Economic Outlook Oic

OI
C ECONOMI
C
OUTLOOK
TheRi
s
andBr
eoft
i
dgi
heDi
ngt
gi
heDi
t
alEc
gi
t
onomy
alDivi
de
2023
CECONOMI
OI OOK2023
COUTL
ORGANI
SATI
ON OFI
SLAMI
CCOOPERATI
ON
STATI
STI
CAL,ECONOMI
CANDSOCI
ALRESEARCH
ANDTRAINI
NGCENTREFORI
SLAMICCOUNTRI
ES
Organization of Islamic Cooperation
Statistical, Economic and Social Research
and Training Centre for Islamic Countries
OIC ECONOMIC OUTLOOK 2023

The Rise of the Digital Economy and Bridging
the Digital Divide
© November 2023 | Statistical, Economic and Social Research and Training Centre for Islamic Countries
(SESRIC)
Kudüs Cad. No: 9, Diplomatik Site, 06450 Oran, Ankara –Türkiye
Telephone +90–312–468 6172
Internet www.sesric.org
E-mail pubs@sesric.org
The material presented in this publication is copyrighted. The authors give the permission to view, copy,
download, and print the material presented provided that these materials are not going to be reused, on
whatsoever condition, for commercial purposes. For permission to reproduce or reprint any part of this
publication, please send a request with complete information to the Publication Department of SESRIC.
This work is a product of the staff of the SESRIC. The responsibility for the content, the views,
interpretations and conditions expressed herein can in no way be taken to reflect the views of the SESRIC
or its Member States, partners, or of the OIC. The boundaries, colours and other information shown on
any map in this work do not imply any judgment on the part of the SESRIC concerning the legal status of
any territory or the endorsement of such boundaries. Final version of the report is available at the SESRIC
website.
Please cite the work as follows: SESRIC (2023). OIC Economic Outlook: The Rise of the Digital Economy and
Bridging the Digital Divide. Economic Development Studies. The Statistical, Economic and Social Research
and Training Centre for Islamic Countries. Ankara.
Under the leadership of H.E. Mrs. Zehra Zümrüt Selçuk, Director General of SESRIC, this report is prepared
by a research team supervised by Mazhar Hussain, Director of Economic and Social Research Department.
The report was led by Kenan Bağcı, who also prepared Chapter 3, Chapter 4 and Chapter 5. Cem Tintin and
Esat Bakımlı supervised and co-authored Chapter 1 and Chapter 2, respectively, with technical assistance
from Davron Ishnazarov, Muzamil Edema, and Buhara Aslan.
All queries on rights and licenses should be addressed to the Publication Department, SESRIC, at the
aforementioned address.
ISBN: 978-625-7162-24-1
Cover design by Savaş Pehlivan, Publication Department, SESRIC.
For additional information, contact Research Department, SESRIC through research@sesric.org
Inner Photo Credit: https://e.huawei.com/tr/publications/global/ict_insights/201908281022/special-report/201911081512

Contents
Acronyms ................................................................................................................... iii
Preface ....................................................................................................................... v
Foreword .................................................................................................................. vii
Executive Summary .............................................................................................................. 1
1 Recent Developments in the World Economy: Trends and Prospects ........9

Economic Growth ........................................................................................................................... 10
Unemployment ............................................................................................................................... 13
Prices & Inflation ............................................................................................................................. 15
International Trade ......................................................................................................................... 17
Current Account Balance ................................................................................................................ 19
Foreign Direct Investment .............................................................................................................. 20
Financial Conditions ........................................................................................................................ 22
Fiscal Balance .................................................................................................................................. 23
2 Recent Economic Developments in OIC Countries ...................................... 26

Production and Economic Growth .................................................................................................. 27
Unemployment ............................................................................................................................... 36
Inflation .......................................................................................................................................... 38
International Trade ......................................................................................................................... 39
Current Account Balance ................................................................................................................ 45
Fiscal Balance .................................................................................................................................. 46
International Finance ...................................................................................................................... 47
SESRIC | OIC ECONOMIC OUTLOOK 2023

i
The Rise of the Digital Economy and Bridging the Digital Divide
SPECIAL COVERAGE: The Rise of the Digital Economy and Bridging the Digital
Divide ...................................................................................................................... 57
3 Changing Patterns of Production and Trade with Rising Digitalization ....58

3.1 Revisiting Industrial Development in a Digital World ....................................................... 59
3.2 Brief Review of Latest Advances in Key Components of Digital Economy and Industrial
Transformation ............................................................................................................................... 65
4 Issues and Challenges for Digital Economic Transformation in OIC

Countries ................................................................................................................ 78
4.1 Current State of Digital Infrastructure .............................................................................. 79
4.2 Access to Digital Technologies and Services ..................................................................... 87
4.3 Skills for Digital Transformation ....................................................................................... 91
4.4 Assessing the Preparedness for Industry 4.0 .................................................................... 94
5 Policy Options for Bridging the Digital Divide in OIC Countries ............... 96
Annex: Country Classifications ................................................................................. 108
References ............................................................................................................... 110

ii
Acronyms
ADB Asian Development Bank

AI Artificial Intelligence
CEE Central and Eastern Europe
COMESA Common Market for Eastern and Southern Africa
CPI Consumer Price Index
DSN Digital supply network
DOTS Direction of Trade Statistics
EC European Commission
ECB European Central Bank
EPR Employment-to-Population Ratio
EU European Union
FDI Foreign Direct Investment
FTRI Frontier Technology Readiness Index
GCF Gross Capital Formation
GDP Gross Domestic Product
GFCF Gross Fixed Capital Formation
GII Global Innovation Index
GNI Gross National Income
GVC Global Value Chain
HIPC Heavily Indebted Poor Countries
ICT Information and Communication Technology
IFS International Financial Statistics
ILO International Labour Organisation
IMF International Monetary Fund
IoT Internet of Things
IPR Intellectual Property Rights
ISIC International Standard Industrial Classification
ITC International Trade Centre
ITU International Telecommunication Union
LAC Latin America and the Caribbean
LAYS Learning adjusted years of schooling
LDCs Least Developed Countries

iii
LVC Local value chain
MENA Middle East and North Africa
ML Machine Learning
MNE Multinational Enterprise
MVA Manufacturing Value Added
ODA Official Development Assistance
OECD Organisation for Economic Cooperation and Development
OIC Organisation of Islamic Cooperation
PPP Purchasing Power Parity
P-PP Public-Private Partnership
R&D Research and Development
RER Real Exchange Rate
RTA Regional Trade Agreement
RVCs Regional Value Chains
SDG Sustainable Development Goal
SME Small and Medium-sized Enterprise
SSA Sub-Saharan Africa
STI Science, Technology and Innovation
TLD Top-level Domain
TOT Terms of Trade
TTIP Transatlantic Trade and Investment Partnership
UAE United Arab Emirates
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNIDO United Nations Industrial Development Organization
UNSD United Nations Statistics Division
USA United States of America
US$ United States Dollar
WB World Bank
WDI World Development Indicators
WEF World Economic Forum
WEO World Economic Outlook
WIPO World Intellectual Property Organization
WTO World Trade Organization

iv
Preface
The Organisation of Islamic Cooperation (OIC) has been working assiduously to achieve
sustainable economic development in its Member States by deploying considerable efforts to
promote intra-OIC trade, investment, tourism, Islamic finance and various other instruments.
This has resulted in a continuous expansion of OIC’s development agenda over the years, which
is duly reflected in the multisector scope of the OIC-2025: Programme of Action. As an important
global development actor, the OIC has also been supporting and encouraging its Member States
to participate actively in the international geopolitical, economic and social decision-making
processes to secure their common interests. With a mission of creating economic opportunities
for all and improving the welfare of people in the OIC Member States, the OIC calls for joint
Islamic action to develop more integrated, interconnected, internationally competitive, inclusive
and sustainable economies.
In recent years, the global economy has been marked by significant transformations across
various dimensions. Economic growth and integration trajectories have been impacted by re-
emerging protectionist sentiments on the international economic policy agenda. Growing
adaptation of digital technologies as well as concerns over supply chain resilience are
transforming trade and investment dynamics. In this shift, innovation and technology-driven
sectors in advanced economies attract greater investments than traditional sectors in developing
economies. Unfortunately, the rising trend of restrictive policies threatens to reverse economic
integration and undermine the cooperation needed to protect against new shocks and address
global challenges. In a very timely manner, the OIC Economic Outlook 2023 report delves into
these multifaceted global economic developments, offering insights into how they are shaping
the world and affecting the OIC region today.
With their unique economic structures, resource endowments, and demographic profiles, OIC
nations are navigating these global developments in their own distinct ways. The digital economy,
in particular, has emerged as a key element for many OIC countries, as they seek to leverage
technology and innovation for economic growth, diversification, and inclusion. The rising
digitalization and automation presents both opportunities and challenges for OIC countries. On
one hand, it has the potential to drive economic diversification, enhance competitiveness, and
empower young and dynamic populations. On the other hand, it also poses questions about the
digital divide, cybersecurity, and the need for effective governance in the digital age.

v
As we navigate the complexities of the global economic landscape, we at the OIC, recognize the
importance of bridging the digital divide as an essential component of our commitment to
sustainable development and prosperity. It is our hope that this report will serve as a valuable
resource for policymakers, businesses, researchers, and all stakeholders interested in
understanding the intricate interplay of global economic developments and the role of the digital
economy in shaping the future. In an increasingly interconnected world, knowledge and informed
decision-making are essential, and we trust that this report will contribute to a deeper
understanding of these critical issues.
I would like to express my sincere appreciation to SESRIC for preparing this report, and I
encourage our Member States to engage with its contents, drawing inspiration and guidance to
shape their own national strategies for bridging the digital divide as they work towards a better
future.
Hissein Brahim TAHA

Secretary General
Organization of Islamic Cooperation

vi
Foreword
It is with great pleasure that I present to you this report titled “OIC Economic Outlook 2023: The
Rise of the Digital Economy and Bridging the Digital Divide”. The report provides a detailed
analysis of recent developments in the global economy and offers valuable perspectives on the
economic landscape of OIC countries by using a wide range of useful comparative statistics and
information.
The world economy today stands at a critical juncture marked by technological advancements,
environmental imperatives, geopolitical tensions, and demographic shifts. The challenges we
face today transcend borders, and require collaborative solutions that bridge divides and go
beyond narrow interests. In particular, the rise of artificial intelligence, blockchain, the Internet
of Things, and other transformative technologies are reshaping industries, supply chains, and the
very nature of work itself. It is in this intersection of the global economy and OIC economies that
we find both commonalities and unique challenges. How we leverage these technologies to
enhance economic resilience, empower our youth, and address pressing issues of economic
transformation is a central theme of our exploration in this year’s edition of OIC Economic
Outlook.
OIC countries, whether through ambitious Dubai smart city initiatives, dynamic e-commerce
ecosystems of Jakarta, the bustling tech hubs of Istanbul or the burgeoning startup ecosystems
of Kuala Lumpur, are embracing digitalization as a catalyst for progress, and harnessing
innovation to redefine industries, create jobs, and drive economic growth. The diversity of these
achievements reflects the dynamism of these economies and the aspirations of their people.
While some cities and regions surge forward, others grapple with limited access to the digital
tools and knowledge needed to participate fully in the digital age. This stark reality should be
reflected in policy dialogues at the OIC level to ensure that the benefits of digitalization are shared
by all segments of society.
The embrace of digitalization and advanced technologies is not only a reflection of economic
progress but also a manifestation of the Islamic principles of innovation and stewardship. The
Islamic tradition encourages the pursuit of knowledge and the responsible use of resources, both
of which find resonance in the OIC countries' endeavours in the digital realm. We need to
encourage OIC countries to draw on their rich heritage to promote ethical and sustainable digital
transformations that align with Islamic values of justice, equity, and social responsibility.

vii
The choices we make today regarding digitalization and advanced technologies will reverberate
through the economies of OIC member states and the world at large. We stand at a pivotal
moment in history, one that demands foresight, collaboration, and innovation. In this report, we
try to not only understand the complexities of this digital age but also to envision a future where
these technologies become instruments of progress, inclusivity, and shared prosperity. As we
delve deeper into the transformative power of digitalization and advanced technologies, let us
seize the opportunity to foster resilience, sustainability, and prosperity among the OIC countries.
Zehra Zümrüt SELÇUK

Director General
SESRIC

viii
Executive Summary
Executive Summary
RECENT DEVELOPMENTS IN THE WORLD ECONOMY

ECONOMIC GROWTH
The world economic growth rate hit 6.3% in 2021, triggered by a strong rebound in both developed
(5.4%) and developing countries (6.8%) following a 2.8% contraction in 2020. The removal of the base
effect in 2022 enabled a moderate growth rate of 3.5%. It is projected to continue in a similar pattern
as the central banks of major economies in the world attempt to cool down inflation. The projections
of IMF estimate that the global economy will continue to maintain a growth rate of 3% in 2023 and
2024. A number of factors could influence the global economic growth prospects in 2023-24, most
notably the ongoing Russia-Ukraine conflict continues to bring significant uncertainties to the outlook
with an impact on energy and commodity prices. On the financial front, measures taken by central
banks have been limiting the financial sector growth, which in turn could potentially increase banking
sector vulnerabilities in the short term while reducing liquidity.
UNEMPLOYMENT
The global unemployment rate fell by 0.7 percentage points to 6.2% in 2021, after peaking at 6.9% in
2020 due to the outbreak of the pandemic. This was the highest level since 1991, when available data
began. In 2022, it further declined by 0.4 percentage points to 5.8%, with global unemployment
standing at 192 million, down from 214.2 million in 2021. ILO estimates that the unemployment rate
will likely remain unchanged through 2023 and 2024. Gender disparities do exist in unemployment in
the world, particularly in developing regions; the unemployment rate is higher among the female
population, and it continues to be harder for a woman to find a job as compared to a man.
PRICES & INFLATION

Commodity prices, on average, increased by 33.5% and reached new heights in 2022, as measured by
the IMF’s Commodity Price Index. Unlike in 2022, however, the overall commodity prices are expected
to decline in 2023. Around the globe, rising inflation has become a central concern in many countries.
Global inflation rose to 4.7% in 2021 and hit 8.7% in 2022. In developing countries, inflation rose from
5.9% in 2021 to 9.8% in 2022, while in developed countries, it more than doubled, rising from 3.1% to
as high as 7.3%. Global inflation is projected to slow through 2023 and 2024 to 6.8% and 5.2%,
respectively, thanks to tightening monetary policies being implemented by central banks around the
globe.

The Rise of the Digital Economy and Bridging the Digital Divide 1
Executive Summary
INTERNATIONAL TRADE
The growth rate in world trade volume in goods and services went down from 10.7% in 2021 to 5.2%
in 2022, whereas trade volume in goods recorded a sharper slowdown, from 11.1% in 2021 to 3.3% in
2022. The significant slowdown in overall economic activity, the conflict in Ukraine, and the lingering
effects of the pandemic have played some role in this picture. Projections reveal that growth in world
trade volume in goods and services is expected to be around 2.0% in 2023 and 3.7% in 2024.
CURRENT ACCOUNT BALANCE

The aggregate current account balance of developed countries was in deficit at US$ 258.4 billion in
2022, compared with a surplus of US$ 435.2 billion in 2021. The massive deficit of the US rose from
US$ 846.4 billion to US$ 925.6 billion over the same period. As a percent of GDP, developed countries
as a group had current account surpluses of 0.8% in 2021, which turned into a deficit of 0.5% in 2022.
The aggregate surplus of developing countries increased by 79% and reached US$ 582.7 billion in
2022. Thus, the surpluses to GDP ratio increased from 0.8% in 2021 to 1.4% in 2022. Current IMF
projections show that surpluses of developing countries are expected to vanish by 2024, whereas
those of developed countries reach 0.3% of GDP.
FOREIGN DIRECT INVESTMENT

Global foreign direct investment (FDI) inflows showed a significant rebound in 2021 and amounted to
US$ 1.48 trillion, up 53.7% from the exceptionally low level of US$ 962 billion in 2020. Afterwards, the
global FDI inflows dropped to US$ 1.29 trillion in 2022, registering a 12.4% decline. It stemmed from
a substantial slowdown in FDI inflows directed to developed countries that declined by 21.6% from
US$ 773 billion in 2021 to US$ 606 billion in 2022, while inflows to developing countries fell slightly by
2.3% from US$ 705 billion to US$ 689 billion over the same period. As a result, the share of developing
countries in global FDI inflows improved from 47.7% in 2021 to 53.2% in 2022.
FINANCIAL CONDITIONS
Following a rapid recovery under eased financial conditions in 2021, the global outlook improved. Yet,
early in 2022, global financial conditions have tightened notably and downside risks to the economic
outlook have increased because of the war in Ukraine. In the second half of 2022, financial conditions
started to ease before it got tightened. In particular, financial conditions have tightened as central
banks continue to hike interest rates. Higher interest rates will also make borrowing more expensive
worldwide, straining public finances. Amid the highly uncertain global environment, risks to financial
stability have increased substantially
FISCAL BALANCE
Globally, fiscal deficits declined in 2021 and 2022 as economies recovered from the pandemic and
governments started to cease their emergency support. Indeed, as of 2022, governments’ ability to
support the economic recovery through fiscal space was more limited. In developed countries, deficits
narrowed from 7.5% of GDP in 2021 to 4.3% in 2022. Deficits are expected to hover around the 2022
level over 2023-24. In developing countries, deficits remained at 5.2% of GDP in 2022, the same as the
previous year. However, they are projected to increase slightly and represent 5.8% of GDP in 2023,
mainly due to weakening revenues.

2
Executive Summary
RECENT ECONOMIC DEVELOPMENTS IN OIC COUNTRIES

PRODUCTION AND ECONOMIC GROWTH
At current prices, the total GDP of the OIC countries increased to US$ 8.7 trillion in 2022 as a result of
the ongoing gradual recovery. With this economic size, the OIC countries, as a group, accounted for 8.7%
of global GDP in 2022, up 0.9 percentage points from the previous year. In terms of Purchasing Power
Parity (PPP) expressed in international dollars, the total GDP of the OIC countries reached 24.4 trillion
dollars and accounted for 14.9% of global GDP in 2022, up 0.3 percentage points from 2021.
GDP per capita

Given the ongoing recovery in output, per capita GDP values at current prices continued to increase
worldwide in 2022. In US dollar terms, the global average rose by 3.2% from the previous year to
US$ 12,884. The increase in the OIC countries was much larger, with the average GDP per capita rising
by 13.1% to US$ 4,581. In PPP terms, GDP per capita averaged globally at 21,015 dollars in 2022, up 9.6%
from a year earlier. In the OIC countries, it increased by 10.8% to 12,851 dollars. Consequently, GDP per
capita continued to be lower in the OIC countries, both in US dollars and in PPP, but the faster growth
rate achieved by the group of OIC countries helped reduce the gap to some extent in 2022.
Economic Growth
The OIC countries registered an average growth rate of 5.6% in 2022, which was higher than the global
average and the highest rate achieved since 2011. In line with the global trends, the economic growth
in OIC countries is expected to moderate in the next two years, to 3.5% in 2023 and 3.9% in 2024.
Guyana was by far the fastest growing economy in the OIC and in the world in 2022. The Maldives and
Niger also recorded a two-digit growth rate, 12.3% and 11.1%, respectively, and they appeared among
the fastest growing 10 economies in the world. On the other hand, 3 out of 54 OIC countries with
available data recorded a negative growth rate in 2022: Libya (-12.8%), Sudan (-2.5%), and Brunei
Darussalam (-1.5%).
Structure of GDP: Value Added by Sector

The latest available data for 2021 show that, constituting only 1.3% of total value added in developed
countries, agricultural activities have a high share of 10.9% in total value added in the OIC countries,
which is even higher than that in non-OIC developing countries (8.6%). The share of the non-
manufacturing industry averaged at 22.1% in 2021 after falling from 27.5% in 2010 to a record low of
19.5% in 2020. The manufacturing sector has a share of 16.2% in total value added of the OIC
countries, which is higher than that of developed countries (13.6%) but significantly below that of non-
OIC developing countries (22.5%). The services sector continues to play a key role in the majority of
OIC economies, accounting for an average of 50.8% of the total value added in the OIC. This share is
still low though, considering that the sector has a share of three quarters (76.1%) in total value added
in developed countries and 55.6% in non-OIC developing countries, averaging at 67.1% worldwide.
Structure of GDP: Expenditures

As of 2021, final consumption expenditures (by both households and government) continue to have
the highest share in GDP in the OIC countries as well as in the rest of the world. Household consumption
accounted for 55.9% of GDP in OIC countries, higher than that in non-OIC developing countries (48.3%)
but slightly lower than that in developed countries (58.6%). The share of general government final
consumption expenditures in GDP was low in OIC countries (13.5%) relative to both developed and

Executive Summary
developing countries. The share of gross capital formation averaged at 27.3% for the OIC countries,
lower than the average for non-OIC developing countries but higher than the average for developed
countries. International trade –in goods and services– continued to account for a higher share of GDP
in OIC countries than in both developed and developing countries. For the OIC countries, the share of
exports and imports in GDP averaged at 33.4% and 31.1%, respectively.
LABOUR MARKET
The employment-to-population ratio (EPR), after falling to a historically low level of 54.5% worldwide
in 2020 due to employment losses, recovered by 1.2 percentage points to 55.7% in 2021 and further
went up by 0.7 percentage points to 56.4% in 2022. EPR continued to be lower in the OIC countries
than in the rest of the world throughout the last five-year period under consideration (2018-2022).
After bottoming out at as low as 51.5% in 2020, EPR in the OIC countries registered a limited recovery
in 2021 to 52% and then grew up to 52.7% in 2022. According to data from the International Labour
Organization (ILO), the number of unemployed in the OIC countries decreased by 0.7 million to 46.3
million people as of 2022. Consequently, the unemployment rate also declined by 0.3 percentage
points to 6.3% in 2022. It is expected to remain at the same rate over the 2023-24 period, continuing
to hover over the global averages.
INFLATION
Consumer price inflation in the OIC countries increased sharply to 20.0% in 2022, compared with
12.6% in 2021. This increase of 7.4 percentage points was much greater than that observed in both
non-OIC developing countries (3.1 percentage points) and developed countries (4.2 percentage
points). Considering that the inflation rate increased to 7.3% in developed countries and to 7.6% in
non-OIC developing countries, the OIC countries, on average, continued to have a much higher
inflation rate in 2022. This trend is expected to continue in 2023 as well, although a decline in inflation
rates is expected worldwide in 2023. Among the OIC countries, Sudan recorded the highest annual
inflation rate of 138.8% in 2022, followed by Türkiye (72.3%), Suriname (52.5%), and Iran (49.0%), all
among the top 10 countries with the highest inflation in the world.
INTERNATIONAL TRADE
Merchandise Trade
The annual value of global merchandise trade, after falling by 7.3% in 2020 amidst the pandemic,
rebounded by 27.0% in 2021 and 10.8% in 2022. Both exports and imports of the OIC countries
followed a parallel course, though a sharper rebound was recorded in exports. Falling by 17.5% in
2020, merchandise exports of the OIC countries increased by 41.4% in 2021 and by 29.8% in 2022.
Merchandise imports increased by 30.4% in 2021 and by 18.2% in 2022 following a drop of 9.8% in
2020. Consequently, the exports, which reached as high as US$ 2.7 trillion in 2022, accounted for a
higher share of global exports; 11.2% in 2022 compared with 9.6% in 2021. Similarly, the imports,
which increased to US$ 2.4 trillion in 2022, had a higher share in global imports, rising from 9.3% in
2021 to 9.7% in 2022.
Services Trade
The value of global trade in services, which shrank by 17.2% in 2020 from the previous year, rebounded by
18.8% in 2021 and further grew by 14.8% in 2022. After experiencing even a greater fall in services trade in
2020, the OIC countries also registered a recovery in 2021 followed by an even sharper increase in 2022.

4
Executive Summary
Their services exports, plummeted by a third (34.0%) in 2020, recovered by 24.8% to US$ 372 billion in 2021,
and then sharply increased by almost a half (47.6%) to US$ 549 billion in 2022, such that their share in global
services exports increased from 5.7% in 2020 to 6% in 2021 and then to 7.7% in 2022. Similarly, their services
imports, which fell by 26.7% in 2020, recovered by 15.3% and amounted to US$ 509 billion in 2021, then
further went up by 22.1% to 622 billion, with their share in global services imports increasing to 9.4% in
2022 from 8.9% in the previous two years.
Net exports of the OIC countries in merchandise trade soared to US$ 303 billion in 2022, compared to
US$ 50 billion in 2021. In services trade, the OIC countries, on aggregate terms, remained a net importer
over the last 5-year period of 2018-2022, though the deficit narrowed over that period. The aggregate
deficit of OIC countries in services trade amounted to US$ 72 billion in 2022, the lowest in the period
under consideration.
Intra-OIC Merchandise Trade

Decreased by 8.1% to US$ 293 billion in 2020, merchandise exports among the OIC countries (intra-
OIC exports) rebounded by 30.3% to US$ 381 billion in 2021 and further rose by 24.4% to US$ 475
billion in 2022. Nevertheless, the OIC countries’ exports to the rest of the world increased at higher
rates, resulting in a decline in intra-OIC export share from 19.6% in 2020 to 18.1% in 2021 and further
down to 17.3% in 2022.
Among the OIC countries, Saudi Arabia was the largest exporter to the OIC countries in 2022, with
intra-OIC exports valued at US$ 94.7 billion. In terms of intra-OIC export share, however, Yemen took
the lead by directing 93.6% of its total exports to the OIC countries. As for intra-OIC imports, the United
Arab Emirates was by far the largest importer from the OIC countries in 2022, with intra-OIC imports
valued at US$ 77.5 billion. In terms of intra-OIC imports share, Benin took the lead receiving almost
two-thirds (63.6%) of its imports from the OIC countries.

The OIC countries, on aggregate terms, recorded a current account surplus of US$ 299 billion in 2022,
more than 2.5 times the surplus of US$ 116 billion in the previous year. In parallel, the surplus as a
percentage of GDP increased from 1.5% in 2021 to 3.4% in 2022, the highest ratio observed in the
past nine years. Looking ahead, the IMF projections signal a shrinking surplus to US$ 107 billion or
1.2% of GDP in 2023. Among the OIC countries, Saudi Arabia registered the largest current account
surplus in nominal terms in 2022 (US$ 152.8 billion), while Türkiye recorded the largest deficit
(US$ 48.7 billion). As a percent of GDP, the surplus reached as high as 30.5% in Azerbaijan, while the
deficit reached as high as 36.0% in Mozambique.
FISCAL BALANCE
Government deficits in the OIC countries, on average, continued to narrow in 2022, down to 0.7% of
GDP. This improvement resulted from both an increase in revenues and a decrease in expenditures,
both as percentage of GDP. However, current projections for the year 2023 signal a deviation from
this trend, with expenditures rising, revenues falling, and deficits expanding to 2.9% of GDP. Most OIC
countries with available data witnessed an improvement in their fiscal balance as percent of GDP in
2022 as compared to the previous year. Moreover, while only seven countries recorded a surplus in
2021, this number increased to 15 in 2022.

Executive Summary
INTERNATIONAL FINANCE
FDI Flows and Stocks

Following a fall of 15.2% to US$ 98 billion in 2020, FDI inflows to the OIC countries rebounded by 40.6%
and reached as high as US$ 138 billion in 2021. A slight decrease of 1.7% to US$ 135 trillion was
recorded in 2022. The share of OIC countries in flows to developing countries was measured at 19.7%
in 2022, up from 19.5% in 2021. Similarly, their share in global FDI inflows reached a decade high of
10.5% in 2022, compared to 9.3% in 2021. In the 5-year period from 2018 to 2022, FDI stocks increased
by 18.4% to US$ 2.3 trillion in the OIC countries while they increased by 53.4% in non-OIC developing
countries and by 33.9% in developed countries. Thus, the OIC countries hosted a slightly lower share
of the global inward FDI stocks in 2022 (5.3%) than in 2018 (6.1%). The bulk of global stocks continued
to be hosted by developed countries, which had a share of 73.8% in 2022.
External Debt
The total external debt stock of the OIC countries increased by US$ 81 billion or 4.1% to US$ 2,064
billion in 2021 from US$ 1,983 billion in 2020. Use of IMF credit, which expanded by US$ 45.7 billion
or 60.7% to US$ 120.9 billion, contributed the most to this increase although it was still the smallest
component of the total external debt stock of the OIC countries. Public and publicly guaranteed debt
increased by US$ 30.7 billion or 3.0% in 2021 and continued to be the largest component of the
total external debt stock (50.8%). Private nonguaranteed debt fell by US$ 4 billion or 0.7% from its
2020 level and amounted to US$ 591.3 billion. Thus, as the second largest component of total
external debt stock, it had a share of 28.6% in 2021. Overall, long-term debt stock, comprising
public, publicly guaranteed, and private nonguaranteed debt, amounted to US$ 1,640 billion in
2021, up US$ 26.7 billion or 1.7% from the previous year, and accounted for 79.5% of the total
external debt stock. Short-term debt reached US$ 303.2 billion in 2021, with an increase of US$ 8.9
billion or 3.0% from the previous year, and maintained its share at around 15%.
International Reserves
World total international reserves amounted to US$ 14.8 trillion in 2022, with a decrease of US$ 1
trillion or 6.5% from the previous year. Two-thirds (68%) of this decrease originated from developed
countries, of which reserves fell by US$ 689 billion, or 9.3%, to US$ 6.7 trillion. In developing countries,
reserves decreased by US$ 332 billion or 4.0% to US$ 8.0 trillion. In the OIC countries, however, the
2022 data available for 36 member countries indicate an increase in reserves by 2.0% to US$ 1.66
trillion in 2022. Nevertheless, while half of them improved their reserves in 2022, the reserve
adequacy with respect to imports deteriorated in most OIC countries due to either a decline in
reserves or a higher increase in imports than in reserves.
Official Development Assistance (ODA)

In 2021, net ODA flows received by the developing world reached US$ 203.9 billion, its highest level
ever, with an increase of US$ 9 billion, or 4.6%, from the previous year. The flows that were reported
at the individual country level (about one-third of the total ODA flows are not reported at the country
level) decreased by 1.7% and amounted to US$ 133.8 billion in 2021, accounting for 66% of the total
ODA flows. ODA flows to the OIC countries reached US$ 78.3 billion in 2021, up 5.7% from US$ 74.1
billion in 2020. The share of OIC countries in total ODA flows to individual developing countries also
increased in 2021, to 58.5%, as compared to the previous year (54.5%).

