Digital transformation holds enormous potential, but many developing countries are struggling to seize the opportunities, and a widening digital divide threatens to exacerbate existing inequalities.
As the United Nations Organization for Trade and Development (UNCTAD) marks its 60th anniversary, it is important to consider the issues that will shape the future of trade and development.
The “Moving Forward Together” series will explore topics of critical importance to developing countries, such as e-commerce and the digital economy.
Digitalization is transforming the way we live, work, learn, consume, recycle and do business. Technological advances, widespread internet access and smartphone adoption have led to an exponential increase in online transactions.
In 2021, 2.3 billion people shopped online, up 68% from 2017. E-commerce sales in 43 developed and developing countries, accounting for roughly three-quarters of global GDP, will reach nearly $27 trillion in 2022, up 10% from 2021.
Huge potential for growth, job creation and poverty reduction
For developing countries, this transformation holds great potential for economic growth, job creation, and poverty reduction. For example, the Asia-Pacific region isn Digitally deliverable exports are expected to reach $958 billion in 2022, up 9% from 2015 and above the global average of 6.8%.
E-commerce and digitalization are enabling new business models, reducing the costs of starting a business and improving access to local and global markets for entrepreneurs and small and medium-sized enterprises in developing countries – a transformation that has the potential to empower women in particular and improve their livelihoods.
For consumers, digitalization brings access, convenience, affordability and greater choice. Mobile banking can reduce the number of unbanked people, which reached 1.4 billion in 2021. Digital platforms also increase circularity and sustainability by connecting demand and supply, enabling individuals to reuse, resell, exchange or rent products and services.
“The digital economy is not just about technology. It's about people. It's about creating opportunity for everyone, regardless of where they are or their background,” said Rebecca Grinspan, UN Secretary-General for Trade and Development.
But the widening digital divide threatens to exacerbate many inequalities
Many developing countries still face significant challenges to participating in and benefiting from the digital economy, including inadequate laws and infrastructure, limited financial resources, regulatory complexity and a lack of digital skills.
For example, in 2023, only 35% of people in least developed countries will use the internet, compared to 67% globally. Globally, gender digital divides persist, with 65% of women using the internet compared to 70% of men, according to the International Telecommunication Union. Underlying gender inequalities, such as lower incomes and limited access to capital, business networks, and skills development programs, limit e-commerce opportunities for many women.
The United Nations Women's Agency estimates that gender gaps in the digital economy have cost low- and middle-income countries $1 trillion in lost GDP over the past decade. A widening digital divide risks exacerbating inequalities between and within countries.
The benefits of global data flows are unevenly distributed, with the largest digital platforms controlling most steps in the data value chain, from collection and transmission to storage and analysis: over 70% of global digital advertising revenue is captured by just five platforms.
This market concentration has raised concerns about openness, fairness, and potential abuses due to exclusivity, discrimination, and self-preferential practices. Online consumers also face challenges related to the accuracy of information and advertising, unsafe products, data privacy, and the lack of effective online dispute resolution channels and package returns when issues arise.
Digitalization leads to increased environmental problems
The rapidly evolving digital economy poses growing environmental challenges, particularly for developing countries that lack the necessary infrastructure, regulatory frameworks and resources to effectively manage these impacts.
Digital devices and infrastructure are heavily dependent on minerals, metals, plastics, glass and ceramics. The production and disposal of electronic devices, and the energy consumption in operating data centers and blockchain, increase waste, pollution, carbon emissions and water usage.
For example, global e-waste reached 53.6 million tonnes in 2019, but only 17% was properly recycled. According to the International Energy Agency, data centres and ICT networks that support digitalisation across all sectors account for 6%-12% of global energy use and 1%-1.5% of global greenhouse gas emissions.
Consumption patterns and reverse logistics in the digital economy also raise environmental concerns, from the impact of parcels to the adequacy of recycling information provided to consumers.
Critical minerals boom brings opportunities and risks
Increased digitalization is driving demand for critical minerals needed to manufacture smartphones, computers and other digital devices.
For example, it is estimated that 800 kilograms of raw materials need to be harvested to make a two kilogram computer, while 70 kilograms of raw materials are needed to manufacture, use and dispose of one smartphone.
Many of the needed minerals are abundant in developing countries, creating opportunities for growth, particularly by supporting domestic value addition.
But there are also significant risks: mining these minerals causes environmental degradation, disrupts local communities and, if not properly regulated, can lead to social conflict and human rights violations.
The rapid growth in demand for critical minerals also increases the risk of further strengthening commodity dependency in many developing countries, making their economies vulnerable to price volatility and external shocks. As much as 85 percent of the world's least developed countries are considered commodity dependent. In the Democratic Republic of the Congo, for example, cobalt exports account for more than 70 percent of the country's total export earnings.
It is therefore important that investment in critical minerals mining is accompanied by measures to accelerate local processing and support diversification strategies in developing countries.
The role of UN Trade and Development in supporting a sustainable and inclusive digital economy
Through research and analysis, technical cooperation and consensus building, we help developing countries navigate the complexities of the digital economy and harness its benefits in a sustainable and inclusive way.
Research and Analysis
The UN Department for Trade and Development provides evidence and analysis on policy options at the national, regional and global levels to ensure that the data-driven digital economy supports sustainable development.
This includes the Digital Economy Report series as well as thematic studies, technical notes and statistics related to markets, e-commerce and the digital economy.
Technical Cooperation
We work with policymakers and stakeholders in developing countries to increase their capacity to benefit from the digital economy and to do so in a gender-sensitive manner. Key efforts include:
- Digital Economy Readiness Assessment: Conduct e-commerce readiness assessments in developing countries, identify barriers, and develop effective e-commerce strategies and action plans.
- Women Empowerment: It develops reports and e-learning courses to support women digital entrepreneurs through its eTrade for Women initiative and promote gender-sensitive e-commerce policies through its Trade, Gender and Development program.
- Strengthening the regulatory frameworkBuild the capacity of legislators and policymakers to address legal challenges in e-commerce, including competition and consumer protection, cybersecurity, and data privacy, and establish effective national and regional frameworks.
- Review of consumer protection and competition laws and policiesIt will conduct a voluntary review of competition and consumer protection laws and policies to ensure they are appropriate for today's digital markets, and will help countries implement policies effectively.
Consensus building and coordination
UN Trade and Development fosters international cooperation and knowledge sharing to ensure that best practices and successful models are adapted and implemented in different contexts.
This collaborative approach will address the cross-border nature of digital economy challenges and enable all countries to contribute to global digital economy governance. Examples include:
Additionally, we are working with the Office of the Secretary-General's Special Envoy on Technology, other parts of the UN, and international organisations such as the G20, the Organisation for Economic Co-operation and Development (OECD) and BRICS to explore ways to leverage e-commerce and the digital economy for sustainable development.
Let's move forward together towards a digital economy that works for all
The digital economy is a transformative force with the potential to drive sustainable and inclusive development.
Through our strategic engagement and unwavering commitment, the UN Commission on Trade and Development will continue to support countries in charting a path to a digital future in which no country or community is left behind, and ensure that progress does not come at the expense of the planet.
