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Colombia betting on digital transformation to drive economic recovery

Colombia betting on digital transformation to drive economic recovery

Colombia is betting on productivity driven by digital transformation to help leverage the recovery of its economy, which last year shrank 6.8% on the impact of the pandemic, the largest contraction since 1975.

For this year, the central bank expects GDP growth of 5.2%, which is in line with the latest forecasts by the IMF of 5.1% for 2021 and 3.6% for 2022. 

“Digital transformation is not just an opportunity, but a necessity,” Sebastián Nieto Parra, head of Latin America and the Caribbean unit at the OECD’s development center, told a webinar.

“We have seen in Latin America, and it’s also the case in Colombia, an important increase in e-commerce, online education and remote working, for which we need a comprehensive and integrated digital agenda,” added the OECD official in the event, which was focused on Colombia’s recovery through digital means.

Nieto Parra praised the fact that Colombia doubled the number of internet users in the last 10 years, but noted that the current internet penetration rate of 65% is still significantly below the OECD’s 85% average.

He said, however, that Colombia’s digital government programs can be considered a benchmark for the region and for OECD countries.

Nieto Parra also said that focused and well-located initiatives to support workers in the use of tools are needed, and mentioned gaps in the use of digital platforms by Colombian state school teachers during the pandemic.

On a broader macro perspective, he praised the tax and fiscal reform being pushed by the government and which have provoked widespread protests as keys to “social and inclusive recovery” for the country. 

Elena Delgado Rojas, director of macroeconomic and sectoral analysis at think tank Fedesarrollo, called for the safe reopening of private sector activities to avoid an “uneven recovery” of the economy, citing this as one of the main tasks for a rebound.

However, Delgado Rojas said that such a recovery cannot take place without structural reforms, particularly those aimed at improving social policies. She also stressed that digital penetration needs to further reach rural and poorer populations.

Paola Bonilla, commissioner of telecom regulator CRC, acknowledged that a large part of the population still finds it difficult to access work, education and shopping digitally, but said that the agency is working on that front by removing barriers to the deployment of infrastructure and encouraging infrastructure sharing among telecom operators.

The public sector will have to play a more prominent role in supporting the private sector, observing fiscal sustainability, is what Olga Lucía Acosta, the official in charge of the UN’s Eclac office in Bogotá, recommended.

According to Acosta, international financing and cooperation will be important, especially for boosting productivity supported by new technologies.

PACKAGE

To help propel the economy, the ICT ministry (MinTIC) is highlighting a multi-million dollar plan to support individuals and companies in the modernization of their business models and in generating new revenue sources from the use of technology.

“We’ve organized and created an economic reactivation package worth over US$261mn, to benefit over 1mn people,” said the undersecretary of digital transformation, Germán Rueda.

The package actually involves a set of previously announced measures and programs (some of them launched by former administrations), such as Vende Digital, focused on helping micro, small and medium businesses to implement digital sales channels.

According to Rueda, Vende Digital, budgeted at US$9.5mn, recently reached 9,900 companies with training and qualification. 

The government has already implemented 24 digital transformation centers for entrepreneurs, in partnership with local chambers of commerce, as part of another initiative, said Rueda.

Another program mentioned as being part of the “package” refers to the issuance of credit lines for SMEs’ working capital, involving favorable rates and without the need for guarantees, said the official. This program has resources from Bancoldex and the national guarantee fund.

Additionally, the package includes the Misión TIC 2022 program aimed at training software programmers, with a budget of US$24mn.

The goal is to get 100,000 Colombians trained in programming by next year. After a pilot phase in 2020, the program is being scaled up and 54,000 Colombians are starting training this month at partner universities, according to the official.

In another program currently underway, the government plans to train 550 data scientists by the end of this year, focusing on analytics, machine learning and artificial intelligence, also in partnership with the private sector.

Another US$128mn is allocated to the already announced Hogares Conectados program, which offers subsidies for the contracting of internet packages by low-income families. Finally, 165,000 SIM cards are being delivered to students and entrepreneurs at a cost of US$30mn for the government.

“Colombian companies have the challenge of implementing technologies that allow them to increase their productivity, sophisticate their goods and services, as well as increase electronic commerce, in order to face reactivation and adaptation, after the COVID-19 pandemic,” ColombiaProductiva, an agency created in 2008 by the ministry of commerce and industry and recently beefed up to help mitigate woes from the health crisis, states on its website.

ColombiaProductiva launched last year in partnership with MinTIC the SofisTICa initiative to support enterprises in the implementation of blockchain, artificial intelligence, internet of things, machine learning, virtual reality and e-commerce, among others.

According to the government, 220 companies from 16 departments have already benefitted.

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