Failure to Prepare Digitally Can be Very Costly

Kryot via flickr // CC

While many countries in the CEE region have had a recent experience of a successful economic transformation, few are doing great in preparation for the new wave of the industrial revolution. This wave will be defined by the use of the technological advances, including AI or IoT, flexibility and preparation of the skilled workforce.

According to the World Digital Competitiveness Ranking prepared by the renowned Swiss Institute for Management Development in cooperation with the Slovak F. A. Hayek Foundation Bratislava (www.hayek.sk) and other partner organizations from around the world, this is exactly an area where the region of Central and Eastern Europe is trailing behind the developed countries of the West.

This index compares the digital competitiveness of 63 countries of the world. It evaluates the readiness of the business environment for the coming of the digital economy.

The three key factors for the successful digital transformation are: 1) Knowledge – the ability to understand and learn new technologies; 2) Technology – competence to develop new digital innovations; 3) Future readiness- preparation for further development.

It is necessary to assess the capacity and readiness of countries to adopt and make full use of the potential of digital technologies. The key factor is the rate of adoption of these technologies, which are becoming a key driver of economic transformation and efficiency of the business sector, public administration, and society as a whole.

Today, technologies directly affect how efficient the economy and its business environment become and how they are prepared to face the challenges of the future as well as the competition from third countries. Several world economies and their governments are already fully investing in the digital economy to increase productivity, the added value of production and the country’s overall prosperity.

Who are the Current Leaders?

The leading positions in terms of the digital competitiveness have been achieved by the United States and Singapore. The 2020 results point to three clear trends across all countries that have achieved higher rankings. One of them is the effective use of digital talent, the success of the implementation of technological infrastructure and the effective use of available technologies.

In addition, the top ten economies are linked by an effective regulatory framework and high speed in adopting new technologies (or “future readiness”). The latter factor is one of the factors used in the evaluation and covers the attitudes of individuals to technology and the flexibility of entrepreneurs, as well as the integration of information technology into social processes.

In the case of the USA, education and research & development are the main drivers of digital growth, with robotics increasingly dominating the educational process. The United States has also seen an increase in electronic citizen participation in civic life this year.

Singapore is at the forefront of talent appreciation and the regulatory framework indicators. Sweden and Denmark excel in knowledge capacity-building performance (making economies productive and efficient in terms of citizens’ needs).

The comparison of the entire world places East Asia, Western Europe and North America among the most progressive regions in terms of digital proficiency. On the contrary, the regions of Latin America, Central Asia and Eastern Europe have the greatest room for improvement.

The Impact of COVID-19 on the Need for a Digital Transformation

The social and economic impact of the COVID-19 virus have uncovered that there is now an almost complete dependence on digital technologies for the provision of the commercial services, as well as basic public services such as education and citizen-oriented services.

All of this makes the digital competitiveness absolutely critical for the rebound of the economy and speeds up the processes that would have otherwise taken a longer time. The current results are formed by a mixture of hard data and survey responses.

As a result, the work on analyzing the impact of COVID-19 is a long term process and the next year’s assessment is likely to shed further light on the impact of digital competitiveness during a pandemic.

What is expected is a form of a K-shaped recovery with a more positive trend for some countries and less positive for other ones. The recovery may be driven by many traditional aspects, fiscal and budgetary responsibility being one of them, however, the foundations for the digitalized economy, in which we now live, can prepare ground for the quick adoption of the new organizational and business practices, which can cut costs and create efficient channels for businesses to prosper more quickly.

The quality of digital infrastructure, the R&D capacities as well as the skilled workforce will play huge role in this recovery.

The Lagging of the Central and Eastern European Countries

This year, the Slovak Republic ranked 50^th among the 63 countries that have taken part. Compared with the previous year the position of Slovakia dropped 3 places. Compared to its closest neighbors, Slovakia is behind the Czech Republic (35^th place), which, despite an improvement of two places, failed to win top spot within the V4 region.

Poland maintains its lead in the region, which is in 32^nd place, improving by 1 place year-on-year. This year, Slovakia also placed behind Hungary, while Hungary is in 47^th place, as it dropped 4 places.

The difference in the competitive strength of post-communist and “Western” countries is evident in the example of Austria, which, although located close to Slovakia, is the 17^th economy according to the WCDR rankings (last year it was in 20^th place).

Of the post-communist countries, Ukraine (58^th place), Croatia (52^nd place) and Slovakia (50^th place) recorded the worst rankings. Romania and Bulgaria placed just ahead of us in 49^th and 45^th place.