6
Executive Summary
Personal Remittances
Despite the COVID-19 pandemic, remittance flows remained resilient in 2020 across the world and
improved afterwards. At the global level, officially recorded remittance flows reached US$ 767 billion
in 2022, up 3.7% from the 2021 total of US$ 739 billion. Inflows to the OIC countries increased by 4.6%
or US$ 8.6 billion to US$ 195 billion, and their share in world total remittance flows slightly increased
to 25.4% in 2022, compared with 25.2% in the previous year.
THE RISE OF THE DIGITAL ECONOMY AND BRIDGING THE DIGITAL DIVIDE
Changing Patterns of Production and Trade with Rising Digitalization
The world economy is witnessing a new form of transformation characterized mainly by rising
digitalization, automation and artificial intelligence. More specifically, the integration of digital
technologies and advanced robotics is transforming the manufacturing process and driving the Fourth
Industrial Revolution (Industry 4.0). These technologies can be grouped into two categories, each
playing a crucial role in revolutionizing the manufacturing landscape.
Smart Manufacturing and Service Technologies: This category focuses on the automation and
decentralization of tasks within manufacturing processes. Advanced robotics introduces sophisticated
machines capable of handling complex tasks with precision and efficiency. 3D printing enables the
creation of three-dimensional objects layer by layer, revolutionizing rapid prototyping and
customization. The IoT connects physical devices, machines, and sensors to facilitate real-time
monitoring, data collection, and optimization of production processes. Together, these technologies
enhance manufacturing capabilities, improve productivity, and lead to more flexible and adaptive
production systems.
Data Processing and Communication Technologies: This category involves the interconnection and
exchange of data across various components of the manufacturing process. Big data analytics
processes and analyses vast amounts of data, providing valuable insights for decision-making, process
optimization, and quality control. Blockchain technology ensures secure and transparent data
exchange and transaction recording, enhancing supply chain management and traceability. Cloud
computing offers on-demand access to shared computing resources, enabling scalability and storage
for large datasets. Machine learning and AI enable machines to learn from data and make intelligent
decisions, further enhancing process automation and efficiency.
The novelty of all these technologies lies in their seamless integration and the convergence of
hardware, software, and connectivity in complex production systems. This integration creates
interconnected and intelligent manufacturing ecosystems, where data-driven decisions and
automation lead to more efficient, agile, and responsive manufacturing processes. As a result,
businesses can achieve higher levels of productivity, reduced production costs, faster time-to-market,
and increased product customization, ultimately driving economic growth and competitiveness across
global value chains (GVCs).
These technologies are crucial for OIC economies as they bring about significant advancements in
productivity, efficiency, and innovation across industries. By harnessing these technologies' potential,
OIC countries can stimulate growth, create new job opportunities, and position themselves at a
competitive place on the global stage. OIC countries have the opportunity to leverage automation and
advanced robotics to accelerate their development, improve productivity, and enhance their global

Executive Summary
competitiveness. There are opportunities to leapfrog traditional stages of development and adopt
advanced technologies directly. However, it requires strategic planning, investment in infrastructure
and human capital, and supportive policies to mitigate potential challenges and ensure inclusive and
sustainable development. By embracing these technologies early on, OIC countries can position
themselves as innovation hubs and attract investment.
Issues and Challenges for Digital Economic Transformation in OIC Countries

There are important opportunities as well as challenges for OIC countries in adapting to the changing
nature of work in association with digitalization and automation. Significant disparities exist across OIC
countries in terms of availability, accessibility, quality and reliability of digital infrastructure and
services. There are OIC countries with well-advanced infrastructure and better readiness for future
economic transformation, but on aggregate, OIC countries fall behind the world average performances
in many indicators. This requires closer collaboration among OIC countries to facilitate knowledge
sharing and capacity development.
The current state of digital infrastructure in OIC countries shows some promising developments in
some OIC countries, but demonstrates major challenges in the majority of OIC countries, particularly
those in sub-Saharan Africa. These countries are the least ready to use, adopt or adapt to frontier
technologies and are at risk of missing current technological opportunities. Facing relatively higher ICT
prices, lower software spending, and limited broadband subscriptions, it is crucial for lagging OIC
countries to recognize the urgent need for digital infrastructure development. High ICT costs and
limited software access hinder economic growth and digital inclusion. Therefore, concerted efforts are
needed to reduce ICT costs, increase investment in software and digital services, and expand
broadband access.
Policy Options for Bridging the Digital Divide in OIC Countries

Bridging the digital divide in OIC countries involves a multifaceted approach that begins with assessing
the current digital landscape, identifying priority areas, and engaging stakeholders to understand the
specific challenges faced by underserved communities. This process encompasses addressing
demographic and geographic disparities, boosting digital literacy, tackling socioeconomic factors
hindering digital access, and ensuring adequate digital infrastructure. Moreover, it requires reforming
regulatory and policy frameworks, focusing on educational and healthcare needs, considering
economic opportunities, and actively involving the public in decision-making. Through a
comprehensive, data-driven strategy and collaboration with public and private sectors, countries and
regions can effectively prioritize and invest in initiatives aimed at reducing the digital divide, fostering
inclusive digital development, and promoting equitable access to the benefits of the digital economy.
In this connection, this report offers a set of comprehensive policy options under seven steps for OIC
countries to adapt to the growing digitalization of economic activities and benefit from its mounting
importance. This includes how to identify the priority areas to invest, how to finance digital
infrastructure investments, how to improve access to digital technologies, how to regulate the digital
economy, how to ensure cyber security, how to support firms and entrepreneurs to better utilize
digital technologies, and how to upgrade skills to increase productivity and minimize job losses.

8
The Rise ofChapter
the Digital Economy
1: World and Bridging
Economic Trendsthe
andDigital Divide
Prospects
CHAPTER ONE
1 Recent Developments in the
World Economy: Trends and
Prospects

Chapter 1: World Economic Trends and Prospects
W orld economic recovery is threatened by persistent inflation, increasing interest

rates, rising geopolitical tensions, and uncertainties, which aggravate the risk of
prolonged low growth due to lingering COVID-19 effects, worsening climate change
impacts, and unaddressed structural challenges. International trade remains under pressure due
to geopolitical tensions, weakening global demand and tighter monetary and fiscal policies.
ECONOMIC GROWTH
A sluggish economic growth recorded in 2022 after a strong rebound in 2021

The COVID-19 pandemic and the associated containment measures resulted in an
unprecedented slowdown of economic activities all over the world in 2020. According to the
International Monetary Fund (IMF, 2022a), the world's real GDP contracted by -2.8%, with
developed economies contracting more than developing countries did, -4.2% and -1.8%,
respectively. With the removal of the pandemic-related restrictions, a strong economic recovery
was recorded in the globe where the world economic growth rate hit 6.3% in 2021, triggered by
a strong rebound in both developed countries (5.4%) and developing countries (6.8%) (Figure
1.1). It should be noted, however, that this quick recovery in 2021 should be interpreted with
some caution that it mainly stemmed from the base effect. The severe output contractions
recorded by countries around the world in 2020 resulted in a low comparison base and significant
statistical carry-over, inflating the year-over-year growth rates in 2021 (UN, 2021).
The erosion of the base effect in 2022 helped to put the real GDP growth rate back to its pre-
pandemic trajectory. A moderate growth rate of 3.5% was recorded in 2022 and it is projected
to continue in a similar pattern as the central banks of major economies in the world attempt to
cool down the inflation. The projections of the IMF reveal that the global economy will continue
to maintain a growth rate of 3% in 2023 and 2024. Several pressing issues continue to mask the
global economic growth trajectory over the period 2022-2024. Most notably, the ongoing Russia-
Ukraine conflict is anticipated to have a substantial impact on the post-pandemic global economic
recovery and pose significant uncertainties to the outlook. Besides, the measures taken by central
banks have been limiting the financial sector growth that could have the potential to increase
banking sector vulnerabilities Figure 1.1: Real GDP Growth (%)
in 2023 and 2024 (IMF, 2023a;
8 Developed Developing World
2023b). This could result in a 6.3
6
moderate decline in financial 3.6
4 2.8 3.5 3.0
3.0
sector growth, which may take
2
the global growth projections 2.3 4.7 1.7 3.6 5.4 6.8 2.7 4.0 1.5 4.0 1.4 4.1
0
further down. Nevertheless, -4.2 -1.8
-2
the positivity in the global
-4 -2.8
economy following the
pandemic still goes on. The -6
2018 2019 2020 2021 2022 2023ᵖ 2024ᵖ
global demand remains
strong, which also keeps the Source: IMF, World Economic Outlook (WEO) Database, April 2023 and WEO Update
July 2023. Note: P= Projection
price level elevated.

10
Figure 1.2: Revisions to World Real GDP Growth Projections (%)
Earlier Projection Latest Projection

6.3
6.2
6.1
6.0
5.9
5.9
6
5
3.5
3.4
3.3
4
3.1
3.1
3.1
3.0
3.0
2.9
2.9
2.9
2.7
2.7
2.7
2.4
2.2
3
2.1
1.7
2
1
0
2021 2022 2023 2024 2021 2022 2023 2024 2021 2022 2023 2024
IMF OECD World Bank
(Jan-23 / Jul-23) (Nov-22/ Jun-23) (Jan-23 / Jun-23)
Source: IMF, World Economic Outlook, January 2023 update and July 2023 update; World Bank, Global Economic Prospects,
January 2023 and June 2023; OECD, OECD Economic Outlook, November 2022 and June 2023.
Given the strong demand particularly seen in developing countries, the global economic growth
rate has been revised upward by the IMF, Organisation for Economic Co-operation and
Development (OECD), and World Bank. IMF July 2023 projections expect a 0.1 percentage point
higher growth in 2023 than previously projected in January. This positive difference is wider in
the case of the OECD. The OECD foresees a growth rate of 2.7% by the end of 2023 instead of
the 2.2% projected in November 2022. Likewise, the World Bank upgraded its projection for the
growth rate of 2023 from 1.7% to 2.1% in its recent Global Economic Prospects Report (Figure
1.2). The outlook for 2024 is, however, highly uncertain. As the Russia-Ukraine conflict continues,
geopolitical tensions are high and commodity prices stay high, the IMF revised the projected
growth rate of 2024 from 3.1% to 3%. The risk of having a more contagious virus strain of COVID-
19, which could affect the global economy, and an increased risk of inflation in emerging
economies also put pressure on the growth prospects in 2024 (IMF, 2023b).
According to the IMF data, in 2020,

during the pandemic, 38 developed Figure 1.3: Number of Countries with a Negative GDP
economies around the world Growth Rate
154 152 152 152
recorded a negative GDP growth
rate. With the pandemic-led
recession in the global economy in
2020, 122 out of 154 developing
countries witnessed a negative
41 41 41 41 122
economic growth rate during that
year. All developed countries 38
17 14
reported a positive growth rate in 0 3 5 7
2020 2021 2022 2023ᵖ 2020 2021 2022 2023ᵖ
2021 thanks to the ongoing
Developed Developing
economic recovery process and only
17 developing countries experienced Source: IMF, World Economic Outlook Database, April 2023.
Note: P= Projection
a contraction in their GDP in the

same year. In 2022, the vast majority of economies from developed and developing regions were
on track and reported positive growth rates (181 countries out of 193 with available data). In
particular, the projections for 2023 show that only five developed countries and seven developing
countries will record a negative growth rate (Figure 1.3).
Divergence in economic prospects across countries remains a major concern
The slowdown in per capita economic growth rate since the outbreak of the pandemic in
developing countries has affected their pace of growth negatively. Overall, the pandemic has
disrupted the progress in many developing countries in terms of per capita income catch-up with
developed countries (SESRIC, 2022). The recovery process from the pandemic was hit by the
outbreak of the war in Ukraine in 2022 that deteriorated prospects for a quick recovery and
inflated global commodity prices. The difference in per capita income growth between
developing and developed countries is estimated to decrease by 1.4% during 2020-24 compared
to 1.9% during the previous decade (Figure 1.4), reflecting that per capita income catch-up with
developed economies would slow down given the projected growth rates.
Regional differences are also significant. Developing countries in Europe and particularly in Asia
are expected to face a remarkable slowdown in the catch-up process while those in Latin America
and the Caribbean and in Sub-Saharan Africa, which have already been diverging from developed
countries, are expected to widen the gap. On the other hand, developing countries in the Middle
East and Central Asia, which also diverged from developed countries in the 2010-2019 period,
are expected to see positive growth rates in real per capita income in the 2020-2024 period. This
positive pattern would allow them to reduce the gap between their average per capita income
and those seen in developed countries over the 2020-2024 period.
Per capita income growth rates among developing economies vary significantly, which also leads
to a diverse pace of catch-up. This is mainly stemming from the differences in real GDP growth
rates in the developing world. Economic dynamism is driven by several countries – so-called
growth engines – in developing economies. Among them, China, India and Indonesia accounted
Figure 1.4: Per Capita Income Growth Relative to Developed Countries (percentage points)*
5%
2020-24 2011-2019
4%
3%
2%
1%
0%
-1%
-2%
Developing Developing Developing Latin America and Middle East and Sub-Saharan
Countries Asia Europe the Caribbean Central Asia Africa
Source: SESRIC staff calculation based on data from IMF, World Economic Outlook Database, April 2023. Note: * Annual average
difference in GDP per capita growth rate at constant prices between developing country groups and developed countries.

12
Figure 1.5: Major Contributors to Economic Growth of Developing Countries (percentage points)
2022 China, 0.9 India, 0.9 Indonesia, 0.2 Others, 1.9
2023ᵖ China, 1.7 India, 0.8 Indonesia, 0.2 Others, 1.4
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Source: SESRIC staff calculation based on data from IMF, World Economic Outlook Database, April 2023 and July 2023 Update.
Note: P= Projection
for over half of the growth of developing countries in 2022. The growth rate in the developing
economies is expected to remain at 4% in 2023 as in 2022. These three countries are again
expected to drive growth thanks to their large domestic markets and diversified export base.
They are projected to make a significant contribution to the growth of developing countries,
accounting for 67% in 2023 (Figure 1.5).
UNEMPLOYMENT
Unemployment rate continued to decline in 2022

According to ILO estimates, global unemployment stood at 192 million in 2022, down from 214.2
million in 2021. It is projected that global unemployment will decrease slightly, by 1 million, to
reach 191 million in 2023 (ILO, 2023). The global unemployment rate fell by 0.7 percentage points
to 6.2% in 2021, after peaking at 6.9% in 2020 due to the outbreak of the pandemic, the highest
level since 1991, when available data began. In 2022, the global unemployment rate experienced
a further decline by 0.4 percentage points to 5.8%. This figure is estimated to remain unchanged
through 2023 and 2024 (Figure 1.6). Overall, the decline in the unemployment rate by 2023 will
not be sufficient to close the gaps led by the pandemic, though the pandemic has waned in most
countries, accelerating the global recovery in unemployment rates remarkably (ILO, 2023).
The severe contraction in the world economy in 2020 has had disproportionate adverse impacts
on employment and earnings of certain groups such as youth, women, workers with relatively
lower educational attainment, seasonal migrant workers, and the informally employed.
Constituting large segments of the population, particularly in developing countries, these groups
have been more vulnerable to negative economic aspects of the pandemic and containment
measures and, therefore, have generally been the hardest hit. Young people – aged 15 to 24 –
constituted a particularly vulnerable segment of the global population, with an unemployment
rate of about twofold as compared to that of adults. Limited employment opportunities for the
youth, which has already been a global challenge, have further deteriorated because of the
pandemic-induced economic collapse. However, youth unemployment has steadily declined,
dropping from 16.4% in 2020, during the peak of the pandemic, to 14.7% in 2021, and further to
14.0% in 2022 as containment measures were gradually removed. Nevertheless, it is estimated
to see slight increases to 14.1% in 2023 and 14.2% in 2024 (Figure 1.6).

Figure 1.6: World Unemployment Rate (%)

Total Youth (15-24)
16.4 16.9
15.8
14.7 14.9 14.3 14.4 14.5
14.0 14.1 14.2 14.2 13.7 13.8
13.6
6.9 7.0 6.7

6.2 5.8 5.8 5.8 6.2 5.7 5.7 5.8 6.2 5.8 5.8 5.9
2020 2021 2022 2023ᵖ 2024ᵖ 2020 2021 2022 2023ᵖ 2024ᵖ 2020 2021 2022 2023ᵖ 2024ᵖ
Total Male Female
Source: ILOSTAT, ILO Modelled Estimates, November 2022.
The total male unemployment rate is estimated to have decreased from 6.2% in 2021 to 5.7% in
2022. It is estimated to remain at 5.7% in 2023 before recording a slight increase to 5.8% in 2024.
Similarly, the female unemployment rate continued to decrease in 2022, falling to 5.8% that year
from 6.2% in 2021. Estimates show that it will stay at 5.8% in 2023 and slightly increase to 5.9%
in 2024 (Figure 1.6). In addition, the labour force participation rate (LFPR), having sharply
declined in 2020 due to the shocks of the pandemic, increased by 1.2 and 1.3 percentage points
for both males and females, respectively, between 2020 and 2022. However, the LFPR continued
to be significantly lower for females (47.3 %) than males (72.5 %) in 2022.
While global unemployment rates for both males and females decreased in 2022, they varied by
gender and region worldwide (Figure 1.7). Unemployment rates for both males and females
decreased in all regions, except in Sub-Saharan Africa and Asia and the Pacific. In Sub-Saharan
Figure 1.7: Unemployment Rate by Region and Gender (%)
20.5 Northern Africa 8.5

20.4 8.6
20.5 9.0
19.0 Arab States 7.3
18.8 7.4
19.4 7.9
8.6 Latin America & 5.8
8.6 Caribbean 5.9
11.4 7.7
6.8 6.1
6.8 Sub-Saharan Africa 6.1
6.8 6.1
6.6 6.1
6.4 Europe and Central Asia 5.9
7.1 6.7
Female 2023ᵖ Male 2023ᵖ
Female 2022 4.6 Northern America 4.8 Male 2022
Female 2021 3.7 3.9 Male 2021
5.4 5.7
4.5 5.5
4.6 Asia and the Pacific 5.6
4.5 5.7
Source: ILOSTAT, ILO Modelled Estimates. Note: Regional classification is based on ILO country groupings. Regions are ordered by
the difference between female and male unemployment rate in 2022.

