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The EBRD and digitalisation

Digital in the EBRD regions

Digitalisation is affecting the world of labour across the EBRD regions. The EBRD’s Transition Report 2021-22 highlighted that underdeveloped digital skills are one of the key constraints holding back digital upgrades to economic systems in many parts of the EBRD regions; in turn impacting productivity growth and efficiency.

Although workers in EBRD regions appear to be just as likely to access free online courses and independent training in the area of digital skills as their counterparts in advanced economies, the amount of training provided by employers is considerably lower than in advanced economies. For instance, survey data from Eurostat indicates while 12% of respondents in advanced economies report having received training provided by their employer, that is true for just 4% of respondents in the EBRD regions.

Furthermore, many economies in the EBRD regions are experiencing a significant “brain drain” – the outward migration of people with higher levels of education and, in particular, better digital skills. Even though EBRD regions are similar to advanced economies in terms of ICT graduates as a percentage of total graduates (with both averaging around 4.5%), the number of ICT professionals and technicians working in the EBRD regions (as a percentage of total employment) is around half of the level seen in advanced economies.

Despite recent improvements in digital infrastructure (accessibility of fixed broadband and mobile internet having increased substantially in EBRD regions over the last 15 years), there also remains a large digital divide gap for more advanced technologies. Many EBRD countries of operations still lag behind western European peers, especially regarding faster 4G technologies. Whilst there are many economies where nearly everyone has access to 4G mobile internet, coverage rates of between 20% and 80% are still common.

This is significant as the digitalisation of information and its dissemination via the internet brings substantial benefits for firms. For instance, a case study looking at high-speed broadband in Türkiye shows that firms with better connectivity are more likely to export and introduce new products. Small manufacturing firms have benefited most from Türkiye’s improved broadband infrastructure, which has allowed them to sell to new foreign markets.

Finally, technological disruption has the ability to deeply influence financial services across the EBRD regions. Indeed, banks’ CEOs regard digitalisation as the biggest challenge they will face in the coming years. While alternative finance is still a fairly new concept in many EBRD regions, a number of countries in those regions are relatively advanced in specific areas, such as peer-to-peer lending. In contrast, equity-based models – such as equity-based crowdfunding – remain virtually non-existent. Thus, the advent of alternative finance has exacerbated emerging Europe’s heavy dependence on debt instruments and has not contributed to the much-needed rebalancing of financial systems.