Internet no 'shortcut to development'

DW: The World Bank report says the benefits of the rapid expansion of digital technologies have mainly been reaped by the wealthy, skilled and influential around the world. What has this rapid development meant for developing countries and less influential people?

Deepak Mishra: Digital technology, as we say in the report, is expanding very rapidly. The mobile phone is the fastest growing technology ever known to mankind. So even seven out of 10 people in the bottom 20 percent of the world income distribution now have a mobile phone. This is pretty outstanding in the sense that people are choosing to go and invest in this technology when they don't have access to electricity or running water or clean toilets.

So the good thing is there are lots of people now in the world who have access and they are benefiting in different ways. But what we find in the report is the nature of the return varies based on your complements - clearly a person living in a country under accountable government, under a business climate which is much more competitive, and [if] he or she has a Phd or high skills, then he or she would be able to take much more advantage of the same technology than somebody who lives in a country under a very controlled regime, in a very closed economy and who is a high school dropout.

So to us, everybody is benefiting in some sense, but the benefit values depending on who you are, what your attributes are and which country you are located in.

In Kenya, the M-Pesa banking system, which works via mobile phone, has changed the national economy within just a few years - almost half of all banking is done through this system now. Would you say that the system itself has brought benefits to poor people?

Yes, there's no doubt that digital technology has created what we call private benefits: So easier communication, wide range of information, considerable saving in time and new forms of leisure. These are all benefits, irrespective of where you live.

But then the next question we're asking is - what about broader public benefit? What about growth? What about jobs? What about service delivery? And those are harder to quantify. But when it comes to private benefits anybody in Kenya is benefiting.

So today there are about 40 percent of adults in east Africa [who are] now paying their utility bills through mobile phones, so there is a significant amount of time that they're saving. We find that there are eight million online traders on Alibaba who are now exporting to 162 countries around the world, so these are the people who had the ability to produce good things, but they were part of a global supply chain which was often controlled by a few large firms. So they would basically produce it and give it to another consolidator who would then pass it down the supply chain and then it goes to the consumers in the rich countries. So Alibaba is one of the largest digital market places - and what it does is bring the producers and the consumers together, so all the intermediaries in the retail sector are basically taken out.

Imagine all those farmers - there are a number of farmers who have become entrepreneurs - they now suddenly have access to this. So 62 percent of the entrepreneurs are small and medium entrepreneurs. About 30 percent are women and one percent have disabilities, so all those people are benefiting tremendously from this.

A third example: Think of digital ID in India. So there are now about a billion Indians out of which about 250 million are living below the poverty line. They now have identity [cards] which they can show to demand public services that they were not able to access before.

There are certainly many good examples of inspiring stories about how digital technology is benefiting the poor, but of course its benefiting the rich even more.

India we know has been able to benefit a lot from digital development and IT. But there are still, as you say, millions of people who live under the poverty line and may not even be able to read and write or to have access to electricity. How long does it take for a country like India to close this huge inequality gap?

That's the thrust of our report. So there are people who thought that just by bringing mobile phones and smart phones to poor people, they would create change and make poor people have income growing faster than the rich. That's not going to happen, unless the poor people also have the right skills and other things to use the technology.

India is actually a very interesting case of contrast. India is considered to be a global superpower when it comes to IT exports. It's the second largest exporter of IT service in the world. And at the same time India has the largest number of people who are not connected to the internet - and that number could be somewhere between 800 million to a billion people. And so clearly what the Indian government has to do is to make sure that all the people who are not connected somehow are able to get connected by having Internet that is accessible, affordable open and safe.

But that's not going to end the story. We're saying that you then need to do the rest of the things - you need to have good regulation that allows new companies to enter the market easily, so that new startups can enter. You have to have workers with the right skills, so that companies don't have the incentive to replace people with machines. And of course you need accountable government so that poor and disadvantaged people are not shut down and people are not controlled but empowered by technology.

So for India it's the case that they are moving pretty quickly on this, and under the new government there has been a lot of emphasis on the digital side, but it will be a long slog and that's why we do not want to give the impression that somehow there's a quick, easy silver bullet to the solution. While Internet is not a shortcut to development, it can be an accelerator.

In a nutshell, will this expansion of digital technologies be more of a blessing or more of a threat for developing countries?

Certainly more of a blessing, because the risks for many developing countries are fairly far into the future. Clearly for developing countries, especially countries in sub-Saharan Africa and South Asia, there is very little real risk of not investing, provided as we said, they are not just increasing access, but while increasing access, they're also making the business climate more competitive, investing in people skills and ensuring that the public institutions are accountable to the citizens.

Deepak Mishra is a Lead Economist at the World Bank and the Co-director for the World Development Report 2016 on Internet and Development. Prior to this appointment, he was the Lead Economist for the East Asia and Pacific region, overseeing the work on economic policy and management. He has served as a Country Economist for Ethiopia, India, Pakistan, Sudan, and Vietnam, leading the Bank's policy and analytical work on economic issues in these countries.