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11. An Analysis of the Binding Constraints on Digital Financial Inclusion in India Using a Decision Tree Methodology

Author:
Nandini Harihareswara and Howard Miller
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
The past decade has seen significant innovation and growth in the volume and value of digital payments in India. However, we find that the associated gains have been heavily concentrated in favor of wealthier and urban customers and have had less impact on lower income and rural populations. While some customers now have a far greater selection of quick, cheap, and convenient digital payments methods, as much as 65 percent of the population remains effectively excluded. Using a decision tree framework, we test a range of factors on the supply and demand sides that could be binding constraints on further digital finance penetration. We find that an unlevel playing field in favor of the (primarily state-owned) banking sector results in a lack of effective competition that could be inhibiting greater innovation and outreach in favor of lower-income and marginalized people. This unlevel playing field is potentially a function of institutional weakness combined with the nexus of control of the government and the banking sector, which is reinforced by the position of the National Payments Corporation of India. This control may also be viewed by the government as necessary to protect economic stability in a very dynamic market. To the extent that institutional deficiencies are the root cause of regulatory barriers to the entry of new providers and the scope of digital financial services offered, they are a binding constraint on advancing digital financial inclusion. Under this market structure, the outreach and inherent business models of digital payments and transfers do not provide sufficient perceived benefits to attract large segments of the population. Further, a lack of trust in providers combines with the perception of low benefits to generate an additional binding constraint, preventing the market from reaching a critical mass at which the bulk of the population would have the means and the incentives to use the system. Therefore, the market remains at an equilibrium below its potential.
Topic:
Development, Governance, Finance, and Digitalization
Political Geography:
India and Asia

12. Digital RMB: A Possible Way to Reassert Data Control in the Digital Economy

Author:
Alex He
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
As the first digital currency piloted by a major economy, China’s digital renminbi (RMB) has drawn worldwide attention. Many observers, however, have exaggerated the digital currency’s influence on RMB internationalization; others have focused on its potential replacement of the current third-party payment system, or the possibility that the digital RMB could be exploited to strengthen China’s authoritarian regime by way of monitoring everyday transactions conducted by Chinese citizens. However, these observations have missed the main point of the digital RMB as a key fintech innovation in the age of the digital economy. It could be an important tool in assisting China’s central bank to reassert control over big data in the financial system and to bring the rapidly growing power of Chinese fintech giants under control. Its issuance also acts as a pre-emptive measure that positions the People’s Bank of China to compete with other central bank digital currencies and cryptocurrencies.
Topic:
Governance, Digital Economy, Banking, and Digitalization
Political Geography:
China and Asia

13. Towards open and secure digital connectivity: Europe’s and Taiwan’s paths after the world’s first digital pandemic

Author:
Brigitte Dekker, Xiaoxue Martin, and Maaike Okano-Heijmans
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Surveillance capitalism and digital authoritarianism have become facts of life in recent years. Set against the US–China trade–tech–data standoff, the European Union (EU) and its member states are navigating their course of open strategic autonomy, assessing how to position themselves in the digital age. Synergies and coordination with like-minded partners – including the United States (US) and countries in the Indo-Pacific – seem inevitable. This raises the question of to what extent Taiwan can be a partner for closer cooperation on digital matters. Can the EU, and specifically the Netherlands, and Taiwan move beyond diverging priorities, and promote a human-centred approach to the digital domain by leveraging their economic, scientific and cultural ties? In answering this question, this Clingendael Report examines the approaches of both sides to strengthening resilient societies, so-called ‘Big Tech’ regulation and digital development assistance. Findings suggest that while the underlying strategic interests and goals of Taiwan and Europe on digital connectivity align, priorities and strengths diverge. China’s growing influence and assertive behaviour pose a substantial challenge to both sides’ open, inclusive democracies, economic competitiveness and standard-setting power. As Europe and Taiwan improve policies domestically, as well as in and with third countries, especially in the Indo-Pacific region, they can benefit from each other’s complementary skills in specific digitalisation and digital connectivity domains.
Topic:
Science and Technology, Authoritarianism, Surveillance, Pandemic, and Digitalization
Political Geography:
Europe, Taiwan, and Asia

14. Exploring Digital Economic Agreements to Promote Digital Connectivity in ASEAN

Author:
Sarah Y. Tong, Yao Li, and Tuan Yuen Kong
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper explores modules and articles on cooperation concerning the digital economy that are applicable for Association of Southeast Asian Nations (ASEAN) countries under certain circumstances. It investigates the progress of and obstacles to ASEAN’s digital connectivity, as well as features of existing Digital Economic Agreements and digital economy-related articles in other agreements. We propose the use of a differentiated strategy and steps to promote integration for ASEAN countries covered in this research.
Topic:
Economics, Globalization, International Trade and Finance, Digital Economy, and Digitalization
Political Geography:
Asia and Southeast Asia

