States view digital economy as vital to growth

Growth in digital interconnectivity in the daily lives of consumers and workers has made the Internet a vital component of GDP, which is in turn driving states to finance and nurture the correct business environment for start-ups and VC firms. The digital economy drives innovation, competition and convenience. In other words, M&A and financing activity in the tech segment has become a key economic driver, which is further being propelled by the growth in segments such as sell businesses, corporate finance (the rapid expansion of London corporate finance in the UK is a strong example) and various technology-focused consultancies. 

In today’s digitally progressive global landscape, economic growth can rise in tandem with technological progress. Unlike natural resources, an Internet economy can be nurtured and expanded from a low base to become a major contributor to GDP. In addition to enhancing the business environment, a strong Internet base can enhance segments that are difficult to equate in monetary value, such as education, innovation, entrepreneurship, political processes and governance, As early as 2011, a study by McKinsey Global Institute stated that Internet-related consumption and expenditure was bigger than agriculture or energy among the world’s largest nations, on average contributing around 3.4% to GDP. Considering that over 2011-2013 an extra 400 million people became regular Internet users, the influence of the Internet economy on GDP is rising rapidly.

Investments in telecom infrastructure, human resources and business environment conditions by governments can drive powerful Internet ecosystems that lead to economic growth. The UAE, for example, has become a regional business hub in the Middle East on the back of a sustained strategy of digital knowledge development, while city states such as Taiwan and Singapore have used their advanced digital environments to provide globally recognised superior business conditions. Governments that enable the growth of disruptive technologies and do not protect traditional industries ultimately benefit from a forward-looking strategy. The UK, for example, had the world’s third largest e-commerce segment and the fourth largest online adspend in 2013 despite being the sixth largest economy in the world by total GDP. 

The European Union (EU) has acknowledged that the digital sector is key to solving the region’s growing unemployment problem. According to the body, by 2020, there will be up to 1.0 million unfilled vacancies for information and communications technology (ICT) practitioners across the EU, with strategies being implemented to increase digital literacy and technical skills that will help to sustain the digital economy. 

The rapid growth of segments such as Big Data and the Internet of Things is set to multiply the connectivity levels of consumers and businesses. Nonetheless, while this will propel growth in digital terms, it also leaves economies and institutions vulnerable to more cyber-attacks from terrorists, criminal organisations and other governments. 

 

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