The Digital Economy at a Glance

It is digital technology that now has the potential to usher in widespread social changes and economic advancement. Accordingly, to prosper in the digital age, it has become crucial for nations to understand and cater for the digitally -based economic construct also known as the digital economy.

Definition of the digital economy

The digital economy has been defined in different ways, primarily based on scope. According to the latest definition from the Organization for Economic Cooperation and Development, it encompasses all economic activities reliant on, or significantly enhanced by, the use of digital inputs, including digital technologies, digital infrastructure, digital services, and data.

This broader scope refers to all producers and consumers, including governments that use digital inputs in their economic activities.

The four key enablers of the digital economy

The global economy is well on its way to fulfilling its digital destiny. More than 65 percent of GDP is predicted to be digitalized as early as 2022.

Accelerated investment in digital transformation will further spur the creation of digitally-enabled products, services, and experiences across all industries, significantly impacting economic development, particularly as nations across the world move away from resource-based economic models.

To facilitate this transition, national authorities and policymakers should focus their efforts and investments on the critical enablers of the digital economy, which are foundational to its evolution, namely digital strategies and regulations, digital infrastructure, data-driven economy and digital skills.

Economic prosperity, wealth creation, and the improvement of citizens' lives are priorities for every nation. As digital technologies are steadily intertwined with the way products and services are created and consumed, the digital economy is becoming a critical component of national transformation.

National digital transformation

By 2023, digitally transformed enterprises will account for more than half of global GDP. Two overarching factors will drive this trend: the proliferation of digital devices and the rising prominence of the millennial and zoomer (Generation Z) user base.

These digital-savvy generations account for 75 percent of the population in the Middle East today. By 2025, the number of connected devices globally is predicted to reach 100 billion, more than 12 times the number of people in this world.

These shifts have significant implications for the evolution of Smart Cities towards Cognitive Cities and the future of national digital transformation.

Trends and concerns on digital economy

The emergence and evolution of the digital economy is characterized by key trends. The primary driver of these trends is technological innovation, namely the advent and widespread use of social media and smartphones, as well as advanced broadband networks and technologies such as the Internet of Things, Big Data Analytics, robotics, Artificial Intelligence and Machine Learning.

The digital economy is primarily a data-driven economy. However, fully exploiting data remains a significant challenge for organizations. It is estimated that less than three percent of existing data is analyzed with the aim of improving enterprise intelligence. National governments and policymakers that focus on developing the digital economy should strive to create an open data economy, where data is shared widely, creating value, albeit supported with strong data privacy and protection laws to counter potential threats.

The increasing role of digital technologies in the workplace requires a range of new digital skills. This falls into two categories: core Information and Communications Technology (ICT) skills, such as programming, applications, infrastructure, cybersecurity and data analytics, and generic ICT skills required by all employees to work in a digitalized environment.

However, as organizations often point out, it is tough to find core ICT skills. Moreover, with rapid technological evolution, the skills learned at educational institutions often fall short and quickly become outdated.

(Safder Nazir is the head of Huawei's Digital Industry Center of Excellence, prior to which he has held various leadership roles in global "blue chip" companies. The opinions in this article are the author's and do not represent S&T Daily.)