availability ensuring an adequate mix of protected licensed, shared and unlicensed spectrum.  Demand side has to be enhanced as well, promoting the creation of content and online services that foster a higher adoption.

4. MSMEs.MSMEs are the predominant form of enterprise across the world. In surveyed countries across the world, they account for approximately two-thirds of existing jobs.(2) With such an important share of the economy, their digitalization should be of prior importance to governments. Frequently the reason for MSMEs not adopting innovative technologies are: either being unaware of the existence of such technologies, missing implementation know-how or absence of awareness of the economic fundamentals that justify implementation. Governments must create awareness on cutting-edge technologies and best practices while improving support for regulatory compliance if MSMEs are involved in Global Value Chains. They should also foster discussion forums between larger and smaller companies to improve collaboration and even create commercial opportunities.

5. Digital trade and data flows. Digital trade has become an engine of economic growth for large and small businesses around the world. Already today, approximately 50 percent of all traded services are enabled by information and communication technologies.(3) Governments need to address e-commerce policies across borders that do not hinder international e-commerce growth, and coordinate cross-border payment systems, data security, consumer protection and authentication, among others. It is essential to encourage negotiations with international trade organizations to align on such cross-border policies. As governments seek to address the challenges to tax systems raised by the digitalization of the economy, they should pursue a multilateral, consistent approach and avoid unilateral measures targeting a single sector or group of companies. Moreover, to foster digital trade and international business operations it is important for countries to avoid data localization requirements and promote efficient data transfer mechanisms.

6. Fintech.More than 30 percent of the population across the world does not have a bank account; a gap that is unevenly distributed among developed and developing countries.(4) Supporting Fintech innovation is one of the potential solutions to close this financial gap, which is key given the positive effect that financial inclusion has on people’s welfare and GDP. G20 members should adopt policy frameworks that enable financial technology services by players from different sectors, promoting competition within all levels of the financial service value chain, fostering innovation. Moreover, governments should encourage companies to provide environments for cooperation which allow the Fintech ecosystem to facilitate testing and connectivity to current systems (e.g., APIs, Sandboxes).

7. Cybersecurity. In this era of digitalization where an increasing amount of information is shared among users, devices and machines, cybersecurity becomes a key issue. Cyber-crime has had an impact of as much as us$600 billion in 2017, and governments have a key role to play to stop cyber-threats.(5) In order to improve cybersecurity across countries, governments should partner with industry to adopt a holistic cybersecurity risk management approach. Both have a joint responsibility to protect and empower people globally, to partner with others and increase the security of our technology to assure cybersecurity and to combat offensive cyber capabilities of criminals, terrorists, and other threats, avoiding damaging trust in the online environment. G20 members should agree on starting baselines to adopt increasingly ambitious goals regarding cybersecurity frameworks. A collaborative environment, cross-sector and cross-border, is needed and should be achieved through information sharing efforts. This will allow countries to protect valuable data from malicious actors.


[1] ITU, UN Broadband Commission sets global broadband targets to bring online the world's 3.8 billion not connected to the Internet, accessed February 25, 2018, https://www.itu.int/en/mediacentre/Pages/2018-PR01.aspx

[2] World Trade Organization (WTO), World Trade Report (2016): Levelling the trading field for SMEs, accessed June 19, 2018, https://www.wto.org/english/res_e/booksp_e/world_trade_report16_e.pdf

[3] UNCTAD, Information Economy Report (2017), 30, accessed February 28, 2017,http://unctad.org/en/PublicationsLibrary/ier2017_en.pdf
[4] World Bank (2018), op. cit.

[5] McAfee, Economic Impact of Cybercrime Report (2017), accessed May 2, 2018, https://www.mcafee.com/us/solutions/lp/economics-cybercrime.html

 

 

 

CHAIR:

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Marcos Galperín
Mercado Libre
“For the first time in the history of humankind, we are at a moment when everyone in the planet can be connected to every other person, instantaneously and at an almost zero marginal cost. The power that this global, immediate, interconnected web has, is endless, like our universe, and equally hard for our brain to comprehend."

 

DEPUTY CHAIR: