World Bank: Romania has top internet infrastructure but fails to reap the digital dividends
Romania is not making the most of the economic gains associated with the digital economy despite an advanced internet infrastructure, allowing for top broadband speeds. Besides the marked digital divide between urban and rural areas, the country needs to develop policies that would help both individuals and business benefit from the opportunities associated with the internet, according to the World Bank.
The World Bank’s Reaping Digital Dividends: Leveraging the Internet for Development in Europe and Central Asia report, released this March points out that most European countries have failed to make the most of their good internet infrastructure. “We are clearly seeing that internet access alone does not automatically translate into economic gains,” says Hans Timmer, Chief Economist for the European and Central Asia region of the World Bank. “Given their level of technological development, countries around Europe should be doing better in terms of e-commerce, but we are not seeing the Googles or Facebooks emerging out of Europe just yet.”
Romania's case shows best that fast internet is not enough to have a competitive digital economy. While nine of the world’s top fifteen cities with the fastest broadband internet are in Romania, less than 10% of the local companies use cloud services and under 20% of the unemployed Romanians use the internet to look for jobs, the World Bank points out.
Romania ranks second in the European Union by the number of subscriptions to fast broadband networks, available to 59% of users. Having built its internet infrastructure more recently, Romania, alongside other new EU member states, benefits from the more advanced fiber technologies. Broadband speeds in the country are above the EU average and at speeds comparable to those in Scandinavia.
The internet services penetration rate in Romania stands at 89%, while the connectivity rate is at 60%, according to Catalin Marinescu, the president of the Communications Authority ANCOM, quoted by Agerpres.
“As the old networks, the copper ones, were underdeveloped, the alternative for the operators was to develop their own, high-quality networks. They started with the optic fiber ones and now, in Romania, the main internet services provider is an alternative operator, the former operator of the state monopoly. This explains why we have a very good quality. On the other hand, the fixed internet penetration is probably insufficient. The penetration rate is of 89% and the connectivity rate of 60%,” Marinescu said.
When it comes to how the internet infrastructure is used in the digital economy, the country has some catching up to do, the World Bank noted.
Less than half of businesses in Romania and Bulgaria have a web presence, and less than 10% of firms use cloud computing, the report found. At the same time, high barriers to entrepreneurship in the services sector hinder the adoption of digital technologies. At a European level, less than 30% of companies use cloud computing and even fewer use this technology for more sophisticated uses beyond e-mail, such as managerial and accounting tasks.
Alongside Bulgaria and the Czech Republic, Romania has one the lowest rates of both overall interaction with the government and online submission of completed forms in the EU. Just 5% percent of individuals in Romania use the internet to download official documents from public websites. At the same time, only 20% of the unemployed people in Romania use the internet to search for a job. Of those who are working, almost none telecommute, compared to more than 10% in Northern and Western Europe.
While overall urban areas tend to have greater internet connectivity than rural areas, in Romania and Bulgaria the urban-rural divide in network access is greater than 30 percentage points. According to a 2016 World Bank report, Romania had the lowest percentage of regular Internet users in the EU (48%), and 39% of the Romanian population never used the Internet.
In order for the country to make full use of the opportunities associated with the digital economy, policies need to be enacted in three major areas, the World Bank recommended.
An improvement of the business environment is needed so that firms have stronger incentives to adopt digital technologies to grow and become more productive. The country should focus on providing training and opportunities to build the more advanced skills demanded by the digital economy, and expand e-government services for businesses and citizens, according to the World Bank.
The full report can be read here.
editor@romania-insider.com
