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Digital transformation in Brazil could reinforce economic recovery from COVID-19 crisis

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Brazil has made significant progress in improving Internet access, digital security and regulation, yet more needs to be done to reduce the country’s digital divide and embrace digital technologies. As Brazil, like the rest of the world, works to contain the COVID-19 crisis, stepping up the pace of digital transformation could hasten and reinforce a just and resilient recovery, according to the OECD.

“Digital technologies are the backbone of today’s economies, and digital tools and connectivity are essential in helping businesses and people to weather the COVID-19 crisis,” said OECD Secretary-General Angel Gurría, launching twin Reviews of Brazil’s digital transformation and its telecommunication and broadcasting sectors. “As Brazil and the world work to tackle this devastating crisis, Brazil should do everything to seize the opportunities offered by digitalisation to strengthen the recovery and build a resilient, inclusive future economy.”

The Review of the country’s digital transformation, Going Digital in Brazil, finds that despite recent progress, Brazil lags in investment in digital innovation and in the level of digital skills in the workforce. The Review recommends ways to increase digital uptake among people and firms, strengthen digital security and privacy, and spur innovation. It calls for better co-ordination of digital transformation policies among ministries and government agencies and for greater resources for implementing Brazil’s Digital Transformation Strategy (E-Digital).

A parallel report, the OECD Telecommunication and Broadcasting Review of Brazil 2020, shows where there is room for Brazil to catch up with advanced economies in ensuring access to high-quality communication services that are fundamental for a successful and inclusive digital transformation. It suggests actions to improve market conditions, competition and the policy and regulatory framework in communication and broadcasting. It also recommends an overhaul of taxes, fees and tariffs that limit operators’ scope for investment and innovation.

Creating a single independent regulator to oversee communication and broadcasting services, as some other countries have done, would help to lower prices and improve quality as services in the two sectors increasingly overlap, the Review says. Similarly, introducing a single-class licensing regime for the two sectors would lower legal costs and administrative burdens for operators. Meanwhile, an upcoming auction of 5G spectrum should be carefully designed to ensure optimal network coverage and competition conditions.

Getting digital policy right is vital in all countries to ensure that the benefits of the digital transformation – such as boosting productivity and improving well-being – are shared fairly across economies and societies. Digital tools can also help to efficiently target social spending. On the other hand, getting digital policy wrong risks worsening existing inequalities between high and low-skilled individuals, large and small firms, and urban and rural regions.

Among the progress made in Brazil in recent years, subscriptions to communications services have steadily increased, thanks to a more than tripling in mobile subscriptions from 2012 to 2019, and relatively affordable mobile voice and data plans. The share of households with Internet access rose to 67% in 2018 from 40% in 2013, and the share of adults using the Internet to 72% from 50%. New laws have strengthened digital security, and consumer and personal data protection. Brazil has created an exemplary institutional structure for Internet governance – the Internet Steering Committee – and has taken steps to strengthen the independence of the communication regulator and to promote competition in mobile markets.

Despite this progress, challenges remain. As of 2018, nearly a quarter of Brazilian adults had never used the Internet, with data showing that Internet use is closely linked to levels of education, income and age. There is also a persistent urban-rural digital divide, with 75% of the adult population in urban areas using the Internet against only 49% in rural areas.

Fixed broadband is less affordable in Brazil than mobile, and while Brazil had 90 mobile broadband subscriptions per 100 inhabitants as of June 2019, not far behind the OECD average of 113, fixed-line broadband penetration of 16% was only half the OECD average of 31%. Only 54% of firms with 10 or more employees had a website in 2019, compared with an OECD average of 78%, and while e-commerce is growing steadily, only 21% of companies conducted sales online in 2019.

A summary of key recommendations from the two Reviews:

Continue to improve digital skills, particularly among micro enterprises and people with low levels of education. Offer firms tax incentives for investing in digital technology upgrades and training. Do more to support research and development in ICT services and innovative start-ups. Increase funding for students in STEM (science, technology, engineering and mathematics) subjects. Remove regulatory barriers to the development of e-commerce.

