6 ways to establish a robust digital economy in emerging countries

With rapid changes in technology, economy, and society, one significant opportunity for emerging countries to grow is the digital economy.

It is a new growth engine that will increase the nation's productivity and income in order to help escape the middle-income trap and take advantage of this emerging trend.

This digital economy will also be key to creating sustainable growth and reducing economic and social inequality.

By contrast, the gap between developed and developing countries is likely to get bigger and more difficult to reduce if developing countries do not try to catch this trend as the world shifts to a digital economy.

Proper and effective policies are therefore required to advance the digital economy. Here are our six main recommendations for the public sector to take full advantage of it:

For domestic digital workforce development, emphasize the development of people with digital literacy and adaptability abilities over the course of their careers to make them tolerant of future rapid change. To encourage participation from all sectors in the growth of the workforce, one method is to establish an open education platform.

In addition, encourage skilled foreign employees to have easy access to employment. The focus should be on transferring technology to local business owners by amending or eliminating regulations that pose a barrier, such as the requirement that there must be four local employees for every one foreign employee, or that a company must have a minimum amount of capital in order to hire foreign skilled workers.

Implement supporting rules and laws to regulate foreign enterprises to offer local businesses competitive advantages throughout the early stages of their development.

Change regulations to simplify business registration in order to facilitate local business operations, and include suitable tax benefits, flexible and efficient funding rules. New fundraising techniques like security token offerings (STO) and initial coin offerings (ICO), as well as the tax exemption of digital assets, should not be neglected.

Create a sovereign wealth fund that makes investments in seed phase start-ups, comparable to developed country institutions like Temasek Holdings in Singapore, China Investment Corporation and Korea Investment Corporation.

However, the fund should not invest in companies that have already succeeded because private investors already have strong incentives to do so. As a result, the advantages of business growth are less favourable than investing in companies in the start-up phase.

Establish social security – a social safety net – for anyone who wants to try running a business. Additionally, make sure the money is still assured even if the business fails – meaning that company owners are able to bounce back and start over.

The distribution of resources is more efficient under such a policy because it lowers the exit barrier, making it simpler for companies with low productivity to leave the market.

Allow the use of digital assets in both domestic and foreign transactions to draw in spending from the new wealthy group, and cross-border transactions to keep up with the expanding trend of small businesses, which includes borderless employment.

To cut transaction costs, policy should also include a tax exemption for the transfer of digital assets.

Make the public sector a digital government by concentrating on operating as if it was a single entity.

It should be changed to become a peer-to-peer platform where the public may be served by the business sector, as well as where people can actively participate and freely express their thoughts in formulating policies for economic and social growth.

The ultimate goal of these recommendations is to make it possible for developing countries to build a robust digital economy – with the free flow of people, information and capital as its cornerstones.

After all, domestic digital enterprises are better positioned to compete in the global market and are crucial to raising the productivity of the nation, as well as sustaining the standard of living of its citizens.