By Dirk Pilat
Deputy Director, OECD Directorate for Science, Technology and Innovation
Last month, some of the world’s largest technology companies – Alphabet, Amazon, Facebook and Google – published stellar quarterly earnings, beating Wall Street estimates and reporting a combined USD 28 billion in profits. The COVID-19 crisis is further strengthening the position of some digitally enabled companies while challenging many brick-and-mortar firms, underscoring the increased reliance of businesses and consumers on digital platforms and services during the pandemic. In fact, as governments work to respond to the virus and mitigate the economic fallout, digital technologies and new business models have allowed many firms to avoid a complete standstill – and they may accelerate our transition to a digitalised future.
In April, the digital economy ministers from G20 countries held an extraordinary virtual meeting to discuss how digital technologies and policies could help respond to the crisis and prevent future pandemics. In this meeting and a subsequent meeting held in June, the ministers acknowledged that connectivity and digital technologies have a critical role to play in responding to and recovering from the crisis, emphasising the importance of sharing experiences and policy interventions across countries.
To advance this work, the G20 Saudi Presidency launched an initiative to collect and share information on policies through which G20 countries are accelerating the availability and use of digital tools to strengthen business continuity and resilience. The results from this effort, published last month by the OECD, shed light on how countries are using policy innovations to address the unique business challenges that COVID-19 presents.
The initiative, based on a survey of G20 members and four G20 guest countries, reveals that G20 economies are accelerating their efforts to go digital in response to the COVID-19 crisis. Results from the questionnaire highlight the emergence of innovative and mostly new policies across seven key areas:
- Responding to growing demand for connectivity
- Fostering e-commerce, online business models and market access
- Increasing access to digital services and tools
- Enabling remote working
- Fostering digital upskilling through online training
- Accelerating electronic payments
- Enhancing access to finance and supporting digitalisation
While some recent initiatives appear to be part of a temporary, emergency response to the crisis – e.g. temporary access to spectrum or solidarity schemes to help firms generate short-term revenue – others, such as programmes around teleworking, e-learning or online business models, may prove to be longer lasting. Some initiatives, such as the UK’s Business Support Platform and Mexico’s initiative to promote the use of delivery apps to support small businesses, are still emerging, demonstrating how countries are turning their attention to digital policies to support economic recovery in the medium-term.
The wide range of policy actions also underscores differences in countries’ approaches, notably regarding the mix of public and private actions. Some governments have played a direct role in certain policies, such as providing digital services and platforms to businesses, while others have acted more as a facilitator by, for example, enhancing connectivity and reducing costs for enterprises. In some G20 and partner countries, governments have acted primarily to provide guidance and information to businesses, with the private sector taking the lead.
The COVID-19 crisis may well mark a turning point in the digitalisation of countries, but uncertainties remain.
As the crisis unfolds, attention will need to pivot back to the general policy environment for digital transformation. Most policy responses highlighted by G20 and partner countries sit within a broader framework of policies for the digital economy. This combination of new initiatives and existing – but upgraded – policies will be necessary to accelerate the uptake and effective use of digital technologies. For example, although emergency responses may allow governments to meet a surge in short-term demand for broadband, long-term investments in broadband networks will be required as well, as suggested in policy responses from China and Singapore.
Heightened risks to digital security during the current crisis may also call for a broader review of policies in this area. In the US, for example, the National Institute of Standards and Technology has issued telework cybersecurity recommendations in response to both the increase in remote work as well as broader changes in business practices. Similarly, the drive to go digital has further highlighted the demand for relevant skills, including strong skills in information and communication technology. Meeting this demand may require action to help businesses meet short-term needs, but also broader policies for education and training.
Ultimately, the COVID-19 crisis may well mark a turning point in the digitalisation of countries, though significant uncertainties remain. It remains unclear whether the changes we’ve seen during this crisis (and the policies enacted in response) will lead to a lasting shift towards a more digital economy, and how extensive this shift may be. Many firms shifted towards a more digital business model because it was the only way for these firms to generate revenue and survive. Companies may choose to return to a more traditional business model once the health crisis has passed, but they may also opt to further strengthen their digital focus, e.g. through remote working and more online sales. The path forward will likely depend upon the degree to which business operations can be carried out online, and could vary widely across firms (large service firms may find it easier to go digital than small manufacturing firms), sectors (digital operations are more suited to financial and business services than to manufacturing or construction) and countries (well-developed broadband networks are likely to facilitate digital operations).
Countries may also need to take further policy actions once the health crisis is under control. Already, countries such as Germany, Korea and the UK have indicated they are considering medium-term actions to support businesses in the recovery, including policies in the digital area. As countries continue to navigate towards this future, the sharing of knowledge, practices and experience will become ever more important.
The OECD remains committed to supporting the G20’s important dialogue on digital issues, which the COVID-19 crisis has propelled to the highest political levels. Through our Going Digital project, including its integrated policy framework, online Toolkit and ongoing analysis of issues such as artificial intelligence and data, and through our COVID-specific policy analysis, we will strive to help countries shape a digital future that boosts growth and improves well-being in the post-COVID era.