To Unlock Potential of Digital Economy, Kosovo Must Go Beyond Internet Access, Says World Bank

Stocks and Financial Services Press Releases Wednesday March 8, 2017 07:57
PRISTINA--8 Mar--World Bank

PRISTINA, March 7, 2017− Countries in the European Union (EU) must enact policies designed to better help workers adapt to new jobs being created by the internet if they want to avoid increasing inequality and exclusion in the region, notes a new World Bank Report. According to Reaping Digital Dividends: Leveraging the Internet for Development in Europe and Central Asia, launched in Bucharest today, affordable and nearly universal access to the internet has not been enough for countries in the EU to fully benefit from opportunities being created by digital technologies and more needs to be done to develop a policy environment that can better leverage this access by linking workers to digital jobs.

"We are clearly seeing that internet access alone does not automatically translate into economic gains," says Hans Timmer, Chief Economist for the European and Central Asia region of the World Bank. "Given their level of technological development, countries around Europe should be doing better in terms of e-commerce, but we are not seeing the Googles or Facebooks emerging out of Europe just yet."

The IT market in Kosovo is small and underdeveloped because of the low level of digitalization and ICT usage in the economy. It is also characterized by strong competition from imports. The low level of specialization and differentiation among Kosovar technology companies is a constraint on competition and growth.

The biggest obstacles to export growth cited by IT market firms include visa barriers, lack of government support, the shortage and poor quality of business contacts abroad and domestically, insufficient market information, and branding problems. Other major issues affecting sector exports and sector growth in the long term is the lack of a skilled workforce for mass production. Constrained access to finance is another impediment to the development of export-oriented IT firms. At the same time, venture capital is not available.

"The spread of the Internet globally and improvements in ICT access in Kosovo mean that businesses and people can access global opportunities for employment and growth in IT-based businesses, online work, and trade in services", says Marco Mantovanelli, World Bank Manager for Kosovo. "Yet, this also means that the skills base will need to be developed, and young people should have the capacity to find and do work in the digital era. This is why the World Bank is discussing possible support for Kosovo's Digital Economy Program (KODE) which aims at sustainable economic growth and job creation through a wider use of broadband internet infrastructure and the development of globally competitive digital businesses and skills. Making the Internet universal and affordable in Kosovo and adapting workers' skills and businesses to the demands of key export markets are precursors for transforming Kosovo into a digital economy."

Online work may also offer increased opportunities for groups facing barriers to employment, for example, older workers, women, or adults with young children where daycare services are costly or scarce. Kosovo is active in promoting online work model among women in rural areas. The Women in Online Work program (WoW)supported by the World Bank, which provided training and coaching for online work for 150 unemployed and underemployed Kosovo women, is an example of such an initiative.

"Although new and unprecedented opportunities are being created by the internet, there also exists the possibility of further exclusion – especially for unskilled workers," says Hernan Winkler, World Bank ECA Economist and lead author of the report. "We need to put policies in place that can help people adapt to new challenges."

"Focusing on measures that increase health and pension coverage for workers of the 'gig' economy or facilitate the transition of displaced workers toward new jobs can be more effective than creating regulations aimed at preventing inevitable technological changes."

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, according to the report. Improving competition may also help foster the adoption of ICT among firms in the EU, especially in Southern Europe, a region with a relatively weaker competition environment.

The rise of the sharing economy and alternative work arrangements pose a new challenge to existing labor market regulations and the social contract, which were established to protect workers in lifelong salaried jobs. The EU has the unique opportunity to lead the policy agenda to make the jobs of the digital economy more inclusive and more productive.

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