The Inter-American Development Bank (IDB) is trumpeting the possibility of making Caribbean economies rich by closing the digital gap.

A new study commissioned by the IDB highlights that closing the Caribbean’s digital gap could boost the region’s gross domestic product by six to 12 per cent over the medium term and assist with the recovery from the pandemic. The study looks at economic growth in the region with a focus on productivity as a key driver of long-term economic growth.

Such a move, the IDB argues, opens up the opportunity for the Caribbean to get to the level of similar economies across the world. David Rosenblatt, IDB’s regional economic advisor for its Caribbean Department, argues that “for the Caribbean, a modern and robust digital and telecommunications infrastructure is a connection with powerful global trends that are driving growth. It is the key to unlock faster productivity growth for decades to come.”

The report estimated that the benefits could be around two to 50 times greater than the estimated cost of implementing digital infrastructure. Through digitalisation, the IDB believes the Caribbean can close the development gap with its comparable economies and avoid experiencing economic contraction for long periods.

During the past five decades, Caribbean economies have contracted on average less than one per cent per annum and are vulnerable to global shocks including being hard hit by the novel coronavirus pandemic.

Assessing digital divide in the Caribbean

The report includes estimated fixed and mobile broadband gaps between countries and advanced economies grouped in the Organization for Economic Co-operation and Development (OECD).

For instance, Trinidad and Tobago has a fixed broadband gap of 9.2 percentage points against the OECD, The Bahamas’ gap is 11.2 percentage points and Jamaica has a 24 points gap. Except for Uruguay, all Latin American and Caribbean countries have positive gaps relative to the OECD.

The report estimates that a 10 per cent boost in digital infrastructure investment could boost the region’s gross domestic product by 3.2 per cent and boost productivity by around 2.6 per cent over six years.

For nearly half of Caribbean economies, digital investments could yield cumulative GDP increases in double digits, which the report calls “transformative improvements.”

When looking at the cost-benefit ratio – the so-called “multiplier effects”– of infrastructure investments, the report found that for The Bahamas, Trinidad and Tobago and Barbados, the potential benefit in terms of the cumulative positive impact on growth could be between 23 and 58 times the associated costs.

The IDB report contends that the governments can play a big role in facilitating more digital investments, including updating regulatory frameworks for issues such as “rights of ways”, spectrum allocation and universal service funds. The report calls for governments to establish a close relationship between digital agendas and national connectivity plans.

The IDB publishes a Broadband Index Report annually for 65 countries, looking at public policies, regulations, infrastructure, and application and training. While some Caribbean economies rank high when compared to Latin American countries, the report notes that it lags with lead countries such as Sweden, the United States, India, Iceland, and Australia.

According to the IDB report, “If this recent crisis has taught us anything, it is that the ability to communicate, transact and reach clients and markets virtually has never before been more critical. The future will reward economies that can do so most effectively.”