Global efforts needed to spread digital economy benefits, UN report says
Digital wealth is concentrated in the hands of a few US- and China-based platforms. The gap between the under-connected and the hyper-digitalized countries will widen and worsen inequalities if unaddressed, says new UN report.
Concerted global efforts are required to spread the rapidly expanding digital economy’s gains to the many people who currently reap little benefit from it, says a new United Nations report.
The UN Conference on Trade and Development (UNCTAD) has released its first-ever Digital Economy Report 2019 that maps the flow, data and funds in the world’s digital economy. It outlines the enormous potential gains and possible development costs as more of the world moves, connects and buys online.
Wealth creation in the digital economy is highly concentrated in the United States and China, with the rest of the world, especially countries in Africa and Latin America, trailing considerably far behind, according to the report.
The United States and China account for 75% of all patents related to blockchain technologies, 50% of global spending on the Internet of Things (IoT), more than 75% of the cloud computing market and as much as 90% per cent of the market capitalization value of the world’s 70 largest digital platform companies.
Under current policies and regulations, this trajectory is likely to continue, further contributing to rising inequality, warned UN Secretary-General, António Guterres.
“We must work to close the digital divide, where more than half the world has limited or no access to the Internet. Inclusivity is essential to building a digital economy that delivers for all,” Mr. Guterres said in the report.
The report gives special attention to digital data and digital platforms, the two main drivers of value creation in the digital economy.
Global internet protocol (IP) traffic, a proxy for data flows, has seen dramatic growth. In 1992, there was about 100 gigabytes (GB) of traffic per day. By 2017 such traffic had surged to more than 45,000 GB per second.
Yet the world is only in the early days of the data-driven economy. By 2022 global IP traffic is projected to reach 150,700 GB per second.
The surge in data traffic reflects growth in the sheer number of people using the Internet and the uptake of frontier technologies such as blockchain, data analytics, artificial intelligence, 3D printing, IoT, automation, robotics and cloud computing.
An entirely new “data value chain” has evolved, comprising firms that support data collection, the production of insights from data, data storage, analysis and modelling, the report observes.
Businesses that build digital platforms have a major advantage in the data-driven economy. By acting as both intermediary and infrastructure, they are positioned to record and extract data related to online actions, interactions and transactions conducted by users.
The report notes that 40% of the world’s 20 largest companies by market capitalization have a platform-based business model.
Seven “super platforms” – Microsoft, followed by Apple, Amazon, Google, Facebook, Tencent and Alibaba − account for two thirds of the total market value of the top 70 platforms.
The combined value of the platform companies with a market capitalization of more than US$100 million was estimated at more than $7 trillion in 2017 – 67% higher than in 2015, according to the report.
Some digital platforms have grown to dominate key niches. Google has some 90% of the market for Internet searches, while Facebook accounts for two thirds of the global social media market and is the top social media platform in more than 90% of the world’s economies.
In China, WeChat (owned by Tencent) has more than one billion active users. Its payment solution and Alipay (owned by Alibaba) have captured virtually the entire Chinese market for mobile payments. Meanwhile, Alibaba is estimated to have close to 60% of the Chinese e-commerce market.
These companies are aggressively consolidating their competitive positions, including by acquiring potential competitors and expanding into complementary products or services, lobbying in domestic and international policymaking circles and establishing strategic partnerships with leading multinationals in traditional sectors, such as automotive, semiconductor and retail industries.
The dominance of global digital platforms, their control of data, as well as their capacity to create and capture the ensuing value, accentuates concentration and consolidation rather than reducing inequalities between and within countries, the report notes.
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