14
Africa, the rates remained stable, while in Asia and the Pacific, the female unemployment rate
slightly increased vis-à-vis a slight decline in the male unemployment rate. Moreover, the gap
between female and male unemployment rates widened in 2022 in Europe and Central Asia, Latin
America and Caribbean, and Northern Africa. In Northern Africa and the Arab States, the
unemployment rate for females continues to be more than twice the rate for males, mainly due
to some social norms and country-specific factors (SESRIC, 2021). It is obvious from Figure 1.7
that, for women, it is harder to find a job in many developing regions of the world.
PRICES & INFLATION
Commodity prices further increased in 2022, with inflation at record heights

In 2020, commodity markets faced significant disruptions from the pandemic and associated
mitigation measures that plummeted global demand for most commodities due to severely
curbed consumption, production, and investment. Commodity prices declined sharply as a result
of tumbling global demand, with oil prices particularly affected, falling by a third (32.7%) from
2019. Behind this fall in oil prices was a large contraction in travel and transport activities, which
accounted for two-thirds of oil consumption, stemming from controls to slow the spread of the
pandemic (World Bank, 2020).
As restrictions relaxed throughout 2021, demand accelerated, but supply was slower to respond
amid ongoing disruptions. Commodity prices saw a significant rise from their low levels in the
previous year, increasing by 52.3%. In 2022, commodity prices increased, on average, by 33.5%
and reached new heights, as measured by the IMF’s Commodity Price Index (Figure 1.8). It is
projected to cool down by 23% in 2023.
Driven by a strong recovery in demand along with improving global economic prospects, energy
(fuel) prices significantly increased by 99.6% in 2021. The pace of increase in energy prices
lowered in 2022, however, it continued to rise (63.6%). Metal prices, buoyed by the recovery in
global manufacturing, improved prospects for infrastructure investment in advanced economies,
and supply disruptions due to COVID-19, increased by 46.7% in 2021 and decreased by 5.6% in
2022. Food prices were up by 26.1% in 2021 and further increased by 14.1% in 2022. Regarding
agricultural raw materials, prices went up by 15.5% in 2021 and by 5.7% in 2022.
Unlike in 2022, the overall commodity prices are expected to decline in 2023. The Commodity
Price Index is projected to decrease by 22.9% in 2023 and further narrow down by 2.0% in 2024.
This decline is attributed to a combination of factors, including slowing economic activity,
favourable winter weather, and shifts in global commodity trade flows (World Bank, 2023a;
2023b).
Accordingly, energy prices in 2023 are projected to see a sharp decrease of 38.0%. This is
because, on the supply side, the impacts of Western sanctions on Russian crude oil exports eased
as Russian exports remained steady when the country redirected its oil to non-sanctioned
countries, mainly India and China, selling at a discount to Brent prices. Additionally, OECD
member countries releasing strategic petroleum reserves helped balance oil markets, partially

Figure 1.8: World Commodity Prices (2016=100) Figure 1.9: Inflation (%)
350 12
Energy
Developing Countries
300 10
250
All 8
200 Metals
Food 6
150 Developed
Countries
4 World
100 Agricultural Raw Materials
50 2
0 0
2020 2021 2022 2023ᵖ 2024ᵖ 2020 2021 2022 2023ᵖ 2024ᵖ
Source: IMF, World Economic Outlook Database, April 2023. Source: IMF, World Economic Outlook Database, April 2023
Note: P= Projection and July 2023 Update. Note: Annual average change in
consumer prices (CPI); P= Projection
offsetting underproduction and OPEC+ output cuts (IMF, 2023a). Global food prices and
agricultural raw materials prices are projected to fall by 5.6% and 11.6%, respectively, in 2023;
this is partially attributed to the Black Sea grain deal signed in July 2022, and subsequent renewal
in November 2022. This agreement facilitated the flow of food supplies from Ukraine and Russia,
major producers of wheat and corn, and ensured that Russian fertilizer could reach global
markets. However, Russia's withdrawal from the grain deal in mid-2023 will cause a possible
increase in food prices (UN, 2022 and IMF, 2023a). Metal prices are expected to rise by 3.5% in
2023, following a 5.6% decline in 2022. Even before the war, supply shortages, alongside the
release of pent-up demand, and the rebound in commodity prices caused consumer price
inflation to increase rapidly all around the world.
Global inflation rose to 4.7% in 2021 and hit 8.7% in 2022. It is projected to slow through 2023
and 2024 to 6.8% and 5.2%, respectively. The increase in inflation was notable in developing
countries, rising from 5.9% in 2021 to 9.8% in 2022, and the projections show that there will be
a downturn to 8.3% and 6.8% in 2023 and 2024, respectively. In developed countries, the inflation
rate was 3.1% in 2021 and then increased by more than twofold to 7.3% in 2022. The projection
displays that it will ease to 4.7% and 2.8% in 2023 and 2024, respectively (Figure 1.9). Although
projections signal a decline in 2023 and 2024, there is great uncertainty regarding the supply-
demand imbalances, including those stemming from the war. Some central banks in developed
and developing countries, particularly the US Federal Reserve, are continuing their monetary
policy tightening due to rising inflationary pressures.
Indeed, around the globe, rising inflation has become a central concern in many countries. In
some advanced economies, including the United States and some European countries, such as
Germany, Belgium, and the Netherlands, the 2022 inflation was expected to be the highest in 40
years. According to the IMF (2022), there is a rising risk that inflation expectations drift from
central bank targets, prompting a more aggressive tightening response from central banks. As
advanced economy central banks tighten policy and interest rates rise in those countries,

16
developing countries could face a further withdrawal of capital and currency depreciations that
could increase inflation pressures. The rising cost of living due to elevated inflation, particularly
the increases in food and fuel prices, could escalate the risk of social unrest, especially in
developing countries.
INTERNATIONAL TRADE
Trade volume continues to grow but at a slower pace
The containment measures and lockdowns aimed to curb the pandemic have affected both
demand and supply negatively. International transportation and global value chains (GVCs) were
also disrupted remarkably during the closures. The unprecedented adverse effects of the
pandemic led to a remarkable collapse (-7.8%) in global trade volume in 2020. However, the
recovery was quick, particularly in merchandise trade, while trade in services remains sluggish
mainly due to the slow recovery in travel activities. After experiencing a 5.0% decline in 2020,
trade in goods rebounded and expanded by 11.1% in 2021. Similarly, trade in goods and services
showed a significant growth rate of 10.7% in 2021 after the setback in the previous year (Figure
1.10).
Reflecting the significant slowdown in overall economic activity, the conflict in Ukraine, and the
lingering effects of the pandemic, the global trade growth rate decelerated in 2022. The sanctions
imposed to press Russia to end the war are limiting financial and trade linkages between Russia
and other countries, with far-reaching repercussions. Accordingly, the IMF indicated that the
growth rate in world trade volume in goods and services went down from 10.7% in 2021 to 5.2%
in 2022, whereas trade volume in goods recorded a similar slowdown from 11.1% in 2021 to 3.3%
in 2022. The latest projections of the IMF indicate that the growth in world trade volume in goods
and services is expected to decline to 2.0% in 2023 and rise to 3.7% in 2024. Similarly, trade
volume growth in goods is forecasted to further slowdown to 1.5% in 2023 before rising to 3.2%
in 2024 (Figure 1.10.A). Several factors like the reduction in expected inflation and the positive
Figure 1.10: World Trade Volume
A. Annual Change (%) B. 2019=100

15 120
10.7 11.1 115
10
110
5.2
3.3 105
5 3.7 3.2
2.0 1.5
100
0 95
90
-5
-5.0 85
-10 -7.8 80
2020 2021 2022 2023ᵖ 2024ᵖ 2019 2020 2021 2022 2023ᵖ 2024ᵖ
Goods & Services Goods Goods & Services Goods
Source: IMF, World Economic Outlook Database, April 2023. Note: P= Projection

expectations regarding a possible deal between Ukraine and Russia could have the potential to
increase the volume of the global trade while reducing the cost of transportation. Overall, as of
2022, the figures revealed that the world trade volume is far above the pre-pandemic levels and
the recovery continues in a positive mood despite having some headwinds due to pressing energy
prices and several on-going regional conflicts/tension (Figure 1.10.B).
In nominal US dollars, merchandise trade registered a two-digit growth rate in all regions in 2021,
while all regions recorded a decline in both exports and imports in the previous year, albeit at
different scales (Table 1.1). Global merchandise export value, contracted by 7.2% in 2020 with
the impact of the pandemic. It grew by 26.6% in 2021 mainly due to the base effect and further
increased by 11.5% in 2022. At the regional level, the largest growth both in 2021 by 42.3% and
in the following year by 41.6% was recorded in the Middle East, mainly due to an increase in oil
prices resulting from the recovering economic activity in the global economy. Exports from Asia,
which declined by a modest 1.4% in 2020, increased by 27.2% in 2021 and grew by 7.3% in 2022.
Regional disparities existed in import growth, as well, ranging from 23% in North America to
42.2% in South and Central America and the Caribbean in 2021. In 2022, the largest increase was
observed in the South and Central America and the Caribbean region at 23.5% while imports to
Asia grew by only 9.5%.
Contracted more severely than merchandise trade in 2020, trade in commercial services also
recorded a smaller rebound in 2021 compared to that of merchandise exports. However,
commercial service exports grew more rapidly in 2022 than merchandise exports. At the global
level, commercial services exports grew by 19% in 2021 and further expanded by 14.8% in the
following year. At the regional level, on the export side, the Middle East registered the largest
increase in commercial services exports in both 2021 (25.9%) and 2022 (47.3%). In 2022, after
Table 1.1: Annual Change in Global Trade Values by Selected Region (%)
Exports Imports
2020 2021 2022 Region 2020 2021 2022
Merchandise
-7.2 26.6 11.5 World -7.5 26.5 13.3
-17.8 41.0 17.8 Africa -16.6 26.6 16.3
-1.4 27.2 7.3 Asia -6.3 30.0 9.5
-6.3 22.4 8.6 Europe -6.3 23.8 15.1
-24.5 42.3 41.6 Middle East -12.8 26.3 20.3
-12.5 23.5 17.5 North America -7.9 23.0 15.7
-9.4 33.7 16.5 South and Central America and the Caribbean -16.0 42.2 23.5
Commercial services
-17.3 19.0 14.8 World -18.1 16.0 14.8
-35.1 22.4 30.6 Africa -23.8 9.9 19.0
-19.8 20.4 13.6 Asia -19.5 15.1 11.6
-12.9 20.0 11.4 Europe -13.1 14.8 12.5
-22.6 25.9 47.3 Middle East -29.6 25.5 22.6
-19.2 11.7 15.6 North America -21.7 19.4 24.2
-36.7 19.1 39.6 South and Central America and the Caribbean -28.5 24.5 33.6
Source: SESRIC staff calculation based on data from WTO STATS.

18
the Middle East came South and Central America and the Caribbean (39.6%) and Africa (30.6%),
the hardest hit regions with commercial service exports falling by more than a third in 2020. On
the import side, the Middle East, which experienced a 29.6% contraction in commercial services
imports in 2020, registered the largest increase (25.5%) in 2021. The highest percentage year-to-
year change in 2022 was recorded in South and Central America and the Caribbean region
(33.6%). Aimed to control the spread of COVID-19, containment measures, especially
international travel restrictions, played a central role in the contraction of commercial services
trade all over the world in 2020. Transport and travel services have been the most affected areas
in terms of both a fall in services trade in 2020 and a rise in the following couple of years. With
the removal of all these restrictions, all regions saw a remarkable recovery in their services
imports in the two consecutive years, allowing them to return and even surpass the pre-
pandemic levels by 2022.
Developing countries expand their surpluses, developed ones face deficit in 2022
After hitting the peak in 2021, global current account balances – the sum of absolute deficits and
surpluses – narrowed in 2022, essentially due to deficits of developed countries driven by the US.
They are expected to further narrow in 2023 mainly due to shrinking surpluses of developing
countries. In 2024 and over the mid-term, global current account balances are expected to
steadily recover (Table 1.2) as commodity prices are expected to decline and stabilise (World
Bank, 2023a).
Aggregated current account balance of developed countries was in deficit at US$ 258.4 billion in
2022, compared with a surplus of US$ 435.2 billion in 2021, while the massive deficit of the US
rose from US$ 846.4 billion in 2021 to US$ 925.6 billion in 2022. As a percent of GDP, developed
countries as a group had current account surpluses of 0.8% in 2021, which turned into a deficit
of 0.5% in 2022. The aggregate surplus of developing countries, which was at US$ 325.7 billion in
2021, increased by 79% and hit US$ 582.7 billion in 2022. The widening surpluses of China and
the large surpluses recorded in the Middle East and Central Asia played a significant role in this
improvement. The surpluses to GDP ratio increased in developing countries, from 0.8% in 2021
to 1.4% in 2022. Current IMF projections show that surpluses of developing countries are
expected to decline to 0.3% of GDP in 2023 and vanish in 2024, whereas those of developed
countries improve to 0.3% of GDP by 2024.
Among developed countries, the United States continues to have a substantial trade deficit that
resulted in a current account deficit of 3.6% in 2021 as well as in 2022, worsening from 2.9% in
2020. This deficit (as a percent of GDP) is expected to fall to 2.7% in 2023 and further drop to
2.5% in 2024. Germany and Japan generated significant trade surpluses in 2021, which helped
them achieve a current account surplus of 7.7% and 3.9%, respectively. In 2022, current account
surpluses of these countries declined to US$ 171 billion and US$ 90 billion or 4.2% and 2.1% of
their GDP’s, respectively. These countries are projected to maintain strong surpluses in the next
two years.

Table 1.2: Current Account Balance

Billion USD Percent of GDP
2020 2021 2022 2023 2024 2020 2021 2022 2023 2024
World (Global Disparity) 281.7 760.9 324.2 160.1 198.9 0.3 0.8 0.3 0.2 0.2
Developed Countries 125.5 435.2 -258.4 13.3 179.5 0.2 0.8 -0.5 0.0 0.3
United States -619.7 -846.4 -925.6 -728.8 -689.9 -2.9 -3.6 -3.6 -2.7 -2.5
Germany 274.2 329.8 171.0 201.2 227.9 7.1 7.7 4.2 4.7 5.1
Japan 147.9 197.3 90.0 131.8 180.3 2.9 3.9 2.1 3.0 4.0
Developing Countries 156.2 325.7 582.7 146.8 19.4 0.5 0.8 1.4 0.3 0.0
Asia 319.2 252.0 288.9 182.6 132.0 1.5 1.0 1.1 0.7 0.5
China 248.8 317.3 417.6 272.5 232.6 1.7 1.8 2.3 1.4 1.1
Europe 1.9 66.1 114.5 -37.7 -38.1 0.1 1.5 2.4 -0.8 -0.7
Latin America and
-15.5 -102.8 -141.6 -111.8 -112.2 -0.4 -2.0 -2.5 -1.8 -1.7
Caribbean
Middle East and
-102.9 130.3 360.9 167.5 99.1 -3.0 3.3 7.5 3.6 2.1
Central Asia
Sub-Saharan Africa -46.5 -19.9 -40.0 -53.9 -61.3 -2.8 -1.1 -2.0 -2.6 -2.7
Source: IMF, World Economic Outlook Database, April 2023. Note: P= Projection
The current account balance performance of developing countries differed across regions in
2022. In Developing Asia, surpluses grew up to 1.1% of GDP from 1% in the previous year,
particularly China, which has a long-standing external surplus, continued to run increasing
surpluses that reached 2.3% of GDP in 2022, compared to 1.8% in 2021. Nevertheless, over the
2023-24 period, surpluses of China and other Developing Asian countries are expected to narrow
down.
Sub-Saharan Africa improved its current account balance in 2021, narrowing the deficit to 1.1%
from 2.8% of GDP in 2020. Yet, in 2022, the deficit increased to 2% of GDP and projections
indicate that it will almost return to the 2020 level by 2024. The Middle East and Central Asia
region was hit the hardest by the pandemic, running a significant deficit of 3% in 2020. The region
recorded a large surplus of 3.3% in 2021 thanks to the strong oil price rebound along with the
global economic recovery. With the soaring energy prices in 2022, the region achieved much
larger surpluses that reached 7.5% of GDP. The current account surplus of the region is expected
to remain higher than other regions in the 2023-24 period. By contrast, Latin America and the
Caribbean run current account deficits in both 2021 and 2022 and expectations are that this will
continue over the next two years.
FOREIGN DIRECT INVESTMENT
A marked slowdown in global FDI in 2022

According to the World Investment Report of the United Nations Conference on Trade and
Development (UNCTAD, 2023), global foreign direct investment (FDI) inflows showed a significant
rebound in 2021 and amounted to US$ 1.48 trillion, up 53.7% from the exceptionally low level of

20
Figure 1.11: World FDI Inflows
World Developed Countries Developing Countries Developing, % of World
1,800 60%
Billion US$
53.2%
50.6%
1,600 47.7%
50%
1,400 41.2%
34.9%
1,200 40%
1,000
30%
800
600 20%
400
10%
1,375
1,708
1,478
1,295
1112
200
809
567
595
962
475
487
773
705
606
689
0 0%
2018 2019 2020 2021 2022
Source: SESRIC staff compilation based on data from UNCTAD, World Investment Report 2023, Annex Tables.
US$ 962 billion in 2020 (due to the pandemic). Afterwards, the global FDI inflows declined by
12.4% and stood at US$ 1.29 trillion in 2022. It stemmed from a substantial slowdown in FDI
inflows directed to developed countries that declined by 21.6% from US$ 773 billion in 2021 to
US$ 606 billion in 2022, while inflows to developing countries fell slightly by 2.3% from US$ 705
billion to US$ 689 billion over the same period. Thus, the share of developing countries in global
FDI inflows improved from 47.7% in 2021 to 53.2% in 2022 (Figure 1.11). It is worth noting that,
as of 2022, inflows to developed countries were substantially below the pre-pandemic 2019 level,
by 45.5%, while inflows to developing countries exceeded the pre-pandemic level by 15.7%.
Change in FDI inflows in 2022 differed significantly by region (Figure 1.12). Eastern Asia became
the largest FDI recipient in 2022 despite a small decline of 1.6% to US$ 374 billion due to a sharp
fall in flows to Northern America by a quarter (25.5%) to US$ 338 billion. Compared to 2021,
flows to Europe declined the most, by 310.5%, while Oceania recorded the largest increase, by
169%. Flows to Latin America and the Caribbean 1 increased by half (51.2%) to US$ 208 billion.
FDI flows to Africa amounted to only US$ 45 billion, down 43.5% from the previous year.
The global environment for international business and cross-border investment changed
dramatically in 2022. Therefore, the growth momentum of 2021 has not been sustained, and the
global FDI flows moved on a downward trajectory primarily due to global crises, particularly the
Russia-Ukraine war, high food and energy prices, and soaring public debt (UNCTAD, 2023). On
the bright side, new greenfield investment in the global value chain (GVC) intensive industries
displayed a 15% increase at the global level. The energy sector caused the change in the GVC; on
the one hand through attracting more investments to renewable technologies up by 15% with
upward trends in almost all regions and sectors, on the other hand, major oil and other
conventional energy companies selling their assets mostly to unlisted private equity firms with
lower disclosure requirements (UNCTAD, 2023).

