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Breaking the cycle of digital exclusion

Policy barriers and the self-perpetuating cycle of data inequality

Least Developed Countries (LDCs) often find themselves disadvantaged in the global digital economy, not solely because of infrastructural gaps but also due to inward-looking cross-border data flow policies. These restrictive policies, aimed at safeguarding national security and mitigating cyber threats, inadvertently deepen the data divide. By limiting the free flow of data, nations that have implemented such policies discourage foreign investment, impede access to international digital markets, and stifle innovation. At the individual level, inconsistent data protection laws impair consumers’ ability to participate fully in the digital economy. This creates another reinforcing cycle: low data flows lead to underdevelopment, which further entrenches fears of digital vulnerabilities. This perpetuates restrictive policy stances, which further limit data flows.

The concerns driving these policies are not always unfounded. Many LDCs lack robust cybersecurity frameworks, which can make them more vulnerable to illegitimate actors. However, the perception that opening borders to data flows inherently jeopardises national security is counterproductive as these regulations can also hinder national economies and living standards by limiting integration into the global economy. Participation in cross-border data ecosystems drives economic development and enables countries to build resilient digital infrastructures through collaboration and investment.

Breaking this cycle requires massive education and capacity-building efforts. Policymakers in LDCs must be equipped with the knowledge to balance the benefits of digitalisation with its risks. Public awareness campaigns, targeted training, and real-world success stories can help dismantle misconceptions about the risks of data sharing and lay the legislative foundation for a jurisdiction to thrive in a digital world. 

Rwanda’s experience demonstrates that addressing restrictive data policies and fostering digital trade can significantly reduce the barriers created by the data divide. By implementing comprehensive data governance frameworks and engaging in international collaboration, LDCs can begin to break the cycle of underdevelopment tied to limited data flows. However, achieving this requires sustained efforts in education, capacity-building, and targeted policy reforms that account for the unique challenges faced by each nation. 

As digital trade continues to reshape the global economy, LDCs have the potential to become active participants rather than passive observers, provided they take decisive steps to integrate into the digital ecosystem. Rwanda’s progress is both a roadmap and a call to action for other developing nations to embrace the transformative potential of digitalisation.

Calls to action and recommendations

The digital transformation presents opportunities and challenges, with data inequality playing a pivotal role in shaping the trajectory of economic equality. As the digital revolution gains momentum, addressing data inequality remains central to fostering a more balanced and sustainable global economic environment.

To achieve this, this paper proposes three priorities for action:

i. Expand global digital development assessments to explicitly monitor and report progress on data inequality:

Without robust monitoring and evaluation, it can be easy for those in the digitally developed world to remain blind to the challenges of digitally undeveloped demographics. To effectively address the global data divide, existing assessments like the United Nations E-Government Development Index (EGDI) and the OECD Digital Economy Outlook, among others, should be expanded to include targeted metrics on data inequality. The EGDI, which currently evaluates ICT use for public service delivery, could incorporate indicators that measure cross-border data flow policies, the inclusivity of digital services, and the availability of data for economic and financial decision-making. Similarly, the OECD Digital Economy Outlook could broaden its scope to assess data governance frameworks in LDCs, the availability of trusted data for trade finance, and the impact of digital trade policies on economic inclusion. Expanding these surveys would provide policymakers and stakeholders with actionable insights, enabling them to track progress, identify gaps, and implement solutions to bridge the data divide.

ii. Support data collection and management initiatives:

Fund and support initiatives aimed at improving data collection and management in developing countries. This will help provide a clearer picture of the economic and social needs in data-poor regions and help with overcoming the scandal of invisibility. Additionally, policymakers and stakeholders should advocate for the adoption of emerging data-sharing regulations, such as the Bank for International Settlements’ (BIS) Project Aperta. Initiatives such as this promote cross-border data portability, enabling clearer guidelines for the sharing of client data among banks and their providers, including credit insurers.

iii.       Encourage policy reforms in LDCs:

Developed nations and international organisations have a critical role to play in supporting LDCs to adopt more open and progressive data policies. This can be achieved by fostering capacity-building initiatives that equip policymakers with the tools to understand the economic potential of cross-border data sharing and digitalisation. Efforts should focus on providing technical expertise, sharing international best practices, and highlighting successful examples, such as Rwanda’s digital transformation, to build trust in the process. By offering targeted support and creating collaborative frameworks, stakeholders can help LDCs establish balanced data-sharing policies that address security concerns while unlocking opportunities for economic growth.

Conclusion

Growing data inequality will amplify global disparities and economic inequality as digitalisation continues to reshape the landscape of international trade. This report began by underscoring the significance of international trade and investment as pivotal drivers of economic progress before moving on to look at how data inequality disproportionately affects the world’s least developed nations. Next, it delved into the relationship between data accessibility and international trade and investment, emphasising the positive outcomes of data’s existence and the adverse consequences of its absence. The discussion then explored recent digital advancements within international trade that are poised to bring about a transformative phase in cross-border commerce, but that nations themselves must be both able (through digital infrastructure) and willing (through government policies) to participate to reap the benefits. We saw, however, that the prospect of expanded data inequality casts a foreboding shadow on trade digitalisation, with potential repercussions for global economic inequality. 

By increasing awareness of the challenges that the world’s least developed economies face – both digital and otherwise – the industry can help ensure that global trade remains inclusive. With concerted efforts and collaboration across all stakeholders, widespread data inequality can become a problem of the past.

Read TTP’s Whitepaper on “The unseen side of trade digitalisation: Data inequality and the global economic divide”

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