Digital Economy

Policy to Support Digital Trade & the Digital Economy

This post is written by Christopher Foster and Shamel Azmeh (University of Manchester). It was originally posted on the GEG Africa blog

The global economy is experiencing important technological shifts with the rise of digital technology a key driver. These changes are likely to intensify in the coming years with new technologies that are emerging such as artificial intelligence, cloud computing, and autonomous vehicles.

For developing and emerging economies, the digital economy provides an opportunity to achieve economic and technological catching-up through using digital technologies and building capacities. But, technological shifts may also widen the technological divide with advanced economies weakening the position of developing economies in global value chains and making ongoing catching-up efforts ineffective.

To explore these issues further, we have recently be undertaking research which aims to offer direction in terms of constructing overall policy strategy in developing and emerging economies, in partnership with the Global Economic Governance Africa project, focussing on South Africa.

Policy models for digital

Drawing on our analysis of digital policy, we highlight two important directions that countries have taken around digital policies. This model extends a previous working papers by Bukht & Heeks produced as part of the DIODE project.

Broader liberal strategies for enabling markets for digital trade highlight the importance of developing the national regulation and conditions to maximise diffusion and impacts of digital products and services into the country. This includes, for instance, creating conditions to attract foreign digital firms and ensuring that benefits are evenly distributed by increasing the digital participation of marginalised groups.

On their own, however, market enabling policies might not necessarily produce the desired economic objectives in terms of technology learning and localization. As such, we also consider a more selective approach which we refer to as digital catch-up policy. This second approach is more interventionist and strategic in nature and it requires higher political capital and knowledge in the policy-making process.

As shown below, the two directions are not mutually exclusive and potentially can be complementary.

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Key approaches to digital policy (include specific areas of policy instrument).

The cases of Brazil and Indonesia

To expand and think about implications of such a policy model, we undertook two case studies of Brazil and Indonesia. These studies provide insights for how policy makers can regulate and deal with the challenges of the emerging digital economy.

Overall, directions of digital policy in these two countries have lots in common. Both countries already have core digital regulation and infrastructure in place and policy makers are working to refine policy to ensure that it fits with the rapidly evolving needs of the digital economy and digitalisation.

Moving beyond solely market enabling policies, we see that both countries focus on a number of strategic areas through interventionist policies. Not all of these initiatives have been effective and some carry costs, but in certain areas they have been associated with more vibrant local sectors that are helping build capacities and increase local economic value-added.

The two tables below expand on our findings, highlighting the broad range of instruments being used in the areas of the policy model (click for more details)

Implications for policy makers

South Africa  (and other emerging and developing countries) faces similar challenges in trying to bridge the technological and industrial gap with more advanced economies in a rapidly changing landscape.  At the same time there is a need to ensure that digital policy is inclusive to achieve broader societal outcomes.

A number of policy lessons can be learnt for South Africa from the cases of Brazil and Indonesia. Policies to enable growth in digital trade are important to provide the framework for the expansion of the digital economy. Underlying this, there must be substantive investments in broadband infrastructure and appropriate regulation. An emphasis on inclusion policies will lead to more broad-based benefits from the digital economy.

To support local firms, digital ecosystem policy is a crucial consideration in grounding the benefits of the digital economy. This includes policies to support the growth and scaling-up of start-ups, and the higher participation of MSMEs in digital trade. Furthermore, encouraging global digital firms to localize some of their activities and to build domestic linkages is an important policy objective. As the ‘disbenefits’ of the digital economy become clear, policy makers need to legislate to reduce challenges in areas such as tax, data protection and the platform economy. Reflecting the importance of scale, regional integration is crucial in terms of digital policy. Broader markets, interoperability and national-regional strategic alignments are key to expanding markets, attracting foreign firms, and potentially increasing their commitment to a region.

Digital catch-up policy provides an important direction for supporting digital growth. Our work reveals a broad range of potential catch-up policy instruments in the digital economy (e.g localisation, incentives, and national digital projects). Future examination should explore the specific catch-up policies that could be fruitful in the case of South Africa.

