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Digitalization spurs job creation, innovation and economic growth
Published in The Saudi Gazette on 23 - 04 - 2012

Increasing digitization (mass adoption of connected ICT services) generates job creation, innovation and economic growth, international strategy consulting firm Booz & Company said in a new study Sunday.
It said greater benefits are linked to the growing usage of digital technologies and applications, rather than access alone. The benefits are not just economic, but encompass social and political spheres as well. Digitization offers incremental economic growth. Countries at the most advanced stage of digitization derive 20 percent more in economic benefits than those at the initial stage. It also has a proven impact on reducing unemployment, improving quality of life, and boosting citizens' access to public services. Additionally, digitization allows governments to operate with greater transparency and efficiency, the report said. Booz & Company's study confirms that digitization has a material economic impact, contributing to growth in per capita GDP, driving job creation, and boosting innovation. Assessments of digitization evolution and its impact were carried out in 150 countries, between 2004 and 2010.
"We found that t a 10 percent increase in digitization leads to a 0.6 percent gain in per capita GDP. By contrast, previous studies that focused mainly on broadband penetration established that a 10 percentage point increase in broadband penetration contributes a gain in per capita GDP of just 0.16 to 0.25 percent," said Karim Sabbagh, Senior Partner and the Global Leader for the Communications, Media and Technology practice at Booz & Company. "Additionally, constrained digital economies realize a 0.5 percent increase in GDP per capita for every 10 percent increase in digitization, while advanced digital economies show a 0.62 percent increase in GDP per capita for every 10 percent digitization increase."
Digitization also has a significant impact on job creation in the overall economy: an increase of 10 percent in digitization reduces a nation's unemployment rate by 0.84 percent. "In the past two years, digitization added an estimated 19 million jobs to the global economy," said Bahjat El-Darwiche, a Partner with Booz & Company. "This is an especially critical finding for emerging markets, which will need to create hundreds of millions of jobs in the coming decade in order to ensure that a booming population of young people can contribute to their national economies."
Finally, a 10-point increase in digitization results in a six-point increase in the country's score on the Global Innovation Index-a correlation suggesting that, as a country progresses in its digitization development, it also becomes more innovative.
Booz & Company analyzed social impact on two levels: the level of quality of life in a society and the equality of access to basic services that a society requires. The results showed that increasing digitization significantly boosts social well-being in a developed economy.
However, the analysis reveals that in countries with lower levels of economic development, the impact of digitization is not as pronounced. The difference appears to be that in less-developed economies, where factors beyond digitization are more critical to quality of life, digitization has an impact on quality of life only when the population has satisfied its basic needs.
"Increasing digitization also supports better access to basic services. Our analysis indicates that, as countries become more digitized, access to health and education improves, as do overall living standards. Digitization's impact on the measures of health, education, and living standards is more pronounced in constrained and emerging economies," said Milind Singh, Principal at Booz & Company.
The final area analyzed was government effectiveness. The impact of digitization was assessed across three dimensions: the transparency of governmental activities; the delivery of e-government services and the provisioning of public education. Booz & Company's correlational analysis demonstrates that greater digitization enables a society to be more transparent, increasing public participation and the government's ability to disseminate information in an accessible manner. Digital technology gives the population more insight into government policies and function-an insight that might, in turn, lead to more active political participation and support the development of human rights.

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