Figure 1.12: World FDI Inflows by Region, 2021 vs. 2022

500 453
2021 2022
380 374
400
338
300
208 213 223
Billion US$
200
138 137 143
80 70
100 45 51
26
0
Africa Northern Latin America Eastern Asia South-eastern Asia, other Europe Oceania
America and the Asia
-100 Caribbean
-107
-200 ▼43.5% ▼25.5% ▲51.2% ▼1.6% ▲4.6% ▲4.5% ▼310.5% ▲169.0%
Source: UNCTAD.STAT
FINANCIAL CONDITIONS
A rocky financial environment ahead

Global financial conditions were relatively stable for global economic activities before the
pandemic. Nevertheless, with the outbreak of the pandemic as an unexpected game-changer at
the beginning of 2020, global financial conditions tightened significantly in the first half of the
year (Figure 1.13). The containment measures and sudden stops in economic activities not only
affected the economic outlook but also deteriorated the expectations and fuelled uncertainty.
As COVID-19 spread globally, the prices of risky assets and commodities started to fall at
unprecedented speed while the prices of safe-haven assets, such as gold and US Treasuries,
gained as investors looked for stability rather than profitability during the crises (IMF, 2020).
Figure 1.13: Financial Conditions Indices (Standard deviations from mean)
2.5
2.0
Other developed
1.5 China
Emerging markets countries
Tightening
1.0 excluding China

0.5
0.0
Loosening
-0.5
-1.0
-1.5 United States
-2.0 Euro Area
-2.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2020 2021 2022 2023
Source: IMF, Global Financial Stability Report, April 2023.

22
Tightened sharply in March 2020 in both developed and developing countries, financial
conditions eased significantly afterwards –except in China– as extraordinary policy measures
have supported the economy, helping to contain financial stability risks. In 2021, financial
conditions eased further in developed economies and the containment of financial stability risks
continued, reflecting ongoing monetary and fiscal policy support and the rebound of the global
economy. Similarly, financial conditions loosened in emerging economies following the trend
observed in developed countries. Early in 2022, global financial conditions have tightened notably
and downside risks to the economic outlook have increased as a result of the war in Ukraine.
Financial conditions have tightened as central banks continue to hike interest rates. Amid the
highly uncertain global environment risks to financial stability have increased substantially. Major
issues facing financial systems include inflation at multi-decade highs, continuing deterioration
of the economic outlooks in many regions, and persistent geopolitical risks (IMF, 2022a). A sharp
tightening of financial conditions is likely to cause a slowdown next year amid high inflation.
Besides, critical financial instability following the failures of Silicon Valley Bank along with the New
York Signature Bank was amplified by the loss of confidence in Credit Suisse, which led to the
tightening of monetary and financial conditions in 2023, particularly in the developed economies.
Because banking sector failures resulted in stock market volatility and the widening of credit
spreads (IMF, 2023a). In this highly uncertain environment, striking a balance between containing
these potential threats and avoiding a disorderly tightening of financial conditions will be critical.
FISCAL BALANCE
Government deficits continue narrowing in 2022

The impact of the pandemic on the fiscal balances of countries was significant. Governments
implemented various fiscal measures to mitigate the economic effects of the crisis, including
increased spending on healthcare and social welfare programs, as well as offering tax cuts and
stimulus packages. As a result, fiscal deficits significantly widened in most countries, leading to a
sharp increase in public debt.
Assessing the sustainability of fiscal deficits and the risks associated with high levels of public debt
is important. Higher deficits and debt levels could lead to several challenges for economies, such
as reduced fiscal space for future spending, higher borrowing costs, and increased vulnerability
to financial shocks.
In the post-pandemic period, it has become essential for many countries around the globe to
consider fiscal consolidation measures to restore fiscal sustainability. Governments are
suggested to develop medium-term fiscal plans that include a combination of revenue-enhancing
measures such as tax reforms, and expenditure rationalization such as reducing subsidies and
increasing efficiency in public spending.
Despite the recently widened fiscal space as a result of the reverse trend in the post-pandemic
era, many countries still need to take additional measures to achieve fiscal consolidation. While
low natural rates may ease pressure on fiscal policy, they do not rule out the need for fiscal

Figure 1.14: General Government Fiscal Balance in Developed Countries

Change in Revenues* Change in Expenditures* Net Lending/Borrowing (% of GDP)
2 2
-2 -2
-2.8 -6.3
-4.2 -3.8 -3.7
-6 -4.3 -4.4 -6
-5.4 -5.5
-6.8
-7.5
-10 -10
-11.6
-14 -14
2021 2022 2023ᵖ 2024ᵖ 2021 2022 2023ᵖ 2024ᵖ 2021 2022 2023ᵖ 2024ᵖ
All Developed Countries Euro Area United States
Source: IMF, World Economic Outlook Database, April 2023. Note: P= Projection; * Percentage point difference from the previous
year in their ratio to GDP.
responsibility (IMF, 2022a; 2022b). In response to this need, fiscal deficits continued narrowing
in 2022 globally compared to the pandemic era. The shifts reflect several shocks that have hit
economies around the globe in recent years—the pandemic, the war in Ukraine, and energy and
food price shocks—and the exceptional policy responses (IMF, 2021). Regarding their fiscal
balances, heterogeneity across countries is observed. Advanced economies generally have higher
fiscal deficits compared to emerging markets and developing economies. However, several
emerging market economies also face significant fiscal challenges, due to their exposure to
external financing risks and commodity price fluctuations.
While the pandemic-related exceptional supports posed a significant burden on the fiscal
balances in 2020, government fiscal deficits declined in 2021 and 2022 as economies recovered
and countries started to withdraw those exceptional supports. Figure 1.14 shows that, in
developed countries, deficits narrowed from 7.5% of GDP in 2021 to 4.3% in 2022, mainly due to
a decline of 2.8 percentage points in expenditures as a percent of GDP as well as an increase of
0.4 percentage points in revenues. The improvements in fiscal balances stemmed mainly from
the removal of fiscal measures and accelerated economic recovery from the pandemic. Deficits
are expected to hover around the 2022 level over the period 2023-2024. Deficits in the Euro Area
declined to 3.8% of GDP in 2022 due to a decrease in expenditures. While further declines are
anticipated over 2023-24, these are also expected to result mainly from reduced expenditures.
Reached as high as 11.6% of GDP in 2021, the deficit in the United States declined to 5.5% in
2022 – with about 4.5 percentage points decrease in expenditures as a percentage of GDP – and
it is projected to bounce back and reach 6.3% in 2023 mainly due to decreasing revenues while
the expenditures remain nearly intact.
In developing countries, a decline in expenditures and an increase in revenues (as a percent of

GDP) together contributed to the fiscal deficit that halved to 5.2% of GDP in 2021 as compared
to 2020 and maintained at the same level in 2022 (Figure 1.15). As of 2022, governments’ ability
to support the economic recovery through increased spending or reduced revenues (fiscal space)
was more limited. The war in Ukraine and the increase in global interest rates to keep inflation

24
Figure 1.15: General Government Fiscal Balance in Developing Countries

Change in Revenues* Change in Expenditures* Net Lending/Borrowing (% of GDP)
3 3
1.4
1 1
-1 -1
-1.8 -1.5
-3 -2.2 -3
-2.5
-3.1
-5 -4.2 -4.5 -3.9 -4.4 -4.4 -4.3 -4.2
-5
-5.2 -5.2 -5.3 -5.2 -5.0
-7 -5.8 -6.0 -7
-6.4 -6.2
-6.7
-7.3
-9 -9
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
All Developing Asia Europe Latin America & Middle East & Sub-Saharan Africa
Countries Caribbean Central Asia
Source: IMF, World Economic Outlook Database, April 2023. Note: P= Projection; * Percentage point difference from the previous
year in their ratio to GDP.
contained were further constraining fiscal space in many countries, especially oil- and food-
importing developing countries. Overall, the deficits in developing countries are projected to
increase slightly to 5.8% of GDP in 2023, mainly due to a decline in revenues.
Prospects for fiscal balance (as a percent of GDP) differ across developing regions. All of the
regions apart from Europe registered an improvement in fiscal balances in 2022 as compared to
the previous year (Figure 1.15). The widening government fiscal deficit of Europe resulted from
a combination of an increase in expenditures and a decrease in revenues. The Middle East and
Central Asia run a surplus in 2022, resulting from both a decrease in expenditures and an increase
in revenues. Fiscal balances are projected to deteriorate in Europe, Middle East and Central Asia,
and Latin America and Caribbean in 2023. In Asia, however, the deficits are projected to narrow
from 7.3% in 2022 to 6.7% in 2023. In Sub-Saharan Africa, fiscal prospects have been improving
since 2021 and the deficits are expected to continue narrowing down in 2023 and 2024.

Chapter 2: Recent Economic Developments in OIC Countries The Rise of the Digital Economy and Bridging the Digital Divide
CHAPTER TWO
2 Recent Economic
Developments in OIC Countries

26
Chapter 2: Recent Economic Developments in OIC Countries
T he economic after-effects of COVID-19 and the war in Ukraine have caused significant
economic challenges, including surging inflation, rapid monetary policy adjustments,
and a period of slow economic growth and reduced investment. These developments
had important ramifications on economic activities in OIC countries as well as the rest of the
world.
PRODUCTION AND ECONOMIC GROWTH
Output up 15.2% to US$ 8.7 trillion in 2022

At current prices, the total GDP of the OIC countries, which contracted to US$ 6.6 trillion in 2020
due to the COVID-19 pandemic, recovered to US$ 7.6 trillion in 2021 and exceeded the pre-
pandemic 2019 level. In 2022, it further increased by 15.2% to US$ 8.7 trillion as a result of the
ongoing gradual recovery. With this economic size, the OIC countries, as a group, accounted for
8.7% of global GDP in 2022, up 0.9 percentage points from the previous year. The share of the
OIC countries in the total GDP of developing countries also increased from 19.0% in 2021 to
20.4% in 2022, indicating that the recovery in current output was faster in the OIC countries
relative to the rest of the world. Nevertheless, this situation is projected to reverse in 2023 given
the expectation of limited output growth in the group of OIC countries (Figure 2.1.A).
In terms of Purchasing Power Parity (PPP) expressed in international dollars, the total GDP of the
OIC countries at current prices reached 24.4 trillion dollars in 2022, and it is expected to reach
26.2 trillion dollars in 2023. With these amounts, the OIC countries, as a group, accounted for
14.9% of global GDP in 2022, up 0.3 percentage points from 2021, and projections show that this
share will reach as high as 15.1% in 2023. Their share in the total GDP of developing countries
also increased in 2022, to 25.6%, and this is expected to be maintained in 2023 (Figure 2.1.B).
Considering the estimated share of the OIC countries in the world population (24.4%) and in the
Figure 2.1: Total GDP and World Shares of OIC Countries (at current prices)
A. In US Dollars (Billion) B. In PPP International Dollars (Billion)
25.7% 25.8% 25.3% 25.6% 25.6%

20.3% 20.4% 19.5%
19.6% 19.0%
14.7% 14.9% 14.6% 14.9% 15.1%
8.2% 8.7% 8.3%

7.8% 7.8%
7,169 6,630 7,552 8,699 8,769 19,911 19,812 21,638 24,403 26,248
2019 2020 2021 2022 2023ᵖ 2019 2020 2021 2022 2023ᵖ
Share in World Share in Developing Countries
Source: SESRIC staff calculation based on IMF, World Economic Outlook Database, April 2023. Note: P= Projection; Data exclude
Syria for the entire period under consideration and Afghanistan and Lebanon for 2021-2023.

population of developing countries (28.4%) in 2022, their share in GDP, whether in current US
dollars or in current PPP international dollars, remains below the desired levels.
Furthermore, it is observed that a significant part of the total GDP of the OIC countries is still
produced by a few member countries, reflecting wide differences in economic size. In 2022, the
largest five OIC countries accounted for half (49.6%) of the total GDP measured in current US
dollars, while this share reached up to 73.5% for the largest ten countries (Figure 2.2.A).
Indonesia, with a GDP exceeding US$ 1.3 trillion, had the highest share in OIC GDP (15.2%),
followed by Saudi Arabia (12.7%), Türkiye (10.4%), United Arab Emirates (5.8%), and Nigeria
(5.5%).
Figure 2.2 shows that the largest ten countries remain unchanged when GDP is expressed in PPP
international dollars, though the ranking of countries changes due to the difference in purchasing
power stemming from relative price differentials between countries. Indonesia was the largest
economy, with a PPP equivalent of 4.0 trillion dollars that constituted 16.5% of OIC GDP in 2022.
Together with Türkiye (13.7%), Saudi Arabia (8.8%), Egypt (6.9%), and Iran (6.5%), these five
countries accounted for 52.5% of the total OIC GDP while, for the largest ten countries, this share
reached as high as 77.5% (Figure 2.2.B).
Figure 2.2: Top 10 OIC Countries by GDP, 2022

A. In US Dollars (Billion) B. In PPP International Dollars (Billion)
Indonesia 1,319 4,037 Indonesia
Saudi Arabia 1,108 3,352 Türkiye
Türkiye 906 2,150 Saudi Arabia
UAE 508 1,675 Egypt
Nigeria 477 1,597 Iran
Egypt 475 1,518 Pakistan
Bangladesh 460 1,340 Bangladesh
Malaysia 408 1,281 Nigeria

Pakistan 376 1,135 Malaysia
Iran 352 828 UAE
0% 10% 20% 30% 40% 50% 60% 70% 80% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Cumulative Share in Total OIC GDP Cumulative Share in Total OIC GDP
Source: IMF, World Economic Outlook Database, April 2023.
Average GDP per capita exceeds US$ 4,500 in 2022

Given the ongoing recovery in output, per capita GDP values at current prices continued to
increase worldwide in 2022 (Figure 2.3). In US dollar terms, the global average rose by 3.2% from
the previous year to US$ 12,884. The increase in the OIC countries was much larger, with the
average GDP per capita rising by 13.1% to US$ 4,581. Non-OIC developing countries registered a
smaller rate of growth (5.0%), with their average GDP per capita reaching US$ 7,076. Thus,
although GDP per capita continued to be lower in the OIC countries, the gap narrowed to some
extent in 2022 (Figure 2.3.A).