For further information, see two recent GEG policy papers which expand on these issues:

Policy model – Azmeh, S. & Foster, C. (2018) Bridging the Digital Divide And Supporting Increased Digital Trade: Scoping Study, Discussion Paper, GEG Africa, Pretoria, South Africa.
Discussion paper | Policy brief

Case studies of Brazil and Indonesia – Azmeh, S. & Foster, C. (2018) Bridging the Digital Divide And Supporting Increased Digital Trade: Country Case Studies, Discussion Paper, GEG Africa, Pretoria, South Africa.
Discussion paper | Policy brief

Digital Economy

The Developmental Value of Digital Platforms in the Global South

Digital platforms are used in the business models of many of the world’s biggest companies and they impact people across the globe in various ways. A survey conducted in 2015 identified 176 platform companies in the world, with an estimated global market capitalisation of $4.3bn — about the same as Sierra Leone’s gross domestic product. Areas such as employment opportunities, social interactions and transportation are increasingly organised through these platforms. Traditionally, most of the platforms and their main markets have been in the global North, yet companies and people from the global South are also adopting and using digital platforms to run their businesses and daily lives.

This raises important questions on the developmental implications of digital platforms. Recently, valuable research has looked into important areas of digital platforms, such as work conducted within the DIODE Network on digital labour, or on innovation ecosystems of open data platforms. As digital platforms continue to have ever-wider significance, further research is needed. A new DIODE working paper – Digital Platforms in the Global South: Foundations and Research Agenda – suggests that, in order to conduct meaningful research in the area, it is necessary to understand the foundations of digital platforms and the key factors of their functioning, as well as discussing their developmental implications.

Definitions matter: two types of digital platforms

The working paper distinguishes between two main types of digital platforms: transaction and innovation platforms. Transaction platforms, or exchange platforms, facilitate interactions between users by reducing transaction costs. They base their functioning on either direct or indirect network effects, where the former refer to a network (or platform) becoming more valuable to each member as more users join, and the latter to the value created when increasing the base of users in groups that are complementary to each other. Common transaction platforms are M-Pesa, Uber or AirBnB. The second type of digital platforms are innovation platforms, whose distinctive feature is to provide technological building blocks for developers to build services and products on top of them. Common innovation platforms are Android or Apple’s iOS.

DP_typology_blog
Typology of Digital Platforms

A research agenda to study digital platforms in the global South

Building on digital platforms’ typology and how they operate, the working paper puts forward and discusses four different research areas for studying the developmental role of digital platforms in the global South:

  • How to better release the developmental potential of innovation platforms, be that in the form of platform design, development or usage.
  • How digital platforms in the global South differ from the ones in the global North, and what kinds of institutional implications these platforms may have in a developing country context.
  • Do digital transaction platforms exacerbate or help to diminish existing inequalities in the global South?
  • What are the alternatives for current digital platforms, especially in cases when they function less than optimally in enabling development?

All of these areas aim to cover different aspects of digital platforms and development. Overall, digital platforms are likely to have both positive and negative implications for people in different locations of the world, and the impacts may come in various forms and differ from one context to another. Research on the topic is therefore crucial to understand these matters better and to help to steer the creation and functioning of digital platforms towards better developmental outcomes. The working paper provides a foundation for this type of research for scholars and other actors interested in the topic.

Digital Economy, Digital Enterprise, Digital Labour

Report from the Philippine Impact Sourcing Conference (PISCON)

The government of the Philippines through its Department of Information and Communications Technology (DICT) conducted the second Philippine Impact Sourcing Conference (PISCON) in Cebu 3rd and 4th of May 2018.

A main objective of the conference was to celebrate the implementation of the Rural Impact Sourcing Technical Training (RISTT) program which DICT conducted across 26 different locations in 2017. More than 600 delegates were present, with a mix of local government officials and people from the online outsourcing business in the country. DICT plan to increase the number of locations for RISTT to 65 for 2018. According to DICT undersecretary Monchito Ibrahim, there has now been a shift among the local government officials, and while DICT previously had to push for them to help host training in particular locations, it is now the local government that come to DICT and ask if they can be one of the locations for such training.