15. Reconciling Tax and Trade Rules in the Digitalised Economy: Challenges for ASEAN and East Asia

Author:
Jane Kelsey
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
As the digital economy expands in scale, scope, and form it poses major challenges for public revenue and tax policy and administration in Asia and other parts of the global South. When attempts led by developed countries at the OECD-led Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to agree on new norms for taxing digital giants like Facebook, Google, and Amazon stalled, individual countries, including a number of developing countries in Asia, began developing their own responses, notably the adoption of digital services taxes. High-level compromises have recently been announced at the OECD, but the details are yet to come and are not expected to address the needs of developing countries to effectively tax the activities of digital giants operating from offshore. As countries seek effective and workable means to tax the digitalised economy, existing and proposed international rules on digital trade in free trade agreements, and plurilateral moves to develop electronic commerce rules in the World Trade Organization, may fetter their ability to do so. To date, very little attention has been paid in trade negotiations to the consequences of these developments for countries’ tax regimes. Nor have the adequacy, effectiveness, and workability of the tax exceptions in trade and investment agreements been properly re-assessed. Many governments are only becoming aware that trade rules may constrains their ability to regulate the (poorly understood and fast moving) digital domain after they have signed up to them. A series of investigations by the US government under Section 301 of the US Trade Act 1974 into digital services taxes, including those adopted by India and proposed by Indonesia, provides a real-world basis on which to assess how binding and enforceable digital trade rules might be used to challenge digital tax measures at the unilateral, bilateral, and multilateral levels. In highlighting these risks, the paper aims to provide a framework for the tax and trade divisions of governments in ASEAN and East Asia to reflect together on the potential for proposed digital trade rules to impact negatively on their public revenue.
Topic:
International Cooperation, International Trade and Finance, Digital Economy, Tax Systems, Commerce, and Digitalization
Political Geography:
Asia and Southeast Asia

16. The Role of Digital Power in Estonia and Taiwan in Combating COVID-19

Author:
Andrey Makarychev, Elizabeth Wishnick, and Andrew J. Nathan
Publication Date:
08-2020
Content Type:
Video
Institution:
Weatherhead East Asian Institute, Columbia University
Abstract:
Taiwan and Estonia are known as digital democracies. As both face threats from neighbors, their degree of digitization typically has been seen as a vulnerability. The DNS attack from Russia that Estonia faced in 2007 brought home the potential for cyberspace to be used as a domain of war. Similarly Taiwan has faced repeated cyberthreats from the People’s Republic of China. Nonetheless, in their successful responses to the COVID-19 pandemic, Taiwan and Estonia have highlighted the strengths of digital democracy in combating a non-traditional security threat without employing the strongarm tactics of authoritarian states. In this article we reexamine the digital vulnerability of democracies and put forward a conception of digital power to explain the success of Estonia and Taiwan in using their digital prowess to combat COVID-19. On the one hand their reliance on cybertechnology make them particularly vulnerable to cyberattacks, but on the other hand their digital power enhances their global stature and domestic capacity to address threats like COVID-19.
Topic:
Security, Cybersecurity, Democracy, COVID-19, Non-Traditional Threats, and Digitalization
Political Geography:
Taiwan, Asia, and Estonia

17. Building on Digital ID for Inclusive Services: Lessons from India

Author:
Alan Gelb and Anit Mukherjee
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Center for Global Development (CGD)
Abstract:
India has emerged as a leader in building on its biometric digital ID (Aadhaar) to reform service and program delivery. It moved quickly to consolidate the rollout of Aadhaar, and then to embed the unique Aadhaar number into program databases. A range of applications, including digital signature and payments, was then constructed on top of the Aadhaar foundation (the India Stack). Together with partners, the Center for Global Development is analyzing the effects of Aadhaar-based reforms. India offers lessons for many other countries as their focus evolves from rolling out an ID system towards using it to improve the efficiency and inclusivity of service delivery. Some programs using Aadhaar are federally administered but others are implemented at state level. It is already clear that some states and sectors are reforming better than others, generally because of better design of the digital reforms or stronger capacity to implement them. The three programs we discuss below high- light achievements as well as challenges that need to be overcome for greater efficiency and inclusion.
Topic:
Development, Governance, Identities, and Digitalization
Political Geography:
India and Asia