Summary:
Colombia's digital transformation is well underway, with 63 percent of the population using the internet, up from 38 percent in 2014. Over half of Colombians aged 15 or older have made or received digital payments, marking a substantial growth from 37 percent in 2017. Colombia has emerged as a leading player in the digital landscape of Latin America and the Caribbean (LAC), hosting 12.8 percent of the region's digital firms, trailing only behind Brazil and Mexico. But with progress comes new challenges. Ensuring universal internet access and fostering digital skills remain pressing issues, particularly in bridging the urban-rural divide. Improving access can help address development challenges, such as inequality and slow productivity growth. A new Country Diagnostic for Colombia under the World Bank Group’s Digital Economy for Latin America and the Caribbean (DE4LAC) initiative outlines the state of the country’s transition towards a digital economy.
Main Challenges:
- Inequality in access to digital technologies, with low access in rural areas and in certain departments. Internet access remains low, especially in rural areas, with over 40 percent of households nationwide, including almost 70% of rural households, without internet.
- Low digital skills among the population, resulting in low sophistication of usage. In 2019, Colombia ranked 94th out of 141 in the World Economic Forum’s Digital Skills Index. Limited access to the internet and low levels of digital capabilities also impacts the private sector’s capacity to generate value-added through the adoption of digital technologies. Less than 20 percent of Colombian exports include some level of technology compared to about 80 percent of exports in Mexico.
- Limited access to the internet and low digital capabilities constraining the private sector's capacity to generate value. Debt financing through private banks accounts for less than 2 percent of ICT firms’ investments in science, technology, and innovation activities. Limitations in capital market growth restrict Colombian digital businesses' ability to attract more diverse and scalable private investments. Digital financial services can reduce financing expenses for micro, small, and medium-sized enterprises and advance more streamlined and convenient payments, a critical component of e-commerce and platform-based business models.
- The digital divide remains a critical challenge to the development of an equitable and resilient digital economy. The top challenges include a high number of youth who are neither in school nor working, inadequate performance of the education system in teaching essential skills, significant disparities in educational opportunities based on socio-economic status, and unequal access to digital resources and technology across the region.
Recommendations:
The report suggests six policy priorities the Colombian government could follow to improve the development of a digital economy.
- Digital Infrastructure: Develop high-quality digital infrastructure by fostering competition to make high-speed internet affordable, co-financing infrastructure in underserved areas, and releasing spectrum to speed up 5G development.
- Digital Public Platforms: Improve government systems by strengthening interoperability of systems, implementing the governance framework, and establishing a well-designed data management model.
- Digital Financial Services: Accelerate expansion of digital financial services by fostering fast and interoperable payment systems, implementing open finance, and leveraging digital government-to-person payments
- Digital Businesses: Support platform-based businesses and digital commerce by enabling capital markets development, designing targeted lines of credit, and strengthening financial infrastructure.
- Digital Skills: Define a national strategy and framework by assessing the most demanded digital skills and integrating them into the curricula.
- Trust Environment: Strengthen personal data protection and critical infrastructure by integrating best practices, ensuring critical assets owned by the private sector are protected, and developing human capital in cybersecurity.