While it can be debated whether such training is impact sourcing in the purest sense of the term (see this previous DIODE blog post), there is no doubt that this training has had an impact on individuals and that new (out)sourcing jobs have been created.

In some locations, a number of the trainees went together and started their own corporations. Two such examples are Narra Digital Solutions in Zamboanga City and DigiWorkz Carmona in Carmona, Cavite.

Zamboanga City is at the southernmost part of Mindanao, a region that is currently under martial law. As recently as 2013 there was a military conflict in the city. Two mothers, who previously had to leave their children to their extended family due to work responsibilities, together with their trainer, started Narra Digital Solutions. Their main target is to do IT jobs for local companies in the Zamboanga region. Also, they do advocacy and teach others, in particular, other single mothers, to do digital work. Previously there were few such opportunities in the area, which meant that the mothers had to leave the children with their family and go to places like Manila to work. By either working from home or an office close to home, they can now take care of their children and earn money at the same time. According to the founders, they can see how their children have a better life than they had before.

DigiWorkz was started by some of the trainees, in close cooperation with the local government in Carmona. The government helped with infrastructure and a building where the cooperative now work. Like Narra Digital Solutions, DigiWorkz also primarily work with local customers and have the ambition of helping to digitalize all local business in the area by 2020. One such business is Wellvise. Having got their website designed by DigiWorkz they are now able to attract customers from wider areas.

These are just two examples of how the trainees have used the skill they got during the training to create sustainable local jobs in their region. While previous research about impact sourcing has focused primarily on the customer, the impact sourcing vendor, and impact sourcing workers, the role of the government has not got that much attention. Further, the connection between training and small impact sourcing start-ups has hardly been researched at all.

Looking into how the creation of such smaller impact sourcing companies has an impact in the local society is part of my current doctoral project where I explore the wider impact of new forms of digital work at the Philippines. You can follow the project on my Facebook page.

Enzo and Jehan 1

Lorenzo Dupa (left) from DigiWorkz Carmona and Jehann Forro from Narra Digital Solutions discuss their experiences during PISCON

Digital Economy, Digital Labour

The Role of Digital Jobs in Solving Youth Unemployment in Kenya

iHub Research in 2014 published a report on Digital Jobs in Kenya. Fast forward to 2018 how far are we? A key insight presented in the report was that there existed a digital skills gap between theoretical skills, attained by youth through various programs, and practical skills, sought after by employers despite the existence of the key trends of: online work, big data analytics, and the mobile applications sector which present great potential for large-scale digital job creation in the future.

February 2018, unemployment is hitting record highs of 39.1% in Kenya, based on a report by the United Nations Human Development Index (HDI) 2017 and in its midst there’s been concerted efforts towards encouraging entrepreneurship, it’s clear that we need to innovate around solving the problem of unemployment.

In December 2016 the government of Kenya launched the online jobs portal, Ajira in a bid to take advantage of ICTs in eradicating unemployment; specifically targeting the youth, with the promise that it would equip 1 million Kenyans with digital skills so that they can secure employment. Ajira’s tag line which states “Online WORK is WORK” aims to raise the profile of online work, promote a mentorship and collaborative learning approach to finding online work, provide Kenyans with access to online work and finally to promote Kenya as a destination for online work.

Since its launch we’ve barely heard of progress, statistics or testimonies of the users of the platform. We do know that together with Kenya Private Sector Alliance, the Ministry of ICT as a result of funding from the Rockefeller Foundation are implementing the first phase of the Ajira mentorship program, to train and mentor future young online workers. Will this be the reason Ajira and the concept of digital work will successfully scale in Kenya?

The concept of digital work is definitely not one that is new in Kenya and definitely not across the world, from where we can learn great lessons. Already existing in Kenya is the platform KuHustle that has 32,000 plus online workers, with over 1,000 jobs posted worth over US$920,000.