28
Figure 2.3: Average GDP per Capita (at current prices)
A. In US Dollars B. In PPP International Dollars

4,581 12,851
OIC 4,049 2022 2022 11,602 OIC
3,539 2021 2021 10,574
2020 2020
7,076 14,765
Non-OIC Non-OIC
6,739 13,439
Developing Developing
5,764 12,077
53,084 62,925
Developed 52,381 57,491 Developed
47,211 52,240
12,884 21,015
World 12,487 19,170 World
11,048 17,357
Source: SESRIC staff calculation based on IMF, World Economic Outlook Database, April 2023. Note: Data exclude Syria for the
entire period under consideration and Afghanistan and Lebanon for 2021-2022.
In PPP terms, GDP per capita averaged globally at 21,015 dollars in 2022, up 9.6% from a year
earlier. In the OIC countries, it increased by 10.8% to 12,851 dollars, remaining below that in non-
OIC developing countries, which rose 9.9% to 14,765 dollars (Figure 2.3.B).
Among the OIC countries, Qatar had the highest GDP per capita in 2022, ranked globally as the
fifth with a value exceeding US$ 84 thousand. This value was more than 18 times the OIC average
and 178 times the lowest GDP per capita recorded by an OIC member, indicating the wide
disparity among the member countries. Qatar was followed –in descending order– by United
Arab Emirates, Kuwait, Brunei Darussalam, Saudi Arabia, Bahrain, Oman, Guyana, Maldives, and
Turkmenistan (Figure 2.4.A). It is noteworthy that most of them are fossil-fuel-rich countries. In
terms of PPP, this list of countries remained the same except that Türkiye and Malaysia replaced
the Maldives and Turkmenistan. The ranking of countries somewhat changed, though Qatar
Figure 2.4: Top 10 OIC Countries by GDP per Capita, 2022 (at current prices)
A. In US Dollars B. In PPP International Dollars
Qatar 84,425 (5) 115,045 (4) Qatar
UAE 51,306 (16) 83,727 (6) UAE
Kuwait 38,329 (26) 70,500 (11) Brunei
Brunei 37,667 (27) 61,808 (22) Saudi Arabia
Saudi Arabia 31,850 (36) 58,083 (25) Bahrain
Bahrain 28,785 (41) 51,471 (35) Kuwait
Oman 24,772 (45) 42,699 (44) Guyana
Guyana 18,342 (55) 41,251 (48) Oman
Maldives 15,883 (61) 39,301 (52) Türkiye
Turkmenistan 12,500 (70) 34,392 (58) Malaysia
Source: IMF, World Economic Outlook Database, April 2023. Note: The numbers in brackets indicate the global rank of the relevant
country among 193 countries.

continued to top the list with a GDP per capita value of over 115 thousand dollars, ranked fourth
on the global scale (Figure 2.4.B).
Real GDP up 5.6% in 2022, the highest in a decade

Prior to the outbreak of the COVID-19 pandemic, economic growth in the OIC countries followed
a decelerating trend, from 6.0% in 2010 to 2.7% in 2019, averaging annually at 4.3%. Under the
pandemic conditions in 2020, the OIC countries, on average, contracted by 1.6%, but in parallel
with the global economic recovery, they grew by 5.5% in 2021 and 5.6% in 2022, the highest rate
achieved since 2011. However, in line with the global trends, the economic growth in OIC
countries is expected to moderate in the next two years, to 3.5% in 2023 and 3.9% in 2024 (Figure
2.5). It is noteworthy that the average growth rate registered by the OIC countries in 2022 was
higher than the global average. As mentioned in the previous chapter, developing economies
grew by 4.0% and the developed ones by 2.7%, with the global economic growth averaging at
3.5% (see Figure 1.1).
Figure 2.5: Real GDP Growth in OIC Countries

5.5 5.6
5.2
4.3 4.3
4.0 4.1
4.3 3.7
3.5
2.7 3.9
3.5
2010-2019 Average
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023ᵖ 2024ᵖ
-1.6
Source: SESRIC staff calculation based on IMF, World Economic Outlook Database, April 2023 and World Economic Outlook Update,
July 2023. Note: P= Projection
The growth performance of the OIC countries differed across income groups in 2022 (Figure 2.6).
Economies of resource-rich high-income countries, which grew 3.5% in 2021, registered the
highest growth rate of 8.1% in 2022, more than double the 2010-19 average of 3.7%. A slow
growth rate of 2.7% is expected in 2023 before returning to the pre-pandemic average with a
rate of 3.8% in 2023.
Having recorded a higher average economic growth (5.4%) during the past ten years prior to the
pandemic as compared to the other groups, the upper-middle income economies recorded the
strongest recovery in 2021 (6.9%), but growth returned to 5.5% in 2022. Economic growth for
this group is expected to further slowdown in 2023 (4.3%) and 2024 (4.0%).
Least affected from the pandemic (+0.4% in 2020), growth in the lower-middle income
economies remained above the 2010-19 average of 3.7% in both 2021 (5.0%) and 2022 (5.0%).
However, it is expected to moderate in the next two years.

30
Figure 2.6: Economic Growth in the OIC by Income Group (%)

10
2.2
3.5
8.1
2.7
3.8
6.9
5.5
4.3
4.0
0.4
5.0
5.0
3.1
3.7
2.6
3.5
5.0
0
-4.4
-2.4
-2.1
-2
-4
-6
2020
2021
2022
2020
2021
2022
2020
2021
2022
2020
2021
2022
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
2023ᵖ
2024ᵖ
High Income Upper-Middle Income Lower-Middle Income Low Income
Source: SESRIC staff calculation based on IMF, World Economic Outlook Database, April 2023 and World Economic Outlook Update,
July 2023. Note: P= Projection; Dashed lines represent the annual average growth rate during 2010-2019 for the related income
group. See Annex B for the income classification of OIC countries.
The group of low-income countries, which registered a slower average growth rate (2.4%) as
compared to the other income groups during 2010-19, shows a different growth trend. After
contracting by 2.1% in 2020, growth rate in this group remained around the pre-pandemic
average in 2021 (2.6%) and 2022 (2.2%). However, unlike in the other income groups, growth in
low-income countries is expected to increase beyond the pre-pandemic average in the next two
years, to 3.5% in 2023 and 5.0% in the subsequent year.
An important observation here is that high-income countries managed to return to and actually
surpass their pre-pandemic real output level in 2022 thanks to the remarkable growth rate they
achieved that year. All the other groups had already recovered their output from the 2020 crisis
in the subsequent year, 2021. As of 2022, the output of the OIC countries, as a group, was about
10% over the 2019 level, mostly driven by the performance of middle-income countries (Figure
2.7).
Figure 2.7: Real Output Growth in OIC Countries Figure 2.8: The Number of OIC Countries with a
by Income Group (2019=100) Negative Growth Rate*
120 56 56 56 56 56 56 56 56 56
54 54 54 54
115
110 37
105
100
95 8 7
5 5 6 6
2019 2020 2021 2022 2023ᵖ 2024ᵖ 4 3 4 3 2
0
OIC High Income
Upper-Middle Income Lower-Middle Income
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023ᵖ
2024ᵖ
Low Income
Source: SESRIC staff calculation based on IMF, World Economic Outlook Database, April 2023 and World Economic Outlook
Update, July 2023. Note: P= Projection. * Excluding Syria for the entire period and Afghanistan and Lebanon for 2021-2024.

At the individual country level, 3 out of 54 OIC countries with available data recorded a negative
growth rate in 2022: Libya (-12.8%), Sudan (-2.5%), and Brunei Darussalam (-1.5%). Current
projections indicate that economies of two OIC countries (Yemen and Pakistan) are expected to
contract in 2023, while all OIC countries with available data are expected to record a positive
growth rate in 2024 (Figure 2.8).
Guyana was by far the fastest growing Figure 2.9: The Fastest Growing OIC Economies
economy in the OIC and in the world in 2022. in 2022 (%)
IMF data show that the Guyanese economy Guyana 62.3
continues to record exceptional growth rates, Maldives 12.3
estimated at 62.3% in 2022, driven by Niger 11.1
accelerating oil production. The Maldives and Saudi Arabia 8.7
Niger also recorded a two-digit growth rate in Malaysia 8.7
2022, 12.3% and 11.1%, respectively, and Kuwait 8.2
they appeared among the fastest growing 10 Iraq 8.1
economies in the world that year. In addition Tajikistan 8.0
to these three countries, Saudi Arabia, UAE 7.4
Malaysia, Kuwait, Iraq, Tajikistan, United Arab
Bangladesh 7.1
Emirates, and Bangladesh made it to the top
Source: IMF, World Economic Outlook Database, April 2023
ten list of the fastest growing OIC economies and World Economic Outlook Update, July 2023.
in 2022 (Figure 2.9).
Industrial activities contribute more to GDP in 2021 than in 2020

The composition of GDP reveals important insights into the structure of economies (Figure 2.10).
The latest available data for 2021 show that, constituting only 1.3% of total value added in
developed countries, agricultural activities have a high share of 10.9% in total value added in the
OIC countries, which is even higher than that in non-OIC developing countries (8.6%). The
agriculture sector is particularly important for the OIC countries in Sub-Saharan Africa; its share
in total value added reaches as high as 60% in Somalia and Sierra Leone, 46% in Chad, and 39%
in both Comoros and Niger.
The share of the non-manufacturing industry is much higher in the group of OIC countries as
compared to the rest of the world, largely due to the substantial fossil fuel extractive industries
in many OIC countries. Although this share fell slowly over the 2010-2020 period all over the
world, it witnessed an increase in 2021. For the OIC countries, it averaged at 22.1% in 2021 after
falling from 27.5% in 2010 to a record low of 19.5% in 2020. The sector accounts for half of the
total value added in Iraq and Guyana, and over one-third of the total value added in other ten
member countries that are heavily engaged in oil & gas extraction: Qatar, Azerbaijan, Brunei
Darussalam, Kuwait, Gabon, Libya, Oman, Algeria, United Arab Emirates, and Saudi Arabia.
The manufacturing sector, which has greater potential to promote productivity and
competitiveness, has a share of 16.2% in total value added of the OIC countries, which is higher
than that of developed countries (13.6%) but significantly below that of non-OIC developing
countries (22.5%). The sector accounts for 35% of the total value added in Turkmenistan and

32
Figure 2.10: Distribution of Value Added by Major Economic Activity (% of total)

A. Country Group Averages (2010-2021)
100
90
80
48.0 53.7 53.3 50.8 53.2 55.6 56.7 55.6
70
66.8 67.5 68.2 67.1
60 74.8 75.9 76.6 76.1
50
13.8
40 14.3 15.8 16.2
22.3 22.5
30 21.6 22.5
27.5 16.7 17.0 16.5 17.0
20 21.2 19.5 22.1
15.7 13.3 12.7 13.3 14.8 14.4 13.6 13.6
10 12.4 11.0 10.8 11.5
10.8 10.9 11.3 10.9 8.8 8.7 9.0 8.6 9.2 8.4 8.6 9.0
0 4.1 4.4 4.5 4.5
2010 2015 2020 2021 2010 2015 2020 2021 2010 2015 2020 2021 2010 2015 2020 2021
OIC Non-OIC Developing Developed Countries World
Countries
Agriculture Industry (excl. manufacturing) Manufacturing Services
100
B. Top Five OIC Countries by Major Economic Activity (2021) 88 87
90 84
80 70 68
70 60 60
60 50 50
46 49
45 43
50
39 39
40 35
30 25 24 23 22
20
10
0
Jordan
Comoros
Iraq
Brunei
Turkmenistan
Suriname
Lebanon
Chad
Qatar
Palestine
Djibouti
Sierra Leone
Türkiye
Somalia
Guyana
Niger
Malaysia
Azerbaijan
Maldives
Bangladesh
Agriculture Industry (excl. Manufacturing Services

manufacturing)
Source: SESRIC staff calculation based on data –at current prices in US dollars– from UNSD, National Accounts - Analysis of Main
Aggregates (AMA). Note: “Agriculture” comprises agriculture, hunting, forestry, fishing (ISIC A-B), “Industry” comprises mining,
manufacturing, utilities, and construction (ISIC C-F), and “Services” comprises services activities (ISIC G-P). Data coverage: 57 OIC
countries, 115 non-OIC developing countries, and 40 developed countries.
20-25% in six other member countries, namely Türkiye, Malaysia, Suriname, Bangladesh,
Uzbekistan, and Indonesia.
The services sector continues to play a key role in the majority of OIC economies, accounting for
an average of 50.8% of the total value added in the OIC group. This share is still low though,
considering that the sector has a share of three quarters (76.1%) in total value added in
developed countries and 55.6% in non-OIC developing countries, averaging at 67.1% worldwide.
In the OIC countries, this share reaches as high as 88% in Lebanon, 87% in Djibouti, 84% in
Maldives, 70% in Palestine, and 68% in Jordan, while it is at least 50% in 26 other member
countries.
The services sector, growing at an annual average of 3.9% during the past decade, has also been
the dominant contributor to economic growth in the OIC countries, usually accounting for over

60% of the growth in total value Figure 2.11: Sectoral Contribution to Growth in Value
added at constant prices (Figure Added in OIC Countries
2.11). Likewise, growing by 5.9% in 100% 6%
Growth in Total
2021, this sector was the largest 80%
Value Added 5%
(right axis)
contributor to the recovery in total 60%
4%
value added (4.9%) in that year: 3%

40%
almost two-thirds (65%) of the 2%
20%
growth in total value added stemmed 1%
from the services sector. Non- 0% 0%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
manufacturing industry, which was -20% -1%
mainly responsible for the -2%

-40%
contraction in 2021, grew by 2.2% in Agriculture -3%
-60% Industry (excl. manufacturing)
2021 and contributed to the recovery -4%
Manufacturing
by about 9%. The manufacturing -80% -5%
Services
industry, on the other hand, grew by -100% -6%
as high as 7.9% and contributed 23%. Source: SESRIC staff calculation based on data –at constant 2015 prices in
US dollars– from UNSD, National Accounts - Analysis of Main Aggregates
Contribution of the agriculture sector (AMA). Note: “Agriculture” comprises agriculture, hunting, forestry, fishing
was less than 4% – the lowest in the (ISIC A-B), “Industry” comprises mining, manufacturing, utilities, and
construction (ISIC C-F), and “Services” comprises services activities (ISIC G-
past decade – given the slowdown in P). Data coverage: 57 OIC countries.
the sector with growth as low as
1.5%.
The analysis of the composition of GDP from the expenditures side reveals that final consumption
expenditures (by both households and government) continued to have the highest share in GDP
over the years in the OIC countries as well as in the rest of the world (Figure 2.12.A). In 2021,
household consumption accounted for 55.9% of GDP in OIC countries, higher than that in non-
OIC developing countries (48.3%) but slightly lower than that in developed countries (58.6%).
This ratio reached as high as 141% in Somalia and also above 100% in Lebanon, Sierra Leone, and
Yemen, a clear indication that a significant proportion of the private domestic demand was
allocated to imported goods and services. In three other OIC countries, namely Comoros,
Afghanistan, and Guinea-Bissau, this ratio was over 90% as well, but as low as 11% in
Turkmenistan and 20% in Qatar.
The share of general government final consumption expenditures in GDP has been low in OIC
countries relative to both developed and developing countries. In 2021, this share averaged at
13.5% for the OIC countries, 15.6% for non-OIC developing countries, and 18.4% for developed
countries. The highest ratio among the OIC countries was recorded in Libya at 38%, followed by
Saudi Arabia (24%), Palestine (24%), Kuwait (23%), and Brunei Darussalam (22%), while it was less
than 10% in ten countries: Lebanon, Nigeria, Bangladesh, Sierra Leone, Egypt, Sudan, Chad,
Somalia, Turkmenistan, and Indonesia.
Gross capital formation (GCF), also called “investment”, is an important indicator for an economy
in that it shows the total value of additions to productive assets, which are intended for use in
the production of other goods and services. Thus, a high share of GCF in GDP is desirable for long-

34
Figure 2.12: GDP by Expenditure (% of total)
140 A. Country Group Averages (2010-2021)

120
37.0 30.8 28.2 33.4 27.4 25.0 23.4 25.5 27.7 29.3 27.3 29.8 28.8 28.4 26.4 29.0
100
27.6 28.2 27.3 20.8 21.8 22.3 22.5 24.5 25.8 26.3 26.8
80 27.7 32.7 33.1 33.4 34.3
14.9 15.0 13.5 19.0 17.5 18.8 18.4 17.5 16.7 17.7 17.1
60 13.3 15.0 15.7 16.6 15.6
40
53.0 58.3 58.1 55.9 50.6 50.6 48.9 48.3 60.2 60.1 58.5 58.6 57.0 56.9 55.3 54.8
20
0
30.8 31.3 29.8 31.1 26.1 24.3 21.8 24.2 27.7 28.7 26.9 29.4 27.8 27.8 25.7 28.0
20
40
2010 2015 2020 2021 2010 2015 2020 2021 2010 2015 2020 2021 2010 2015 2020 2021
OIC Non-OIC Developing Developed Countries World
Countries
Household Consumption Government Final Consumption Gross Capital Formation Exports Imports (-)
200
B. Top Five OIC Countries by Expenditure Item (2021) 177
180
152
160 141
140 127
120 106 103 105
99
91 93
100 82 80 86 86
76
80
57
60 50 50
38 43 41
40 24 24 23 22
20
0
Comoros
Brunei
Lebanon
Mauritania
Brunei
Lebanon
Palestine
UAE
Kuwait
Mozambique
Turkmenistan
Uzbekistan
UAE
Djibouti
Djibouti
Djibouti
Sierra Leone
Yemen
Somalia
Guyana
Saudi Arabia
Bahrain
Somalia
Guyana
Libya
Household Government Final Gross Capital Exports Imports

