Russia Can Gain More from a Digital Transformation, says World Bank

Stocks and Financial Services Press Releases Friday May 19, 2017 08:34
Moscow--19 May--World Bank

Moscow, May 19, 2017− Russia is uniquely positioned to exploit advantages in the digital arena in order to promote economic growth and improve its business environment. Early reforms in Russia's telecommunications sector enabled faster, more accessible and more affordable Internet connectivity for people and firms across the country, according to the recently published report Reaping Digital Dividends: Leveraging the Internet for Development in Europe and Central Asia.

More than 60% of firms in Russia have a website and more than 90% utilize email – one of the highest rates in the Europe and Central Asia region. Despite this high usage, however, the report points out that e-commerce activities constitute just 1.4% of Russia's Gross Domestic Product (GDP), compared to 3% in Western Europe and the United States, and 5% in China. The low overall level of e-commerce activity is further hampered by a weak digital payment system: just one out of every five people has a credit or debit card, and only 37% of Russian firms use Internet banking.

For Russia to maximize the benefits of the Digital Age, the report argues that it is vital to improve the country's education sector – matching today's curricula with the jobs of tomorrow. The country has a unique opportunity now to lead the policy agenda in making jobs of the digital economy more inclusive and more productive.

"Further development of the digital economy in Russia is a unique opportunity to improve productivity growth and the necessary diversification of jobs and exports," said Hans Timmer, World Bank Chief Economist for Europe and Central Asia. "Russia's potential is huge, but to fully achieve this, providing access to digital technologies is not enough. It also requires changes in education, financial markets, labor markets, and competition policies."

According to the report, existing inequalities in Russia could be further exacerbated, as unskilled workers are less likely than skilled ones to use the Internet to find a job or participate in professional networks. However, policies to facilitate tax and social contribution payments in the sharing economy could nudge workers out of the shadow economy and provide them with some employment protection. Improving competition may also help foster the adoption of ICT among firms in Russia.

Russia's connectivity is important not only for its own economy, but also for improving the connectivity of landlocked countries in Central Asia. Reforms in the digital arena can help increase competition and efficiency in the market for Internet provision in Russia. In order to maximize the effectiveness of such reforms, the report argues that efficient sector regulations must also be introduced to fuel sustainable growth and increased usage of digital payment systems.

"Transition to the digital economy is clearly the next frontier for economic and social transformation in Russia and will require a major focus on strengthening the enabling environment in parallel with further development of digital infrastructure and platforms," said Andras Horvai, World Bank Country Director and Resident Representative in Russia. "Russia has a strong track record of achieving what it considers most important, as it recently demonstrated through broad improvements in its domestic business environment and introduction of digital services and electronic platforms that are making it easier for firms to register and operate. This creates ground for optimism for the future of digital economy in Russia."


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