In order to adequately take advantage of this opportunity it is paramount to address the barriers affecting the job market as a whole in Kenya and creating mechanisms to overcome these barriers. Based on estimates from the government before the launch of Ajira in 2016, it was assumed that there were already 40,000 Kenyans working online and as adoption of technology and the Internet is gradually increasing in the country, this number has most definitely increased and has the potential to continue to do so, with time.

Digital job platforms serve the purpose of easing the process of connecting employers to a competitive selection of employees from different locations, background and privilege so long as they have an internet connection. Meanwhile it seems in this central narrative that technology in the form of digital jobs will be the salve of solving youth unemployment. How true is this assessment?

There is no doubt that digital jobs will definitely enable and increase the possibility of a greater percentage of the young population in Kenya (who are possibly marginalised due to issues surrounding lack of access) to acquire formal employment at higher wages than they would have previously probably acquired. Beyond the basic digital skill gap that is being addressed through training and mentorship by government initiatives, there exists huge demand for specialised skills, such as developers, data scientists, which the current supply levels fail to meet and this is an example of some of the fundamental barriers affecting the job market in Kenya, that need to be addressed while also focusing on digital jobs.

By utilising this multi-stakeholder and multi-dimensional perspective in analysing the challenges currently being faced in the job market in Kenya today, this approach will propel us closer to solving the issue of youth unemployment.

 

Digital Economy, Digital Enterprise

Enter Digital Enterprises in Africa

Digital technologies like Internet applications and mobile phones are changing the nature of work, business and organisations. Their extensive embeddedness in the economic exchange of goods and services is also creating digital economies – a phenomenon with growing importance. The digital economy is “that part of economic output derived solely or primarily from digital technologies with a business model based on digital goods or services”. For the global South in particular, the digital economy even though usually only accounting for 3 percent to 4 percent of gross domestic product (GDP), has a much larger impact when firms use it to spur competition and productivity in traditional sectors, such as retail, banking, and manufacturing. Available statistics suggest that the mobile ecosystem alone contributed US$8.3 billion to the Nigerian economy and 7% of Mali’s GDP consists of its digital industry (da Silva, 2014). Despite these successes, the region is yet to catch up with the bigger benefits the global North enjoys from the digital economy.

Synthesising Available Evidence
To have a deeper understanding of the digital economy in the global South (specifically Africa), available evidence was gathered and synthesised as part of DIODE Network activities. Unfortunately, the synthesis had to rely mostly on practice-based literature due to the scarcity of academic research on the digital economy of Africa. Such a synthesis was also important to uncover areas that need further research. Guided by the narrow definition of the digital economy, the synthesis focused on the activities of enterprises in telecommunications, digital services, software and IT consulting, hardware manufacture, information services, platform economy, gig economy, and sharing economy. Available evidence suggests countries like South Africa, Nigeria, Kenya and Ghana are quite advanced in the digital economy. Their advancement reflects their level of development and abounding availability of digital enterprise activities. Encouragingly, other countries with some investments from established players in the global North, are also making efforts to catch up.

Areas for New Research
Overall, five main themes emerged as areas that need new research efforts. First, there is need to undertake studies that trace value creation amongst various forms of digital enterprises. Second, there is need to study the career trajectories of people who engage in the various aspects of digital enterprises – especially the gig economy; in order to understand the factors determining their involvement. Third, there is need to undertake periodic and regular research to find out the motivations of the companies that want digital presence and mobile apps developed for them, and the development impact of their decisions on those who work on such requests especially if they are gig workers. Fourth, there is need to undertake country and cross-country case studies of the various platform and digital enterprise issues, to generate lessons and best practices for countries that are now picking up. Fifth, one big question that remains unanswered relates to knowing who exactly is benefiting from the digital economy in Africa, therefore it would be interesting to know the true beneficiaries, and also the coping mechanisms of the losers.

In summary, there is a paucity of academic research on digital enterprises in Africa. In order to end this paucity, more research needs to be conducted around this phenomenon in the global South. Such research could begin with the areas derived and discussed in this synthesis study.

Read More in the Synthesis Study here:

Boateng, R., Budu, J., Mbrokoh, A.S. Ansong, E., Boateng, S.L. & Anderson, A.B. (2017). Digital Enterprises in Africa: A Synthesis of Current Evidence, Paper 2. DIODE Network, University of Manchester.