Improve access to reliable, affordable and high-quality Internet by deploying fibre optic infrastructure to rural and remote areas and by encouraging competition in communication services. In broadcasting, where concentration is higher, reduce barriers to entry and remove de facto legal restrictions on the vertical integration of the pay TV value chain. Design the upcoming auction for 5G spectrum in a way that ensures a competitive market, particularly in light of new legislation enabling the successive renewal of spectrum licences.

Create a converged and independent regulator to oversee both communication and broadcasting, and replace the current dual licensing system with a single-class licensing regime for communication and broadcasting services. Harmonise tax rates in the communications sector across states and reduce them where possible. Aim to overhaul the indirect tax system in the long term to reduce distortions.

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Two-Thirds of Poorer Countries Are Cutting Education Budgets Due to COVID-19

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Children in Côte d'Ivoire wear face masks as they return to school after temporary closures due to COVID-19. © UNICEF/Frank Dejongh

Education budgets are not adjusting proportionately to the challenges brought about by COVID-19, especially in poorer countries.  Despite additional funding needs, two-thirds of low- and lower-middle-income countries have, in fact, cut their public education budgets since the onset of the Covid-19 pandemic, according to the new joint World Bank – UNESCO Education Finance Watch (EFW)

In comparison, only one-third of upper-middle and high-income countries have reduced their budgets.  These budget cuts have been relatively small thus far, but there is a danger that future cuts will be larger, as the pandemic continues to take its economic toll, and fiscal positions worsen.  These differing trends imply a significant widening of the already large spending disparities seen between low- and high-income countries.

According to the new report, prior to the COVID-19 pandemic, in 2018-19, high-income countries were spending annually the equivalent of US$8,501 for every child or youth’s education compared to US$48 in low-income countries. COVID-19 is only widening this huge per-capita education spending gap between rich and poor countries.

EFW stresses that the education finance challenge is not only about mobilizing resources, but also about improving the effectiveness of funding. Unfortunately, recent increases in public education spending have been associated with relatively small improvements in education outcomes. Although access to education has improved, the learning poverty rate – the proportion of 10-year-olds unable to read a short, age-appropriate text – was 53 percent in low- and middle-income countries prior to COVID-19, compared to only 9 percent for high-income countries.  COVID-19 related school closures are likely to increase this 53 percent share to as much as 63 percent.

“This is a critical moment where countries need to recover the learning losses the pandemic is generating, invest in remedial education, and use this window of opportunity to build more effective, equitable, and resilient systems,” said Mamta Murthi, World Bank Vice President for Human Development.  “The learning poverty crisis that existed before COVID-19 is becoming even more severe, and we are also concerned about how unequal the impact is.  Countries and the international development community must invest more and invest better in education systems and strengthen the link between spending and learning and other human capital outcomes.”

EFW notes that global spending on education has increased over the last 10 years, but the signs are that the pandemic may interrupt this upward trend. Funding for education has grown most rapidly in low- and lower-middle-income countries, where the gaps between the funding needed to achieve the SDGs and current allocations are the widest. The deterioration in government finances over the medium-term suggests that without concerted efforts to prioritize education, the outlook for mobilizing the domestic resources required for education will worsen.

Aid for education has increased by 21 percent over the last 10 years. Disbursements had increased rapidly in the 2000s and fell between 2010 and 2014 in the aftermath of the great financial crisis. However, since 2014, aid to education has increased by 30 percent, reaching its highest recorded level of US$ 15.9 billion in 2019. However, fiscal constraints, other sectoral needs, and changes in student mobility patterns, suggest that external aid for education might fall at a time when it is needed most.    

