The Global Economic Governance (GEG) Africa programme is a policy research and stakeholder engagement programme to strengthen the influence of pro-poor African coalitions at global economic governance fora.
Thursday, 08 November 2018 12:43

Policy to support digital trade: lessons from two emerging economies

Written by Shamel Azmeh and Christopher Foster

GEGAfrica Policy Briefing, November 2018

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GEGAfrica Theme 3

This briefing explores policy experiences in the digital economy and digitalisation through a detailed study of two selected countries, Brazil and Indonesia. This critical analysis provides insights into how policymakers can regulate and deal with the challenges of the emerging digital economy. Overall, digital policy directions in these two countries have much in common. While both countries already have core digital regulation and infrastructure in place, policymakers are working to refine policy to ensure that it fits with the changing needs of the digital economy and digitalisation. Both countries are moving beyond market-enabling policies to focus on a number of strategic areas through interventionist policies, rather than allowing a relatively passive diffusion of technology and knowledge. 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 increase local economic value added.Digital policies in Indonesia and Brazil have important implications for South Africa and other developing countries. The two cases highlight the need to combine regulations that enable the expansion of digital markets with more interventionist policies that build capacities in the digital economy and improve domestic value- added capture.
 
The two countries highlight lessons for digital policies for medium, small and micro-sized enterprises (MSMEs) and start-ups. For MSMEs, facilitating simpler access to platforms and providing simpler systems for tax and exports are key lessons. For start-ups, policies should move beyond solely encouraging digital start-ups to tackling the challenges encountered in scaling up those start-ups into larger sustainable businesses. Policies that promote domestic venture capital and encourage global linkages are crucial.
 
The two countries are also adopting a range of policies that aim to promote the localisation of activities by global digital firms through building domestic capacities and using domestic market access as leverage to attract higher value-added activities in the digital economy. To maximise leverage, regional integration to expand the domestic market is important. In both cases, the focus is on economically marginalised groups, as the digital economy is seen as a way to provide economic empowerment to these groups.
 
Authors: Shamel Azmeh and Christopher Foster
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