Huawei presented a key paper titled “Digital Divide – ICT Maturity Fuels Economic Growth” at GITEX GLOBAL 2024:

The Digital Transformation Imperative

Thanks to breakthroughs in AI, 5G-A, and cloud computing, our physical and digital worlds are becoming increasingly intertwined. This convergence, known as the Fourth Industrial Revolution, is reshaping the world of work at an extraordinary pace and accelerating global growth. In fact, digitalization and intelligence are expected to account for 70% of total global economic growth in the next five years ^[1] . From smart cities that optimize energy use to AI-powered medical diagnostics, the impact is already changing the way societies operate. Recognizing these opportunities, more than 170 countries have developed national strategies focused on AI-driven digital transformation.

The link between technological progress and economic growth is a well-trodden path. From the steam engine to the assembly line, each industrial revolution has redefined our economic landscape. However, the current digital revolution is having a huge impact because of its rapid pace of innovation and the profound impact it is having on how companies transform their operations.

The new Global Digitization Index, or GDI, created in partnership with IDC,   measures the progress of this digital transformation in countries and highlights the clear link between a country’s ICT maturity and its economic prosperity. More importantly, the research shows how strategic investments in digital infrastructure can significantly accelerate economic growth and how countries at different stages of digital maturity can leverage this transformation to propel their economies forward.

Digital Maturity Environment

Building on the previous Global Connectivity Index, the 2024 GDI report was created after research with academics and experts and covers 77 countries representing 93% of global GDP and 80% of the world’s population. It categorizes countries into three clusters: Pioneers, Adopters, and Newcomers. Each cluster reflects a different stage of digital maturity, with pioneers like the US, China, and Singapore leading in both ubiquitous connectivity and digital foundations. Adopters like Spain and Malaysia are rapidly expanding their digital capabilities, while newcomers like Vietnam are laying the groundwork for their digital future.

The growing investment gap in digital infrastructure is particularly striking. From 2019 to 2023, the growth ratio of digital infrastructure investments among Pioneers, Adopters, and Newcomers was 18:3:1, with an average annual increase of $7.2 billion, $1.1 billion, and $400 million, respectively. This disparity is not just a number, but a strong indicator of the different economic trajectories these countries face, as the research shows that every $1 invested in digital transformation generates $8.3 in returns for a country’s digital economy.

The Digital Dividend Effect

At the heart of the report’s findings lies a powerful discovery: for pioneering countries, each point increase in GDI score translates into an increase in GDP per capita of US$945. This economic impact is 2.1 times higher than for adopting countries and 5.4 times higher than for newcomers. This is the digital dividend effect in action.

So what is driving this impact? The answer lies in the ecosystem dynamics of mature digital economies. In leading countries, we see mature digital ecosystems where technologies like AI, IoT, and cloud computing work seamlessly together.

These ecosystems foster network effects, where the value of digital services increases exponentially with each new user or connection. Moreover, the accumulation and intelligent use of data is driving innovation at an unprecedented pace in less digitally mature economies.

Consider the Port of Tianjin in China, where the integration of 5G, cloud, AI, and green energy has resulted in a smart, zero-carbon terminal. This digital transformation has resulted in a 50% reduction in container transfer time and a 17% reduction in energy consumption compared to traditional terminals. This is a microcosm of how digital maturity increases economic efficiency and sustainability.

The Compound Nature of Digital Investments

What makes the digital dividend effect so powerful is its compound nature. Digital technologies do not exist in isolation; they enhance and reinforce each other. For example, the rollout of 5G networks not only improves connectivity, but also enables edge computing, real-time AI applications, and IoT deployments at scale. This compounding effect creates a virtuous cycle of innovation and growth.

Moreover, as these technologies develop, they generate vast amounts of data. In digitally mature economies, this data becomes a new factor of production, feeding AI systems that further accelerate innovation and productivity gains. This is a self-reinforcing cycle, which explains why digitally advanced countries can extract much more value from incremental improvements in their GDI scores.

Bridging the Gap: A Call to Action

The digital dividend effect presents both a challenge and an opportunity. It highlights the urgent need for Starter and Adopter countries to accelerate digital transformation to avoid falling further behind. However, it also provides a roadmap to skip development stages and ensure that any digital development is sustainable and resilient by identifying four enablers: Smart World, Ubiquitous Connectivity, Digital Foundations, Green Energy, and Supportive Policy and Ecosystem.

Startups should prioritize building robust connectivity infrastructure, both fixed and mobile broadband. Research shows that countries that excel in both areas (fixed broadband speeds >150 Mbps and mobile >80 Mbps) see significantly higher e-commerce transactions per capita, unlocking digital economic potential.

Indonesia, a ‘Start’ country in the GDI, recently completed its national fiber optic development initiative, providing internet access to approximately 6 million people in 57 provinces and counties, and 16.4 million people. Indonesia’s 4G network covers more than 94% of cities and villages, and the country’s internet penetration rate is 79.5%. This coordinated development has made Indonesia the largest e-commerce market in Southeast Asia. By 2023, its digital economy reached US$82 billion, and more than 15 unicorn companies were established. It is estimated that the country’s digital economy will exceed US$210 billion by 2030.

Adopters need to focus on both connectivity and digital foundations. Investments in data centers, cloud services, and AI capabilities can help these countries accelerate their journey toward digital maturity. Mexico’s data center expansion plan exemplifies this approach. The country aims to build 73 new data centers by 2029, in addition to its existing 15. The initiative is expected to boost national GDP and create 68,198 direct and indirect jobs. Such targeted investments in digital infrastructure demonstrate how adopter countries can leverage technology to drive economic growth and job creation in key sectors.

The challenge for the Pioneers is to maintain their edge. This requires not only continued investment in the latest technologies, but also the development of the skills and policies needed to fully exploit these innovations. Our data shows that while the proportion of STEM graduates is similar across clusters (around 25%), the Pioneers convert 95% of these graduates into ICT professionals, compared to just 15% in the Startup countries.

The Future of the Digital Economy

Looking ahead, emerging technologies such as quantum computing and advanced artificial intelligence systems promise to further enhance the digital dividend effect. These technologies have the potential to solve complex problems in areas ranging from drug discovery to climate modeling and create new vectors for economic growth.

Additionally, the role of digital infrastructure in ensuring economic resilience cannot be overlooked. The COVID-19 pandemic has shown how digitally mature countries are better equipped to adapt to disruptions by maintaining economic activity through remote working, online education and digital services.

The decisions we make today to invest in our digital future will determine the economic trajectories of nations for decades to come. The digital dividend effect shows us that in the race to digital maturity, the stakes have never been higher, but also the potential rewards have never been higher.

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