• Frontier technologies represent a $350b market, which by 2025 could grow to over $3.tr.
• The economies most ready for these rapidly changing technologies are in Northern America and Europe, while those least ready are in sub-Saharan Africa and other developing regions.
• UN trade body warns of serious implications for developing countries if poor communities and countries are either overwhelmed or simply left behind by the new technological wave.

Governments and the international community need to use new and emerging technologies to reduce the inequalities brought into sharper focus by the pandemic, the UN trade body said.

United Nations Conference on Trade and Development (UNCTAD) said that frontier technologies, which include artificial intelligence (AI), the internet of things, big data, blockchain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic represent a $350 billion market, which by 2025 could grow to over $3.2 trillion.

“It is key that developing countries do not miss the wave of frontier technologies, otherwise it will further deepen inequalities. Hence, societies and productive sectors need to be well prepared and build the required skills” acting UNCTAD Secretary-General Isabelle Durant, said.

She said frontier technologies have already brought enormous benefits, but rapid advances can have serious downsides if they outpace the ability of societies to adapt.

New technologies, new inequalities

According to the “Technology and Innovation Report 2021” report, each wave of technological change has brought inequality in new shapes.

The great divides that exist between countries today started with the onset of the first industrial revolution over 250 years ago. Since then, every spurt of progress has brought sharper inequality between countries.

The outcomes for one generation have affected the opportunities for the next, resulting in intergenerational transmission of inequalities. Between 1820 and 2002, the contribution of between-country inequality to global inequality rose from 28 per cent to 85 per cent.

The report says frontier technologies can affect inequalities through differential access to their benefits and their potential unintended consequences.

Today, major concerns are related to risks of automation taking jobs in large scale, the gig economy and the reduction of labour rights. Others are the inequalities created by market and profit concentration, the increase of inequality driven by AI and widening technological gaps.

But how the new technological wave will affect inequalities in and between countries will depend on national policies, the report states.

It finds that the countries best prepared to equitably use, adopt and adapt these technologies are mainly in Northern America and Europe, while those least prepared are in sub-Saharan Africa and other developing regions.

India is the greatest performer

Based on this index, the countries best prepared are the US, followed by Switzerland, the UK, Sweden, Singapore, the Netherlands and the Republic of Korea. The list also has high rankings for some transition and developing economies – such as China ranked at 25 and the Russian Federation at 27.

The countries ranked highest are largely the richest ones, but there are many outliers – countries that perform better than their per capita GDPs would suggest.

The greatest overperformer is India, followed by the Philippines. On the R&D components of the index, China and India perform well, partly because these countries have abundant supplies of highly skilled but relatively inexpensive human resources. 

Also, they have large local markets, which attract investment from multinational enterprises. Vietnam and Jordan also do well, reflecting supportive government policy.

India, whose actual index ranking was 43, while the estimated one based on per capita income was 108. Hence, India overperformed by 65 ranking positions. It is followed by the Philippines, which overperformed by 57 ranking positions.

How did the outliers exceed expectations? China, at position 25, and India perform well for R&D. This reflects their abundant supplies of qualified and highly skilled human resources available at a comparatively low cost. They also have large local markets, which attract investment by multinational enterprises. In China, the progress is partly a reward for spending two per cent of GDP on R&D.  

The Philippines has a high ranking for industry, reflecting high levels of foreign direct investment in high-technology manufacturing, particularly electronics. Multinational enterprises are attracted by the country’s strong supply chains and a solid base of parts manufacturing.

The Philippines also has pro-business policies along with a skilled, well-educated workforce and a network of economic zones.

Overall, however, the top five overperforming developing countries have lower rankings for ICT connectivity and skills. This drawback is true for developing countries as a group.

 “Technologies are not deterministic. We can shape their pathways for good. And we have an obligation to do it,” Shamika N. Sirimanne, director of UNCTAD’s division on technology and logistics, said.

She said that whole economies and societies are being reshaped by rapid technological change, and “although we don’t know yet how the final picture will look, it’s safe to say that changes will be more far-reaching than we imagine.”

Governments and other development actors will need to prepare fast, she said and added that developing countries, particularly the least developed ones, can’t afford to miss this new wave of rapid technological change.

 “Developing countries should also align science, technology and innovation (STI) policies with industrial policies. New technologies can re-invigorate traditional production sectors and speed up industrialization and economic structural transformation,” she added.

Technologies should not perpetuate inequalities

However, UNCTAD warns of serious implications for developing countries if poor communities and countries are either overwhelmed or simply left behind by this new technological wave.

“Technological progress is essential for sustainable development but can also perpetuate inequalities or create new ones. The task for governments is thus to maximize the potential benefits while mitigating harmful outcomes,” the report states.

It says success in the 21st century will require a balanced approach – building a robust industrial base and promoting frontier technologies that can help deliver the 2030 Agenda for Sustainable Development and its global vision of people-centred, inclusive and sustainable societies.

The report also emphasises that governments have a critical role to play in paving the way for technologies, especially in creating an enabling environment and ensuring the benefits of these technologies are shared by all.

Likewise, labour unions have a renewed interest in taking up workers’ concerns about the looming changes that automation will cause employment relations, the report says.

Each country will need science, technology and innovation (STI) policies appropriate to its stage of development, but all developing nations will suffer the impact of frontier technologies and need to prepare people and firms for a period of rapid change.

UNCTAD said that developing countries need to work towards universal internet access and ensure all their citizens have opportunities to learn the skills required for frontier technologies.