Russia Can Gain More from a Digital Transformation, says World Bank | Forum

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Moscow, May 19, 2017− Russia is uniquely
positioned to exploit advantages in the digital
arena in order to promote economic growth and improve
its business environment. Early reforms in Russia’s
telecommunications sector enabled faster, more
accessible and more affordable Internet connectivity for
people and firms across the country, according to the
recently published report Reaping Digital Dividends:
Leveraging the Internet for Development in Europe and
Central Asia .
More than 60% of firms in Russia have a website and
more than 90% utilize email – one of the highest rates in
the Europe and Central Asia region. Despite this high
usage, however, the report points out that e-commerce
activities constitute just 1.4% of Russia’s Gross
Domestic Product (GDP), compared to 3% in Western
Europe and the United States, and 5% in China. The low
overall level of e-commerce activity is further hampered
by a weak digital payment system: just one out of every
five people has a credit or debit card, and only 37% of
Russian firms use Internet banking.
For Russia to maximize the benefits of the Digital Age,
the report argues that it is vital to improve the country’s
education sector – matching today’s curricula with the
jobs of tomorrow. The country has a unique opportunity
now to lead the policy agenda in making jobs of the
digital economy more inclusive and more productive.
“Further development of the digital economy in Russia is
a unique opportunity to improve productivity growth and
the necessary diversification of jobs and exports,” said
Hans Timmer, World Bank Chief Economist for Europe
and Central Asia . “Russia's potential is huge, but to fully
achieve this, providing access to digital technologies is
not enough. It also requires changes in education,
financial markets, labor markets, and competition
policies.”
According to the report, existing inequalities in Russia
could be further exacerbated, as unskilled workers are
less likely than skilled ones to use the Internet to find a
job or participate in professional networks. However,
policies to facilitate tax and social contribution
payments in the sharing economy could nudge workers
out of the shadow economy and provide them with some
employment protection. Improving competition may also
help foster the adoption of ICT among firms in Russia.
Russia’s connectivity is important not only for its own
economy, but also for improving the connectivity of
landlocked countries in Central Asia. Reforms in the
digital arena can help increase competition and
efficiency in the market for Internet provision in Russia.
In order to maximize the effectiveness of such reforms,
the report argues that efficient sector regulations must
also be introduced to fuel sustainable growth and
increased usage of digital payment systems.
"Transition to the digital economy is clearly the next
frontier for economic and social transformation in Russia
and will require a major focus on strengthening the
enabling environment in parallel with further
development of digital infrastructure and platforms," said
Andras Horvai, World Bank Country Director and
Resident Representative in Russia. "Russia has a strong
track record of achieving what it considers most
important, as it recently demonstrated through broad
improvements in its domestic business environment and
introduction of digital services and electronic platforms
that are making it easier for firms to register and
operate. This creates ground for optimism for the future
of digital economy in Russia."