Consumption Consumption Formation
Source: SESRIC staff calculation based on data –at current prices in US dollars– from UNSD, National Accounts - Analysis of Main
Aggregates (AMA). Data coverage: 57 OIC countries, 114 non-OIC developing countries, and 40 developed countries.
term economic growth as current investment leads to greater future production. Figure 2.12.A
shows that this share has been relatively stable over the past decade and averaged at 27.3% in
2021 for the OIC countries, lower than the average for non-OIC developing countries (34.3%) but
higher than the average for developed countries (22.5%). GCF accounted for as high as 57% of
GDP in Mauritania and half (50%) of GDP in Mozambique and Turkmenistan, the highest ratios in
the OIC and in the world. This ratio was at least 40% in four other countries (Djibouti, Uzbekistan,
Maldives, and Iran) and less than 10% in three countries (Iraq, Guinea Bissau, and Lebanon).
International trade –in goods and services– continued to account for a higher share of GDP in the
OIC countries than in both developed and developing countries in 2021. Moreover, both exports
and imports had a higher share of GDP in 2021 compared to the previous year in all these groups
of countries, as the pandemic-induced severe disruptions to global supply chains and travel
services phased out. The share of exports increased by 5.1 percentage points from the previous
year and averaged at 33.4% for the OIC countries, while it rose to 25.5% for non-OIC developing

countries and to 29.8% for developed countries. The share of imports increased by 1.3
percentage points to 31.1% for the OIC countries ant it was still higher than the average of both
country groups in comparison (Figure 2.12.A).
Among the OIC countries, Djibouti was the country with the highest exports share in GDP (152%),
ranked sixth on the global scale. This share reached 105% in the United Arab Emirates, 91% in
Bahrain, 82% in Guyana, and 80% in Brunei Darussalam, while it was less than 10% in four
member countries (Comoros, Gambia, Sudan, and Pakistan). As for the imports share in GDP,
Djibouti (177%) also had the top rank in the OIC and the second rank in the world after Hong
Kong, China. This share was as high as 93% in Lebanon, 86% in Somalia and the United Arab
Emirates, 76% in Guyana, and over 50% in twelve other member countries. At the other side of
the spectrum, imports to GDP ratio was as low as 12% in Nigeria and less than 20% in Sudan,
Bangladesh, Pakistan, Indonesia, and Egypt.
UNEMPLOYMENT
Unemployment rate further declined in 2022, will remain stagnant till 2024
Global crises such as the Russia-Ukraine war, soaring food and energy prices, increasing debt and
inflation have negatively affected the labour market recovery from the pandemic. In 2020,
COVID-19 has brought unprecedented disruption to labour markets in the OIC countries just as
in other parts of the world. The challenges induced by the pandemic crisis have exacerbated the
lack of employment opportunities that would have existed even without the pandemic. Labour
markets demonstrated a promising recovery in the past two years following the pandemic;
however, the pace of recovery is expected to reverse after 2022.
After falling to a historically low level of 54.5% worldwide in 2020 due to employment losses, the
employment-to-population ratio (EPR)2 recovered by 1.2 percentage points to 55.7% in 2021 and
further went up by 0.7 percentage points to 56.4% in 2022. However, due to the gloomy
Figure 2.13: Employment-to-Population Ratio Figure 2.14: Unemployment Rate (%)
OIC Developed OIC Developed

Non-OIC Developing World Non-OIC Developing World
60 7.5
7.0
58 6.2 6.3 6.3
6.5
56 6.0
5.5
54
5.0
52 4.5
52.7 52.8
52.7 4.0
50
3.5
48 3.0
2018 2019 2020 2021 2022ᵉ 2023ᵖ 2024ᵖ 2018 2019 2020 2021 2022ᵉ 2023ᵖ 2024ᵖ
Source: Authors’ calculation based on ILOSTAT, ILO Modelled Estimates, November 2022.

36
economic outlook across the world, it is projected to slightly move downwards in the next two
years, remaining below the 2019 level. Although all country groups followed a similar recovery
path, both developed countries and non-OIC developing countries maintained a higher EPR than
the global average. In comparison, EPR continued to be lower in the OIC countries than in the
rest of the world throughout the period under consideration. After bottoming out at as low as
51.5% in 2020, EPR in the OIC countries registered a limited recovery in 2021 – only by 0.5
percentage points to 52% – and then it grew up to 52.7% in 2022. Projections show that the OIC
countries, as a group, will be able to slightly increase EPR, in contrast to the other country groups,
and move closer to the pre-pandemic levels in the next couple of years (Figure 2.13).
As the pandemic transformed from a public health crisis into an employment crisis, millions of
people across the OIC were pushed into unemployment in 2020. According to data from ILO, the
number of unemployed in the OIC countries increased by over 5 million to reach 48.3 million in
2020. Consequently, the unemployment rate bounced to 6.8% in that year, up 0.7 percentage
points from 6.1% in 2019. In the following two years, the number of unemployed people
decreased by 1.3 million and then by 0.7 million to 46.3 million people as of 2022. Consequently,
the unemployment rate also declined by 0.2 percentage points in 2021 and by 0.3 percentage
points to 6.3% in 2022. It is expected to remain at the same rate over the 2023-24 period.
Although both developed countries and non-OIC developing countries were hit harder by the
pandemic, leading to 1.8 percentage points and 1.5 percentage points increases, respectively, in
their unemployment rates in 2020, their recovery has been more substantial in the following two
years. Besides, the unemployment rate remained higher in the OIC countries over the whole
period under consideration except for 2020, when it averaged at 6.8% for the OIC countries
compared with 7% in non-OIC developing countries and 6.9% in the world (Figure 2.14). It is
notable that the OIC countries, with 46.3 million unemployed people, accounted for 22.6% of the
global unemployment in 2022, compared to 21.7% in 2021.
The latest available data show that, in 2022, the unemployment rate fell in 48 OIC countries, and
increased in 8 countries. Varied greatly among the OIC countries, the unemployment rate was as
high as 27.9% in Djibouti (the second highest in the world after South Africa), followed by
Palestine (25.7%), Gabon (21.5%), Libya (20.7%) and Somalia (20%) (Figure 2.15.A). At the other
Figure 2.15: Unemployment Rate in OIC Countries, 2022
A. Top 10 Countries B. Bottom 10 Countries

Djibouti 27.9 0.1 Qatar
Palestine 25.7 0.5 Niger
Gabon OIC 21.5 OIC 1.4 Bahrain
Libya Average 20.7 Average 1.4 Chad
6.3% 6.3%
Somalia 20.0 1.7 Benin
Sudan 18.7 2.3 Oman
Jordan 17.9 2.5 Kuwait
Tunisia 16.1 2.6 Côte d'Ivoire
Iraq 15.5 2.8 UAE
Yemen 13.6 2.8 Mali
0 5 10 15 20 25 30 7 6 5 4 3 2 1 0
Source: ILOSTAT, ILO Modelled Estimates, November 2022.

side of the spectrum, it was as low as 0.1% in Qatar (the lowest in the world), 0.5% in Niger, 1.4%
in Bahrain and Chad, and 1.7% in Benin (Figure 2.15.B).
INFLATION
Consumer price inflation to peak at 20% in 2022

Consumer price inflation – measured by the consumer price index (CPI) – rose in most countries
across the world in 2022. However, on average terms, the increase was more remarkable in the
group of OIC countries (7.4 percentage points) compared to non-OIC developing countries (3.1
percentage points) and developed countries (4.2 percentage points). Inflation in the OIC
countries rose sharply to 20.0% in 2022, compared with 12.6% in 2021. Considering that the
inflation rate increased to 7.3% in developed countries and to 7.6% in non-OIC developing
countries, the OIC countries, on average, continued to have a much higher inflation rate in 2022.
This trend is expected to continue in 2023 as well, although a decline in inflation rates is expected
worldwide in 2023 (Figure 2.16.A).
With the annual inflation rates observed in the 5-year period from 2018 to 2022, the average
consumer prices in the OIC countries were 73.5% higher in 2022 compared to 2017, which was
considerably above the world average increase of 26.1%. In the same period, average prices
increased by 27.4% in non-OIC developing countries and only by 15.1% in developed countries
(Figure 2.16.B).
Among the OIC countries, Sudan recorded the highest annual inflation rate of 138.8% in 2022,
which was also the third highest in the world after Venezuela (200.9%) and Zimbabwe (193.4%).
Then came Türkiye (72.3%), Suriname (52.5%), and Iran (49.0%), all among the top 10 countries
with the highest inflation in the world. Yemen, Sierra Leone, Nigeria, Kazakhstan, Burkina Faso,
and Kyrgyzstan completed the top ten list in the OIC (Figure 2.17). Overall, Türkiye, Iran, Sudan,
Nigeria, and Pakistan –given their weight in the OIC economy– were the largest contributors to
Figure 2.16: Inflation Rate (Annual Average Consumer Prices)

A. Annual Change (%) B. Index (2017=100)
25 220
20.0
20 200
173.5
180
15
160
8.7
10
140 127.4
5 7.3
120 126.1
115.1
0 100
2018 2019 2020 2021 2022 2023ᵖ 2018 2019 2020 2021 2022 2023ᵖ
OIC Developed OIC Developed
Non-OIC Developing World Non-OIC Developing World
Source: SESRIC staff calculation based on IMF, World Economic Outlook, April 2023 and July 2023 Update.
Note: P= Projection. Group averages are calculated as a weighted average of national price indices, with the weights being each
respective country’s GDP in current international dollars based on PPP. The group averages exclude Venezuela.

38
Figure 2.17: Top 10 OIC Countries by Inflation Rate, Figure 2.18: Largest Contributors to
2022 Inflation, 2022 (percentage points)
Sudan 138.8%
Türkiye 72.3% Others
4.0
Suriname 52.5%
Iran 49.0% Pakistan
0.8
Yemen 29.1% Türkiye
Nigeria 20.0% 9.9
Sierra Leone 27.2% 1.0
Sudan
Nigeria 18.8% 1.2
Kazakhstan 15.0%
Iran
Burkina Faso 14.1% 3.2
Kyrgyzstan 13.9%
Source: IMF, World Economic Outlook, April 2023. Note: Annual average change in CPI. Excluding Afghanistan, Lebanon, and Syria.
the average inflation rate in the OIC in 2022 (20.0%), accounting for four-fifths of the rate (Figure
2.18). In 2022, there were no OIC country with a negative inflation rate. The lowest inflation rate
was recorded in Benin at 1.5%, followed by Saudi Arabia (2.5%), Maldives (2.6%), Oman (2.8%),
and Malaysia (3.4%).
INTERNATIONAL TRADE
Merchandise exports and imports further increase by 29.8% and 18.2%, respectively
According to the IMF data (Direction of Trade Statistics – DOTS), the annual value of global
merchandise trade, after falling by 7.3% in 2020 amidst the pandemic, rebounded by 27.0% in
2021 and further went up by 10.8% in 2022. Both exports and imports of the OIC countries
followed a parallel course, though a sharper increase was recorded in exports. Falling by 17.5%
in 2020, merchandise exports of the OIC countries increased by 41.4% in 2021 and further by
29.8% in 2022. Merchandise imports increased by 30.4% in 2021 and by 18.2% in 2022 following
a drop of 9.8% in 2020. Consequently, the exports, which reached as high as US$ 2.74 trillion in
2022, accounted for a higher share of global exports; 11.2% in 2022 compared with 9.6% in 2021.
Similarly, the imports, which increased to US$ 2.44 trillion, had a higher share in global imports,
rising from 9.3% in 2021 to 9.7% in 2022. A similar trend is observed for the OIC countries’ share
in the merchandise trade of developing countries. Their share in exports increased from 22.6%
in 2021 to 25.8% in 2022, while their share in imports went up from 23.4% to 24.9% over the
same period (Figure 2.19).
In terms of the share of individual member countries in total merchandise exports from the OIC
group, it is observed that the bulk of total exports continued to be concentrated in a few
countries (Figure 2.20.A). In 2022, the largest five exporters accounted for 61.3% of total
merchandise exports of all member countries while the largest ten accounted for 79.4%. Saudi
Arabia, with US$ 407 billion worth of merchandise exports and a 14.9% share in total OIC exports,
became the largest exporter among the OIC countries in 2022. It was followed by the United Arab

Figure 2.19: International Merchandise Trade of OIC Countries
25.2% 25.8%
24.2% 24.9%
23.9% 24.1% 23.6% 23.4%
22.6%
21.0%
11.2%
10.1% 9.6% 9.6% 9.7%
8.6% 9.2% 9.2% 9.0% 9.3%
1.96 1.81 1.49 2.11 2.74 1.80 1.75 1.58 2.06 2.44
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
EXPORTS (Trillion US$) IMPORTS (Trillion US$)
% of Developing % of World
Source: SESRIC staff compilation based on data from IMF, Direction of Trade Statistics (DOTS), October 2023.
Note: Exports are valued on a free-on-board (FOB) basis while imports are valued on a cost, insurance, and freight (CIF) basis. Data
coverage: 57 OIC countries.
Emirates (US$ 375 billion, 13.7%), Malaysia (US$ 352 billion, 12.9%), Indonesia (US$ 291 billion,
10.6%), and Türkiye (US$ 254 billion, 9.3%). Additionally, Qatar, Iraq, Kuwait, Kazakhstan, and
Nigeria took place in the list of the top 10 exporters in the OIC in 2022.
As in the case of exports, merchandise imports of the OIC countries were also heavily
concentrated in a few countries in 2022. As depicted in Figure 2.20.B, with US$ 378 billion of
imports, the United Arab Emirates took the lead as the top importer, accounting for 15.5% of the
total imports of the OIC countries. It was followed by Türkiye (US$ 364 billion, 14.9%), Malaysia
(US$ 295 billion, 12.1%), Indonesia (US$ 236 billion, 9.7%), and Saudi Arabia (US$ 184 billion,
7.5%). Accordingly, these largest five importers accounted for 59.8% of the total OIC merchandise
imports, while for the largest ten countries, which additionally included Bangladesh, Egypt,
Morocco, Pakistan, and Nigeria, this ratio reached 74.9%.
Figure 2.20: Major OIC Countries in International Merchandise Trade, 2022 (US$, billion)
A. Top Exporters B. Top Importers

Saudi Arabia 407 (14.9%) 378 (15.5%) UAE
UAE 375 (13.7%) 364 (14.9%) Türkiye
Malaysia 352 (12.9%) 295 (12.1%) Malaysia
Indonesia 291 (10.6%) 236 (9.7%) Indonesia
Türkiye 254 (9.3%) 184 (7.5%) Saudi Arabia

Qatar 131 (4.8%) 80 (3.3%) Bangladesh
Iraq 126 (4.6%) 80 (3.3%) Egypt
Kuwait 89 (3.2%) 73 (3.0%) Morocco
Kazakhstan 83 (3.0%) 71 (2.9%) Pakistan
Nigeria 66 (2.4%) 64 (2.6%) Nigeria
Source: IMF, Direction of Trade Statistics (DOTS), October 2023. Note: The numbers in brackets indicate the share of the respective
country in OIC total. Data coverage: 57 OIC countries.

