Decisive action needed to harness digital trade and investment for inclusive sustainable development, finds new UN report

Digital trade and investment are driving forces of the modern economy, and growth in the Asia-Pacific region has exceeded the global average, with the region now accounting for a quarter of the US$ 4 trillion trade in digitally deliverable products.


However, digital trade and investment remain highly uneven, according to the new Asia-Pacific Trade and Investment Report 2023/2024: Unleashing Digital Trade and Investment for Sustainable Development, produced by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the United Nations Conference on Trade and Development (UNCTAD) and United Nations Industrial Development Organization (UNIDO). While six economies in the Asia-Pacific region are responsible for 85 per cent of the region’s digitally deliverable exports, least developed countries (LDCs) account for less than 1 per cent.


“This disparity underscores an urgent need for action,” said Armida Salsiah Alisjahbana, United Nations Under-Secretary-General and Executive Secretary of ESCAP. “It is imperative that we work together to ensure that digital trade and investment are not just growth engines but also catalysts for inclusive and sustainable development.”


ESCAP research suggests that a 1 per cent increase in digital trade value is associated with a 0.8 percentage point rise in the growth rate of an economy’s real Gross Domestic Product (GDP) per capita. As these benefits are closely tied to Internet penetration rates, unlocking the full potential of digital trade urgently calls for bridging the “digital divide”.


“To achieve inclusive and sustainable outcomes from digitalization in the Asia-Pacific region, we need to work with countries at low levels of digital readiness to scale up their capacity to benefit from digital trade” said Rebeca Grynspan, Secretary-General of UNCTAD. “Digital trade is not just about technology; it’s about people. It’s about creating opportunities for everyone, regardless of their location or background.”


LDCs in the Asia-Pacific region have seen rapid growth in digital trade, but only 0.1 per cent of the region’s digital FDI inflows reached them in 2021. In addition to risks of underinvestment in crucial infrastructure, these countries face a shortfall of skilled workers and regulatory complexities, which drive up operational costs. As a result, in spite of the growth, these countries accounted for less than 1 per cent of the region’s exports of digitally deliverable services in 2022.


“Addressing the social and environmental challenges arising from digital trade and investment is a complex matter, with diverse impacts that no single ministry or agency can manage in isolation,” according to UNIDO Director General Gerd Müller. “The Asia-Pacific Trade and Investment Report highlights how trade and investment policies can mitigate these challenges and enable the resulting benefits.”


In addition to levelling the playing field on Internet penetration, harnessing the potential of digital trade and investment as effective means for achieving sustainable development will also require proactive trade and investment policies and coordinated efforts, globally as well as regionally.