Text Reference

da Silva, I. S. (2014). Mali Digital Plan 2020 to reorganise economy. Retrieved from http://www.biztechafrica.com/article/mali-digital-plan-2020-reorganise-economy/9327/

Picture Reference

Ansip, A. (2017). Heading to Nigeria, EU Commission and Its Priorities, Retrieved 23 November 2017 from https://ec.europa.eu/commission/commissioners/2014-2019/ansip/blog/heading-nigeria_en

Digital Economy

Impediments in Building the Digital Economy: Case of the National Optical Fibre Network Plan of India

Context

It is generally accepted that broadband plays a key role in the world, impacting the economy, productivity, employment and other spheres of society. The national governments in both developing and developed world are either contemplating or are already executing broadband access plans. India is no different. The Broadband Policy of India aims at enhancing quality of life through societal applications including tele-education, tele-medicine, e-governance, entertainment as well as employment generation by way of high speed access to information and web-based communication.

By 2010, only 0.53% of India’s broadband connections were working on optical fibre. On 25 October 2011 the Government of India approved the setting up of National Optical Fiber Network (NOFN) which will be connecting all 250,000 gram panchayats (GPs) (group of three or four villages make GPs). In Jan 2012, the government had formed a special purpose vehicle for the same, called Bharat Broadband Network Limited (BBNL). It was estimated that additional optical fibre cable (OFC) deployment of 301,000 route kilometres mainly from blocks to villages to cover the 250,000 GPs as part of the backhaul network is needed. The final deployment plan is based on utilizing the existing optical fibre network of BSNL, POWERGRID and RAILTEL. The NOFN is to be rolled out in a phased manner at a cost of 4 billion USD and was slated for completion in December 2012. The funding for the project shall be from Universal Service Obligation Fund (USOF) collected from the telecom service providers. Upon the completion of the NOFN roll out, GPs were expected to get broadband connectivity with speeds of up to 100 megabits per second.

In the BharatNet plan, optical fibre is being laid till the GPs’ office. The onus of taking Internet from that point of contact to the end users is left to the service providers. The service providers can be private, public, NGOs and semi-governmental organizations. Private entrepreneurs in GPs have a greater role to play in taking broadband to the households and individuals through BharatNet. The other important players in the village ecosystem are NGOs, political activists and semi-governmental organizational personnel. Either they provide information to the needy or deliver services to the GPs by making use of BharatNet or serve as a bridge between service providers and the people; and they can also be called infomediaries.

The most celebrated case of M-Pesa in Kenya in addressing financial exclusion problem through mobile phones is great example of institutional users playing a major role as infomediaries in scaling up the innovation (Foster & Heeks, 2013). M-Pesa grew because of small agents and distributors who introduced new mechanisms to serve the customers, which later were adapted by Vodafone, the telecom service provider. As the institutional users are closer to the rural populace, they would be able to adapt or customize BharatNet for wider use and diffusion. The diffusion or uptake of BharatNet is dependent on the institutional users in rural India who double up as infomediaries in rural India.

In the case of broadband, the absorptive capacity of the stakeholders or the infomediaries is important to fully realize the benefits of the infrastructure. The future potential service providers are expected to have capacity to understand, learn and garner the benefits. Once the optical fiber is laid, the absorptive capacity of the institutional users will determine the level of reach of broadband to the rural households. Though the optical fiber is laid by the government, scaling is possible only by the multiple sets of institutional users.

BBNL embarked upon pilot projects in three blocks covering 58 Gram Panchayats in three different states and completed by 2012. Given that pilot GPs had received BharatNet in 2012 and other GPs are in the process of receiving the same, there is need for an empirical study in the mid-term that helps the implementation process. Some of the findings are reported here.

Method

24 Gram Panchayats were selected using systematic random sampling in Arian (16) and Paravda, Vizag (8). Computer assisted in-depth interviews were conducted in person with 1,329 respondents from state government, central government, private and non-governmental and semi-governmental organizations in 2016.

