Publication: Digitalisation and Trade: What Hope for Lower Income Countries?

Foster, C.G. (2017) Digitalisation and Trade: What Hope for Lower Income Countries?, Background paper for the UNCTAD Information Economy Report 2017, UNCTAD, Geneva, Switzerland.
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The idea of digitalisation, the growing use of digital technologies and digital data as part of firm activities, is an area that is attracting considerable interest, including in low income countries. Yet, discussions of digitalisation in lower income countries often remain around future hopes and ambitions. There is little systematic analysis of firm activities with digital technologies and platform use, and what can be learnt from attempts to use digital technologies to undertake international trade.

Drawing on an extensive review of the literature, this paper highlights three key modes of digital participation in lower income countries – ‘thintegration’, platforms and full chain digitalisation.

Value chains in sectors with a concentration of powerful firms on the buyer side (such as garments and commodities) tends to lead to digitalisation driven and controlled by these lead firms. In these value chains, digitalisation can lead to reduced value and instability. However, a more optimistic picture may emerge in other “less captured” sectors (such as newer agricultural sectors, services, and those linked to certain final goods). In such cases, platforms can improve value chain coordination and provide the potential for smaller firms to participate and gain from trading globally.