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Is the Network Readiness Index a fair measure of non-Western economies?

The Network Readiness Index (NRI) is a metric which measures how prepared countries are to use information and communications technologies (ICT) for the interest of development and competitiveness in the future.

The index ranks more than a hundred economies around the world based on several indicators such as governance, people and technology, along with dozens of other sub-indicators. It was established in 2002 by the World Economic Forum and was published in partnership with INSEAD annually within the Global Information Technology Report until 2016.

In 2019, the NRI’s methodological approach was redesigned by its founders and co-editors, Soumitra Dutta and Bruno Lanvin, to focus on digital transformation. In the same year, Dutta and Lanvin also co-founded the Portulans Institute, an independent non-profit research institute, to publish the index.

The 2020 NRI report features 134 economies which account for 98 percent of the world’s gross domestic product (GDP). Egypt ranked 84 overall, and eighth out of 13 Arab countries. When including the North African states in the tally of African countries, Egypt ranked fourth out of 34 countries. In total, 34 lower-middle-income economies were included, of which Egypt ranked seventh.

However, global indices such as the NRI, have been viewed with scepticism as being Western-centric and painting all economies with the same brush without taking into account their nuanced and contextual differences, especially economies of the Global South. Some of these differences are the significantly larger informal sectors these economies have, and the many innovative ways their populations utilize technology in their own informal methods to respond to their urgent needs. These innovations go largely undetected and are missing from the data, another issue which developing and emerging economies face.

As well as being the Portulans Institute’s co-chair of board and director, Lanvin is also INSEAD’s executive director for global indices. Speaking to Business Forward, Lanvin sheds light on how this year’s NRI report took extra measures to account for these contextual differences to ensure that the index presented a fair picture.

Photo: Emmanuel Berrod/Flickr

Is it fair to assess low and middle income countries/developing and emerging economies in the same way as high income countries/advanced economies?

This is a rather technical issue. We do deflate variables to take into account disparities between rich and poor countries. The deflator we use is the one used by the IMF [International Monetary Fund], the Purchasing Power Parity [PPP]. Technically, these differences are being mitigated through the filtering of data.

How can you account for the large informal sectors and data gaps of low and middle income countries/developing and merging economies?

This is a subject which is close to my heart because my first research [project] was on the size of the informal sector in various types of economies. The size of informal sectors is sometimes used for negative purposes. Basically, a number of analysts [say the informal sector] is something you don’t see. It’s not measured. They use that to say these countries are poor and not very innovative. [In reality], they are not so poor and there’s a lot of innovation which is not measured and it’s happening in the informal sector.

Generally, there is a political bias and intent in singling out the size of the informal sector. The reality is that the informal sector is significant in a large number of economies around the world, and not just emerging economies. In countries where tax rates are excessively high, a number of activities go underground and they disappear from the radar.

What it boils down to is that you don’t want the informal sector to grow too much. It’s a good lubricant for the economy. It helps fight inequalities and poverty. It substitutes for social security in many instances but if you want to modernize an economy, you want the informal sector to reduce [in size]. This has two main consequences or implications.

The first one is that if you reduce the size of the informal sector, you increase tax revenues for the government. [The second is] that it has to be compensated by an increase in the quality of the social services offered, typically pensions and social security with which the informal sector becomes unnecessary.

“the indications provided in the index suggest ways in which the size of the informal sector can be reduced. That in itself is a positive and optimistic message.”

We do measure what is measurable, which means that the informal sector is not present in the NRI. But, the indications provided in the index suggest ways in which the size of the informal sector can be reduced. That in itself is a positive and optimistic message.

How can we decolonize digital transformation and network readiness across the Global South?

What is worth pursuing is diminishing the dependence of countries in the Global South vis-à-vis countries in the north. We see in the rankings of NRI that smaller economies are generally at the top. We are moving away from the typical model where you had to be a rich large economy with a large market and [better] access to international markets to be a champion worldwide.

The example of smaller economies -and some of them are not very rich economies- is, of course, a very good indicator of what can be done in the Global South. 20 years ago, we anticipated that the digital divide between rich and poor would diminish progressively.

If we look at the world picture today, we see two things. On the one hand, after diminishing rapidly [at first], the digital divide has not diminished so much in the last decade, so the gap between rich and poor remains. But more importantly, the nature of the divide has changed. We used to look at the divide in terms of infrastructure and access to technology. Right now, the divide is much more about content [and] about the value derived from technology that can be injected into local economies. There are a number of tools which are still very much in the hands of the rich countries that have to do with logistical and value chains. First and foremost, they have to do with human resources, talent, education and the ability to equip citizens with the tools that will enable them to create value out of technology.

“Right now, the divide is much more about content [and] the value derived from technology that can be injected into local economies.”

These are the areas in which NRI is trying to help: [by rebalancing] technology versus people. That’s a key fundamental message. The other one is to stimulate efforts through fostering talent and education [over the long term].

The fact that China is among the leaders is evidence that this whole equation is being de-Westernized. There are other examples. If you take leaders in e-government for instance, Singapore is there. You have other non-Western countries which are leading the way. We cannot and should not underestimate the creativity of poorer countries, including Sub-Saharan Africa.

What responsibility do tech companies corporations have in this regard?

For a number of years, I headed the World Bank’s InfoDev program and my role was to stimulate innovation at local levels using whatever technology was available. The amazing results achieved in countries like Mauritius, Kenya, Senegal, South Africa and Rwanda are evidence that things are happening at the local level which owe little to recipes imported from the West.

“Just to take one example, it is often forgotten that the majority of companies in Silicon Valley are created by people from the Global South.”

Even the US is realizing how much they owe to the south. Just to take one example, it is often forgotten that the majority of companies in Silicon Valley are created by people from the Global South. The presence of many Chinese, Indian, African and Lebanese entrepreneurs is also evidence that things could happen. They don’t happen massively and quickly enough and they need support. This is why we think NRI can help because it provides the data to generate support from [large and small] private corporations and governments where that help is needed.

Are there any efforts under development to account for the nuances and context-specific characteristics of developing and emerging economies and the countries of the Global South in measuring their digital transformation and network readiness? If yes, what are they?

NRI is all about context. It provides global benchmarking tools and allows comparison but we insist that action has to take place at the local level. For that, the comparisons that make sense are typically original comparisons. It makes more sense to compare the performance of Egypt to that of Saudi Arabia or Jordan than to compare to China or Canada.

There are points of reference that can be used but people would relate much more to the type of environment, cultural surroundings and business practices that they know of so it’s easier to identify where improvements can be made.

One thing which I believe is important in the data collection is to show practically why efforts to collect better data at the local level matter so much. Many developing countries are not ranked in the NRI because the data is not available. It doesn’t mean that they are performing worse than others. It just means that the local statistical apparatuses are not sophisticated enough to collect the data needed.

“Many developing countries are not ranked in the NRI because the data is not available.”

I have great hopes in what is happening around the sustainable development goals [SDGs] of the UN [United Nations] are calling for better data collection in education, health, inequality and poverty. I believe that this is going to stimulate the efforts made at a local level to gather better data. [This is]one of the reasons why we introduced a pillar just about SDGs in the NRI and we hope to see that pillar grow as better data is collected in the future. The same goes for new indicators used in NRI like trust and inequalities [among others], but the SDGs will be, for me, one of the reasons why data collection at the local level is going to become more vigorous and less [dependent] on the data collection made in the richer countries.

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