In the sample of institutional users or respondents, 77% of respondents are males. 37% of sample fell in the range of 26-35 years and 34% in 36-50 years. Only quarter of sample had education below 9 years of schooling. Almost all of the respondents had a photo id card, aadhaar card and bank account in own name. Two thirds of them know how to send SMS, half of the know how to use search engine, and use email. One tenth of them can troubleshoot hardware and minor software related problems.

68% are from private organizations, 23% from state, 2% from central and 7% semi government organizations. Among the private organizations, 59% are petty traders. Overall, half of the sampled organizations have been started seven or more years. Of the customers served by them, 68% come from the same locality. Half of the sample is receiving electricity for more than 10-12 hours and 35% for 7-9 hours during 0600-1800 Hrs.

Key Findings

The key findings of the study are:

 Poor awareness about BharatNet / NOFN

  • In overall, 30% of the respondents claimed that they are aware of the BharatNet / NOFN of which 8% claimed to know it very well.
  • Awareness about ICT related programmes appears to be poor: 83% did not know about optic fibre, 76% about Digilocker and 68% about Digital India.
  • “Newspapers” at 39%, “Friends and Family” at 37% and “Televisions” at 30% are top three sources of information about BharatNet / NOFN.
  • Half of the sample incorrectly assumed that BharatNet / NOFN provides free Internet to people.
  • Slightly less than half felt that poor electricity supply will affect BharatNet /NOFN.
  • Among the Internet users, the top reasons for not using BharatNet / NOFN are: ‘Equipment breaking down’ (54%), ‘Slow Internet connectivity’ (53%), and ‘Already having internet’ (54%).
  • The respondents are optimistic about the potential uses of BharatNet / NOFN. Following are some of them: ‘Learn new skills for personal use’ (65%), ‘Access to better hospitals’ (66%), ‘Finding new business opportunities’ (63%), ‘Access Internet banking’’ (70%), ‘Finding new job opportunities’ (66%), ‘Getting information about Government Schemes’ (76%), ‘Learning new things through online videos’ (78%), ‘Learning new skills for employment’ (68%) and ‘Receiving required latest information’ (67%).

ICT ownership, access & use

  • Out of 1329 contacted, only 32 institutional users access BharatNet.
  • 65% organizations do not use Internet from any source.
  • 62% of the institutional users do not use Internet at the personal level as well.
  • Among non-users, intention to use Internet in future is about only 16%. Half of them do not intend to use Internet.
  • One third of organizations reported that they are computerized. Inter-office connectivity is better among public organizations.
  • In nearly 2/3 of the organizations, the respondents do not have additional personnel to handle the ICT related infrastructure.
  • The Internet is used 3-5 hours per day by the organizations.
  • The top three activities done at the personal level are: Reading information online, listening to music/radio online, and video.
  • Among Internet users, interaction with suppliers (33%), contacting potential customers (33%) and interaction with customers (26%) are done ‘somewhat frequently’ or more.
  • Only 8% of users are open to provide Internet as product or services to external people, if permitted.
  • The top three triggers for Internet use are: ‘to get instant information access’ (69%), ‘can do many things at once using Internet’ (58%) and ‘everyone around is using Internet’ (51%).
  • The top three barriers are: ‘can continue work without Internet’ (75%), ‘do not have required devices to access the Internet’ (73%), ‘no prior experience of using the Internet’ (52%).

 Policy Suggestions

  • There is a need for public information campaigns among the institutional users and other stakeholders, as extant awareness about BharatNet is poor. A demonstration of benefits and opportunities available is likely to result in better adoption.
  • Trade associations should conduct activities to spur entrepreneurship in the rural digital entrepreneurship space. Innovation hackathons may be one of the activities.
  • NGOs can work with private firms to deliver ICT based goods and services in rural India, by utilizing the corporate social responsibility funds to be spent as per government regulations.
  • Local private entrepreneurs should be encouraged to explore new businesses on the basis of BharatNet. Contact center for e-health, online education, skills training, and business process outsourcing is a possibility.
  • The post implementation scenario can be handled in three major models: government-led, private-led, and shared model.