“External financing is key to support the education opportunities of the world’s poorest,” said Stefania Giannini, Assistant Director-General at UNESCO. “Yet donor countries are likely – and some have already begun – to shift their budget away from aid to domestic priorities. Health and other emergencies are also competing for funds.  We foresee a challenging environment for countries reliant on education aid. UNESCO estimates that it may fall by US$ 2 billion from its peak in 2020 and not return to 2018 levels for another six years.” 

The EFW is a collaborative effort between the World Bank and the UNESCO Global Education Monitoring Report team.  It will be produced annually following the main release of spending data by UNESCO’s Institute of Statistics.  The EFW aims to draw together the best data available on all sources of education funding and monitor efforts to improve information on the levels and use of education funding.  However, good quality and timely information on government, household, and aid spending in education is not readily available in all countries.  This hinders planning and monitoring at a time when countries cannot afford any missteps.

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Global Alliance on Circular Economy and Resource Efficiency

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Bringing together governments and relevant networks and organizations, the Global Alliance on Circular Economy and Resource Efficiency (GACERE) aims to provide a global impetus to initiatives related to the circular economy transition, resource efficiency, sustainable consumption and production patterns, and inclusive and sustainable industrialization.

GACERE is being established by the European Commission on behalf of the European Union (EU), and by the United Nations Environment Programme (UNEP), in coordination with the United Nations Industrial Development Organization (UNIDO).

GACERE will be launched on Monday 22 February 2021 from 12:00 until 13:15 CET on the margins of the first segment of the fifth meeting of the United Nations Environment Assembly.

The event will be hosted by Virginijus Sinkevičius, EU Commissioner for Environment, Oceans and Fisheries; Inger Andersen, United Nations Under-Secretary-General and UNEP’s Executive Director; and LI Yong, UNIDO’s Director General.

Ministers of countries which have joined GACERE and other stakeholders will provide their perspectives on the Alliance’s intended role in supporting a global just transition to circular and resource-efficient economies and the achievement of the 2030 Agenda for Sustainable Development.

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First steps towards strengthening Moldova’s national innovation system

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The United Nations Industrial Development Organization (UNIDO) has published “The Innovation Ecosystem in Moldova”, a report that presents a preliminary analysis of Moldova’s research and innovation ecosystem. The report aims to inform and connect actions in the fields of innovation and industrial competitiveness in the context of the Country Framework Programme signed between the Republic of Moldova and UNIDO in December 2018.

Iuliana Drăgălin, Moldova’s Secretary of State of the Ministry of Economy and Infrastructure (MEI), said, “The report presented by UNIDO sets out the support mechanisms and tools developed and applied by the Government of the Republic of Moldova to promote industrialization and business development in Moldova, such as free economic zones, industrial parks, clusters, science and technology parks and business hubs, as well as recommendations for improving the research and innovation ecosystem.”

An examination of the statistics and current trends in the adoption of digital technologies in Moldova shows that the country still has a low transition level towards the Fourth Industrial Revolution (4IR). However, the study also reveals that Moldova has good adoption readiness, spearheaded by infrastructure developments such as the extensive fibre optic and mobile networks coverage. The report concludes with a series of recommendations to maximize the country’s innovation potential.

Drăgălin thanked UNIDO, Moldova’s Organization for Small and Medium Enterprise Sector Development (ODIMM), the Chamber of Commerce and Industry, the National Agency for Research and Development, and the Investment Agency, as well as the specialists from MEI and the Ministry of Education, Culture and Research. She also noted that the respective institutions were actively involved in the process of developing and finalizing two project proposals set out in the UNIDO Country Framework Programme for Inclusive and Sustainable Industrial Development 2019-2023: Supporting Industrial SMEs in Moldova through the Subcontracting and Partnership Centr, and Development of innovation, entrepreneurship and technology transfer (EIT) platforms for strengthening the links between research and industry in Moldova.

I am pleased to note that improving industrial competitiveness, job creation and promoting innovation-based economic development in Moldova, by strengthening knowledge and collaborative links between scientific and research institutions, the Government and the private sector, is of major interest to our partners,” acknowledged Drăgălin.

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