The Impact of Digital

Our discussions revealed that the adoption of digital strategy by global importers and exporters presents such a profound shift in the future of trade that as many as 350 million more businesses could begin to export goods and services through digital commerce.

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Digital penetration is uneven around the world, with developed economies much further ahead than the developing world. In North America, 90% of the population uses the internet, while in Europe the figure is 70%. However, fewer than 20% of people in South Asia and sub-Saharan Africa use the internet. This has big implications for trade. At present, the share of e-commerce sales of all sales is eight times higher in North America, Europe, East Asia and the Pacific, compared with South Asia.

Analysts from CEBR expect this gap to persist until at least the end of the decade because closing the gap requires both structural change – the presence of more internet connections – and behavioural change, amongst consumers.

However, there is the potential for developing regions which currently lag developed economies to “leapfrog” by skipping the e-commerce stage of development, to more advanced forms of digital trade.

The huge growth of mobile banking and payments in some countries in sub-Saharan Africa is a good example of this. Developing countries will not be excluded from the benefits of the digital revolution when it comes to trade, according to CEBR.

Global trade has not yet recovered to pre-Great Recession levels, even though transport costs, communications and regulatory costs have fallen. Trade rose faster than global GDP for four decades but the trade to global GDP ratio hit a peak of 31% in 2008 before falling to 26% in 2009. A disconnect between trade and global GDP occurred at the time of the Great Recession and it continues to trend downwards. Possible reasons for the decline in world trade are that investment has been slow to recover, following the financial crisis. Also, the uncertainty created by geopolitical problems including the Arab Spring, Russia’s intervention in Ukraine and the war in Syria could be discouraging businesses from seeking to trade with foreign partners. However, digitalisation has the potential to reverse that trend, as it will stimulate the digital economy and make it easier for all businesses to trade outside their home markets.

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For the last 12 months DMCC, the authority on trade, enterprise and commodities in Dubai, has teamed up with FutureAgenda on an odyssey to discover the future of global trade. We gathered industry leaders, academics and experts in five key cities to discuss how global trade will change in the next decade and how it will drive the global economy into the next phase of growth.

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Impact of Digital – Alex McIntosh

Going Digital to Boost Global Export Economy

As many as 350 million businesses could become exporters in future as global trade moves online, according to data analysed by DMCC and economic consultancy CEBR.

Businesses in high-income economies in North America and Europe will lead the way, but the developing world will catch up quickly as mobile technology becomes the main way of accessing the internet, according to a report on the future of trade by DMCC, the authority on trade enterprise and commodities, and CEBR.

At present, almost 90% of the population in North America and 70% of Europe’s population have access to the internet, compared with less than a fifth of the population in South Asia.

There are also huge variations in e-commerce, with just 1% of retail sales occurring online in South Asia, while in North America, Europe and East Asia and the Pacific, the share of e-commerce sales in all sales is more than 8 times higher.

The report says that there is a high correlation between the share of businesses in a region that export and the pace of digitalisation.

DMCC and CEBR’s analysis of World Bank data suggests that there is “a huge potential among lower-income countries to “catch-up” with higher income ones when it comes to digitalisation.”

The report says that there are huge variations in the level of digitalisation around the world.

While over 90% of businesses across all industries have a digital infrastructure in place, they do less well in using that infrastructure to connect with suppliers and customers.

The industries where digitalisation is most advanced include the Information & Communications sectors, and the Professional, Scientific and Technical sectors.

The Accommodation and Food Services sector leads the way in connecting with consumers, probably due to the technologies that make online reservations and bookings possible.

Meanwhile, sectors including Construction and Manufacturing have some way to go before they can be called truly digital, CEBR and DMCC find.

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Digital Boom a Boost For Trade

The number of businesses exporting goods and services around the world could leap seven-fold if global commerce becomes fully digitalised, according to DMCC, the authority on trade, enterprise and commodities.

This huge boost to global trade made possible by digital technology could finally start to reverse the decline in trade as a percentage of global GDP, which has been occurring for the last six years.

The Future of Trade report, produced after a year-long study by DMCC and CEBR, a leading economic consultancy, suggests that a “digital revolution” will be one of the most significant drivers of trade in the next two decades and could help trade recover to pre-crisis levels.

Emerging economies will also benefit from this expansion of global trade, as there is more of a level-playing field between them and developed markets when it comes to technologies such as mobile payments.

Figures from Mastercard and CEBR show that six of the top 15 nations ranked by mobile payment readiness are “emerging” countries, including Kenya, Saudi Arabia, China and Malaysia.

DMCC and CEBR predict that the equivalent of 30,000 new public companies around the world could become exporters by adopting digital strategies towards their suppliers and customers.

When looking at all companies around the world, the number of firms that could become exporters could be between 100 million and 350 million, the report states.

At present just one in five businesses export outside their home market, although that figure rises to a third in OECD countries and is just 15% in South Asia.

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The Market research industry has seen huge changes over the last few years as a result of the adoption of digital strategies. I think we will see an acceleration of some of the trends we have seen recently as more companies adopt digitalisation strategies. We have seen this in new companies coming out of say Silicon Valley. It is much easier to scale a business, it is much easier to create a brand than it ever has been before and it’s cheaper to build up very large customer bases.

Alex Mcintosh
UK CEO
YouGov

Key Facts

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12% of companies around the world use 3D printing in some capacity

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potential growth in value of the digital economy over the next decade

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The number of companies that will export for the first time if they go digital

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Import tariffs, share of import values
3% World
1.5% US
1% EU

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85% reduction in cost of exports with the adoption of a fully digital supply chain

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Trade as share of Gross Domestic Product
31% East Asia
29% South Asia
18% OECD

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Our Partners for Future of Trade

Download the Whitepaper

For the last 12 months DMCC, the authority on trade, enterprise and commodities in Dubai, has teamed up with FutureAgenda on an odyssey to discover the future of global trade. We gathered industry leaders, academics and experts in five key cities to discuss how global trade will change in the next decade and how it will drive the global economy into the next phase of growth.

Download PDF

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