Other suggestions regarding private player participation, and other details of the study are available at:

http://lirneasia.net/wp-content/uploads/2017/08/BharatNet_Report-with-Que_July-2017.pdf

We would like to thank Ford Foundation, New Delhi for funding the study. However they are not responsible for the contents in this report.

 

Digital Economy, Digital Labour

Early regulatory reforms can benefit developing countries in the digital economy

Over the last few years, the use of digital technologies has grown rapidly. The Internet has played a key role in driving this digital growth. However, whilst these new developments have created many advantages and brought varying degrees of development and ‘inclusivity’ in developing economies, issues of governance and policy are growing almost simultaneously with every new innovation and development in digital technologies. While a clear majority of these are issues of infrastructure (technical), online security and privacy (ethical), there are also other emerging aspects which require immediate policy reviews.

Take for example bike-sharing platforms. Cities in the UK have recently seen a splurge of hi-tech rental bikes on its streets. These ‘dockless’ hire systems allow users to pick up and leave the bike anywhere for just £1 an hour, locking and unlocking them with a simple smartphone app. The flexibility of use of these station-less smart bikes (unlike the Transport for London’s Boris/Santander bikes that need docking at specific docking stations) has popularised use of oBike (a Singapore start-up) and moBike (a Chinese start-up).

While this new pollution-free, high-tech bike-sharing transport system has provided many, especially those without the potential of owning a personal bike, an opportunity to travel around the city quickly and at minimal costs, this newly introduced digital economy business model has raised new regulatory issues.

The bikes are not quite as nature-friendly when they are left at any nook and corner.  In London, the masses of bikes created a huge hindrance for pedestrians, wheelchair users and those with buggies, as they began cluttering the streets and blocking paths. In Manchester, newly launched Mobikes were reported being sabotaged, stolen or dumped in canals and bins.

Such outcomes highlight emerging tensions for policymakers as they seek to encourage innovation and business start-ups, and promote sustainability.

The above refers to incidences in a developed country with supposedly advanced transport systems and planning regulations. If the same approach were to be applied in developing economies, leaving these dockless bikes lying around in the streets that are already overwhelmed with traffic, vendors and pedestrians can lead to even more drastic consequences, not ruling out the added possibility of these bikes being pilfered. Already, in China, where this business model was initially carried out, piles of these hire bikes were found dumped on the streets of Shenzhen. While the idea of introducing these bikes in China was for a sustainable cause – to help lower congestion and air pollution – it led to further unnecessary congestion and pile-ups.

Other parallels can be drawn with similar business models and platform companies, such as the food delivery courier Deliveroo, the car-hailing platform Uber, and the home-sharing app, Airbnb, where governance is a growing issue.

The recent legal actions against Deliveroo and Uber highlight the issues around  self-employed contractors without access to benefits such as sick pay, paid holiday, pensions, and protection afforded by the minimum wage.

Deliveroo claimed that the current law does not cater to the flexible working system where the company pays its workers by the job and not by the hour, and even called for a change in UK law to be able to give its workers more rights. Uber too maintained that its drivers are self-employed contractors rather than permanent employees and are not entitled to such benefits.

Despite these persistent claims, Deliveroo was forced to remove a controversial clause in its agreement which restricted couriers’ ability to challenge their self-employed status at an employment tribunal and work for other companies. Deliveroo was also made to remove a clause that obliged riders to give two weeks’ notice to terminate their agreement with Deliveroo. Uber on the other hand lost a court case when the employment tribunal ruled in favour of cab drivers and ordered Uber to pay drivers national living wage and holiday pay (though Uber is appealing the decision).

In a similar incident in 2012, an MTurk[1] worker filed an employment lawsuit in California against CrowdFlower, an intermediary firm between the MTurk platform and several end-clients. The microworkers claimed they were misclassified as independent contractors and paid less than the legal minimum wage. The suit obtained class action status and was settled in 2014 for $585,000 in favour of MTurk workers who had done more than a minimal amount of work for CrowdFlower.

While the above cases show a positive outcome to cases against gig economy operators in developed economies, where ministers can order a crackdown on these firms, such sophisticated and organised systems are often absent or lacking in developing economies with similar problems. Lawsuits can be highly unaffordable for those in developing countries, not forgetting that these gig economy workers may also be illiterate (e.g. cab drivers, courier personnel etc.) and unaware of their legal rights. Corruption within the legal system may also hinder gig workers in these economies from filing cases, where companies are powerful and able sometimes to bribe their way out of such sticky situations. These drawbacks open the door for greater exploitation of workers within developing economies.

Laws need updating to cater to the new business models of the digital economy. However, with innovation moving faster than regulation being brought in, legislation is rarely achieved quickly. What little legislation exists only serves narrow interests and provides minimal protection for workers and users. So what are the implications for developing countries? And how can developed economies lead the process for change to benefit developing countries?

For one, developed economies are leaders in setting standards and perhaps need to do more in terms of ensuring that these high standards are met not only within its own jurisdictions but also across borders where such international companies operate. Governments in developing economies also need to be more proactive in understanding and regulating new models of work as well as working with platform firms to curtail exploitation. The weak labour laws and governance in developing countries can sometimes be an attraction for companies in the West keen to penetrate markets in developing countries. This often leaves workers in developing economies open to exploitation and at a severe disadvantage as their governments are more interested in attracting new business investments and businesses in gaining entry to new markets. It is common knowledge that online microworkers in developing economies are paid less than their counterparts in developed economies for the same work. It highlights the need to reform existing regulatory frameworks.

Further, with relatively weak institutions and capacity for implementing policy in developing countries, the issues can be even more detrimental. Shocking stories of rapes by Uber and Ola cab drivers have been a regular headline in the news in India, and growing. This resulted in a temporary ban on these services in New Delhi, as it was discovered that Uber had not carried out proper verification checks on drivers. But little has been done in terms of legislation to avoid these incidents in future. Such negative occurrences can be a hindrance to the growth of the digital economy in developing economies that can otherwise benefit from the use of digital technologies.

It is also well-known that there is a massive digital divide between developed and developing countries, urban and rural regions, when it comes to anything digital. Within developing economies, rural areas and women and girls are often found to be excluded from participation in the digital economy due to various infrastructural and cultural issues.  Thus, new business and employment models are not quite accessible to these women or to those at the bottom of the pyramid who live below the poverty line and struggle to buy a meal a day, let alone have the income to pay for bike hire. There is a danger that such business models, while bringing new benefits, can also create a wider divide among urban-and-rural regions, and consequently between developed-and-developing economies.

As new business models of the digital economy make their way to the Global South, the importance of developing sound digital economy policies in developing/emerging countries must be emphasised. Emerging/developing markets are the engines of global growth and generate some of the most attractive investment opportunities globally. The IMF have projected that emerging/developing economies will grow by 4.5% in 2017, versus just 2% in developed economies. If governments in such emerging and developing economies want to entice and sustain foreign investors and innovators, they would need to focus on serious legislative strategies early on, that would not only benefit businesses but also citizens. While developing countries can ‘learn’ from some of the experiences of developed countries, they would still need to design policies that meet their own needs and which fit their local setting. For instance, policies in developing countries need greater focus on regional and gender inclusivity and other technical and social issues to reduce inequality and enable participation of the underprivileged in the digital economy. Regulatory reforms are also needed that ensure platform operators’ responsibility when it comes to protection of users against exploitation and hazards.

It is evident that the challenges of regulation exist not only within developed economies but also in developing economies, when it comes to digital platforms. New legislation needs to be put in place as developments in digital technologies grow. While one may insist that it’s “a grey area”, reform in existing regulatory frameworks is paramount and urgent, especially in developing countries with weak institutional settings, inadequate education systems and large pools of labour. It will ensure that such aspects as the sharing/gig economy will serve as an opportunity rather than be used as a tool for exploitation.

[1] MTurk or Mechanical Turk: The oldest and most well-known microwork platform owned by Amazon