40
A striking increase in services exports in 2022

The value of global trade in services, which shrank by 17.2% in 2020 from the previous year,
rebounded by 18.8% in 2021 and further grew by 14.8% in 2022, according to statistics from the
World Trade Organization (WTO). After experiencing even a greater fall in services trade in 2020,
the OIC countries also registered a recovery in 2021 followed by an even sharper increase in
2022. Their services exports, plummeted by a third (34.0%) in 2020, increased by 24.8% to
US$ 372 billion in 2021, and then sharply increased – almost by half (47.6%) – to US$ 549 billion
in 2022, such that their share in global services exports increased from 5.7% in 2020 to 6% in
2021 and then to 7.7% in 2022 (Figure 2.21.A). Similarly, their services imports, which fell by
26.7% in 2020, increased by 15.3% and amounted to US$ 509 billion in 2021, then further went
up by 22.1% to 622 billion in 2022, with their share in global services imports increasing to 9.4%
in 2022 from 8.9% in the previous two years (Figure 2.21.B). It is worth noting that the value of
trade in services in 2022 surpassed their pre-pandemic levels both in the OIC countries and in the
world. This implies that the trade in services, which has been hit harder than the trade in goods,
have fully recovered from the pandemic crisis only by 2022.
Figure 2.21: International Services Trade of OIC Countries
A. Exports B. Imports
10.0% 9.9%
9.4%
8.9% 8.9%
7.7%
6.8% 7.2%
5.7% 6.0%
415 452 298 372 549 584 603 442 509 622
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
Value (Billion US$) % of World Value (Billion US$) % of World
Source: WTO, Data Portal, October 2023.
As in the case of merchandise trade, services trade of the OIC countries was also concentrated in
a few countries in 2022. The United Arab Emirates, with US$ 154.7 billion worth of services
exports and a 28.2% share in total services exports of the OIC countries, was the top exporter in
services. It was followed by Türkiye (US$ 90.3 billion, 16.4%), Egypt (US$ 31.9 billion, 5.8%),
Malaysia (US$ 31.7 billion, 5.8%), and Qatar (US$ 31.6 billion, 5.7%) and (Figure 2.22.A).
Together, only the top two countries accounted for as high as 44.6% of the total. For the largest
ten exporters that also included Morocco, Indonesia, Bahrain, Kuwait, and Saudi Arabia, this ratio
increased to 79.7%. Regarding services imports, the United Arab Emirates was the leading
importer as well, registering a value of US$ 96.9 billion that made up 15.6% of the total services
imports of the OIC countries. It was followed by Saudi Arabia (US$ 82.8 billion, 13.3%), Malaysia
(US$ 44.6 billion, 7.2%), Qatar (US$ 43.4billion, 7%), and Türkiye (US$ 41 billion, 6.6%) (Figure
2.22.B). While these largest five importers accounted for half (49.7%) of the total, this ratio

Figure 2.22: Major OIC Countries in International Trade in Services, 2022 (US$, billion)
A. Top Exporters B. Top Importers
UAE 154.7 (28.2%) 96.9 (15.6%) UAE
Türkiye 90.3 (16.4%) 82.8 (13.3%) Saudi Arabia
Egypt 31.9 (5.8%) 44.6 (7.2%) Malaysia
Malaysia 31.7 (5.8%) 43.4 (7.0%) Qatar
Qatar 31.6 (5.7%) 41.0 (6.6%) Türkiye
Morocco 30.7 (5.6%) 40.4 (6.5%) Indonesia
Indonesia 23.1 (4.2%) 27.5 (4.4%) Egypt
Bahrain 22.0 (4.0%) 25.4 (4.1%) Kuwait
Kuwait 11.6 (2.1%) 23.4 (3.8%) Nigeria
Saudi Arabia 10.6 (1.9%) 18.8 (3.0%) Iraq
Source: WTO, Data Portal, October 2023. Note: The numbers in brackets indicate the share of the respective country in OIC total.
reached 71.5% for the largest ten countries that additionally included Indonesia, Egypt, Kuwait,
Nigeria, and Iraq.
Merchandise trade surplus soars in 2022, while deficit in services trade narrows
The OIC countries, on aggregate terms, became a net exporter in merchandise trade in 2021,
with a trade surplus amounting to US$ 50 billion as compared to a deficit of US$ 87 billion in the
previous year. In 2022, the surplus amounted to US$ 303 billion, six times the surplus of the
previous year (Figure 2.23). The largest contribution came from Saudi Arabia, which registered a
surplus of US$ 223.8 billion. Qatar (US$ 98.4 billion), Iraq (US$ 74.6 billion), Kuwait (US$ 60.9
billion), and Malaysia (US$ 57.1 billion) were among the countries with a large surplus. On the
other hand, 37 member countries reported a deficit in 2022, the largest being by Türkiye
(US$ 109.5 billion), followed by Pakistan (US$ 39.8 billion), Bangladesh (US$ 33.3 billion),
Morocco (US$ 32.3 billion), and Egypt (US$ 31.7 billion).
In services trade, the OIC countries,

Figure 2.23: Aggregate Trade Balance of OIC Countries
on aggregate terms, remained a net (US$, billion)
importer over the last 5-year period
400 Goods
of 2018-2022, though the deficit Services
303
300
narrowed over that period. The
200 154
aggregate deficit of OIC countries in
services trade amounted to US$ 72 100 58 50
billion in 2022, the lowest in the 0

period under consideration (Figure
-100
-72
2.23). Of the 49 countries with -87
-200 -151 -143 -137
available data, only 11 countries did -169
report a positive balance in 2021: -300

2018 2019 2020 2021 2022
United Arab Emirates, Türkiye, Source: Authors’ calculation based on IMF, Direction of Trade Statistics
Morocco, Egypt, Maldives, Bahrain, (DOTS), and WTO Data Portal, October 2023.

42
Albania, Jordan, Tunisia, Djibouti and Togo. The surpluses reached as high as US$ 57.7 billion in
the United Arab Emirates, followed by Türkiye with US$ 49.9 billion and Morocco with US$ 11.2
billion. On the other side of the spectrum, deficits reached as high as US$ 50.9 billion in Saudi
Arabia, followed by Indonesia with US$ 20.3 billion and Iraq with US$ 17.0 billion.
Intra-OIC exports further down to 17.3% in 2022

Decreased by 8.1% to US$ 293 billion in 2020, merchandise exports among the OIC countries
(intra-OIC exports) rebounded by 30.3% to US$ 381 billion in 2021 and further rose by 24.4% to
US$ 475 billion in 2022 (Figure 2.24.A). Nevertheless, the OIC countries’ exports to the rest of the
world increased by a higher rate of 43.7% in 2021 and 30.5% in 2022, which could largely be
attributed to resurgent oil exports. This has resulted in a decline in intra-OIC exports share from
19.6% in 2020 to 18.1% in 2021 and further down to 17.3% in 2022 (Figure 2.24.B). The sluggish
growth in intra-OIC trade flows reduces the prospects for achieving the 25% target set in the OIC
Ten-Year Programme of Action (OIC-2025).
Among the OIC countries, Saudi Arabia was the largest exporter to the OIC countries in 2022. The
total exports of Saudi Arabia to other member countries amounted to US$ 94.7 billion,
accounting for 20.0% of the total intra-OIC exports. It was followed by the United Arab Emirates
(US$ 69.2 billion, 16.6%), Türkiye (US$ 64.3 billion, 13.5%), Indonesia (US$ 39.5 billion, 8.3%), and
Malaysia (US$ 37.3 billion, 7.9%). Only the top four countries together accounted for over half
(56.4%) of the total intra-OIC exports, while this ratio reached up to 79.0% for the top 10
countries, which also included Qatar, Egypt, Kazakhstan, Oman, and Bahrain. Of these ten
countries, Bahrain’s exports to the OIC countries accounted for as high as 65.1% of its total
exports, while intra-OIC exports share was as low as 10.6% in Malaysia (Figure 2.25.A).
By comparison, some countries having a relatively lower value of intra-OIC exports directed a
much higher share of their exports to the OIC countries. Indeed, as of 2022, intra-OIC exports
accounted for as high as 93.6% of Yemen’s total exports, though, in value, it was less than
Figure 2.24: Intra-OIC Merchandise Trade
A. Intra-OIC Exports (US$, billion) B. Intra-OIC Exports (%)

500 475
21%
450 19.6%
381 20%
400
329 319 19%
350 18.1%
293
300 17.6%
18% 17.3%
250 16.8%
200 17%
150 16%
100
15%
50
0 14%
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
Source: SESRIC staff calculation based on data from IMF, Direction of Trade Statistics (DOTS), October 2023.

US$ 100 million. Similarly, in three other countries with less than US$ 1 billion of intra-OIC exports
(Somalia, Gambia, and Niger), this share was more than 55% (Figure 2.25.B).
As for intra-OIC imports, the United Arab Emirates was by far the largest importer from the OIC
countries in 2022. Its total imports from other member countries amounted to US$ 77.5 billion,
accounting for 16.0% of the total intra-OIC imports. It was followed by Türkiye (US$ 40.3 billion,
8.3%), Malaysia (US$ 39.4 billion, 8.1%), Saudi Arabia (US$ 36.4 billion, 7.5%), and Indonesia
(US$ 32.3 billion, 6.7%). These largest five importers together accounted for 46.6% of the total
intra-OIC imports in 2022 while this ratio reached up to 70.7% for the largest 10 importers that
Figure 2.25: Major OIC Countries in Intra-OIC Merchandise Trade, 2022

A. Major Exporters C. Major Importers
65.1%
by Intra-OIC Exports Value by Intra-OIC Imports Value
59.1%
51.9%
46.1%
40.3%
35.7%
26.5%
25.8%
25.7%
23.3%
23.2%
21.5%
19.9%
14.7%
14.4%
13.7%
13.6%
13.4%
12.2%
10.6%
77.5
21.0
94.7
69.2
64.3
39.5
37.3
18.8
16.9
12.2
11.6
10.5
40.3
39.4
36.4
32.3
32.2
22.9
20.6
20.5
Egypt
Oman
UAE
Oman
Egypt
UAE
Indonesia
Qatar
Indonesia
Iraq
Pakistan
Türkiye
Türkiye
Saudi Arabia
Malaysia
Malaysia
Saudi Arabia
Bangladesh
Kazakhstan
Bahrain
Value (US$, billion) Share in total exports Value (US$, billion) Share in total imports
B. Major Exporters D. Major Importers

93.6%
by Intra-OIC Exports Share by Intra-OIC Imports Share

63.6%
89.1%
88.2%
59.1%
58.8%
56.7%
53.8%
52.1%
51.2%
66.8%
46.1%
65.9%
65.3%
65.1%
64.8%
64.7%
43.0%
40.4%
56.7%
Value (US$, billion) Share in total imports

32.2
22.9
10.5
0.7
2.7
0.2
3.7
0.3
2.5
0.7
1.3
0.1
3.7
0.6
1.4
2.7
2.1
4.4
0.0
0.3
Mali
Oman
Comoros
Pakistan
Djibouti
Turkmenistan
Benin
Afghanistan
Gambia
Yemen
Lebanon
Kuwait
Togo
Yemen
Syria
Somalia
Niger
Sudan
Gambia
Bahrain
Value (US$, billion) Share in total exports
Source: SESRIC staff calculation based on data from IMF, Direction of Trade Statistics (DOTS), October 2023.

44
also included Pakistan, Oman, Egypt, Bangladesh, and Iraq. From those ten countries, Oman’s
imports from the OIC countries accounted for as high as 59.1% of its total imports, while intra-
OIC imports share was as low as 12-14% in Türkiye, Malaysia, and Indonesia (Figure 2.25.C).
Oman’s intra-OIC imports share was actually the second highest after Benin (63.6%), and it was
followed by Afghanistan (58.8%), Comoros (56.7%), and Mali (53.8%), all receiving at least half of
their merchandise imports from the OIC countries (Figure 2.25.D).
Surplus at 3.4% of GDP in 2022, the highest in nine years

The OIC countries, on aggregate terms, recorded a current account surplus of US$ 299 billion in
2022, more than 2.5 times the surplus of US$ 116 billion in the previous year (Figure 2.26). In
parallel, the surplus as percentage of GDP increased from 1.5% in 2021 to 3.4% in 2022, the
highest ratio observed in the past nine years. Given that the deficit in services trade continued in
2022, as illustrated by Figure 2.23 above,
Figure 2.26: Aggregate Current Account Balance of
the soaring surplus in merchandise trade OIC Countries
(from US$ 50 billion in 2021 to US$ 303
400 3.4% 4%
Billion US$
billion in 2022) contributed significantly
Percent of GDP
to the resulting current account surplus. 300 3%
Looking ahead, the IMF projections 1.5% 2%

200 1.2%
signal a shrinking surplus to US$ 107 0.7%
1%
billion or 1.2% of GDP in 2023.
100
-0.4% 0%
Among the OIC countries, Saudi Arabia 48 116 299 107
0
registered the largest current account -30 -167 -1%
surplus in nominal terms in 2022, which -100 -2%
amounted to US$ 152.8 billion, followed
by the United Arab Emirates (US$ 59.6 -200 -2.5% -3%
2018 2019 2020 2021 2022 2023ᵖ
billion), Qatar (US$ 58.6 billion), Kuwait
Source: IMF, World Economic Outlook, April 2023. Note: Data exclude
(US$ 52.6 billion), and Iraq (US$ 31.4 Syria for the entire period under consideration and Afghanistan and
billion). Türkiye, on the other hand, Lebanon for 2021-2023.
recorded the largest current account

deficit, amounting to US$ 48.7 billion. It was followed by Bangladesh (US$ 18.7 billion), Pakistan
(US$ 17.4 billion), Egypt (US$ 16.6 billion), and Mozambique (US$ 6.5 billion) (Figure 2.27.A). As
a percent of GDP, the surplus reached as high as 30.5% in Azerbaijan, followed by Kuwait (28.5%),
Guyana (27.3%), Brunei Darussalam (26.5%), and Qatar (26.0%). At the other side of the
spectrum, the current account deficit was as high as 36.0% of GDP in Mozambique, 26.8% in
Kyrgyzstan, 18.1% in Maldives, 16.8% in Somalia, and 16.0% in Senegal (Figure 2.27.B), while it
was also above 10% in five other OIC countries: Niger, Gambia, Mauritania, Palestine, and Sierra
Leone.

Figure 2.27: OIC Countries with the Largest Current Account Surpluses/Deficits, 2022
A. Billion US$ B. Percent of GDP
Saudi Arabia 152.8 Azerbaijan 30.5%
UAE 59.6 Kuwait 28.5%
Qatar 58.6 Guyana 27.3%
Kuwait 52.6 Brunei 26.5%
Iraq 31.4 Qatar 26.0%
Mozambique -6.5 Senegal -16.0%
Egypt -16.6 Somalia -16.8%
Pakistan -17.4 Maldives -18.1%
Bangladesh -18.7 Kyrgyzstan -26.8%
Türkiye -48.7 Mozambique -36.0%
Source: IMF, World Economic Outlook, April 2023. Note: Excluding Afghanistan, Syria, and Lebanon.
FISCAL BALANCE
Government deficits narrow down to 0.7% of GDP in 2022

Government deficits in the OIC countries, on average, continued to narrow in 2022, down to 0.7%
of GDP, from 3.5% in 2021 and the historically high level of 6.7% in 2020. This improvement
resulted from both an increase in revenues and a decrease in expenditures, both as percentage
of GDP. Indeed, revenues increased from as low as 20.4% of GDP in 2020 to 21.2% in 2021 and
to 22.9% in 2022. Revitalisation of oil exports revenue along with the economic recovery and
rising energy prices played a significant role in this picture. Expenditures, on the other hand,
decreased from as high as 27.1% of GDP first to 24.7% and then to 23.6% over the same period.
Current projections for the year 2023 Figure 2.28: Government Fiscal Balance in the OIC (% of
signal a deviation from this trend, GDP)
with expenditures rising to 25.2% of
30 27.1 Expenditures
GDP, revenues falling to 22.3% of 25.4 25.6 24.7 25.2
23.6
25
GDP, and deficits expanding to 2.9%
of GDP (Figure 2.28). 20 23.0 22.6 22.9 22.3
20.4 21.2 Revenues
15
Figure 2.29 shows that 37 of the 54
10
OIC countries with available data
witnessed an improvement in their 5
Net Lending/Borrowing
fiscal balance as percent of GDP in 0
2022 as compared to the previous -5 -2.3
-0.7
-3.1 -3.5 -2.9
year, particularly Qatar (from +4.4%
-10 -6.7
to +14.2%), Oman (from -3.2% to 2018 2019 2020 2021 2022 2023ᵖ
+6.3%), Algeria (from -7.2% to Source: SESRIC staff compilation based on data from IMF, World Economic
+2.2%), Kuwait (from +2.3% to Outlook, April 2023. Note: Data exclude Syria for the entire period under
consideration and Afghanistan and Lebanon for 2021-2023.
+11.6%), and Brunei Darussalam

46
Figure 2.29: Government Fiscal Balance in OIC Countries: 2021 vs. 2022 (% of GDP)
15 QAT
KWT
10 ARE
Net Lending/Borrowing, 2022
OMN IRQ AZE

TCD
5
SAU LBY
DZA GAB
BRN TKM
KAZ SOM
PSE OICDJI GIN 0 MRT
-15 -10 -5IDNTURCMR YEMSDN 0 5 10 15
SUR BGDCOM
IRN
BHR GUY MAR MOZ -5
UGA
EGY
TUN NER CIV
JOR
PAK TGO
BFA
SLE -10
MDV
-15
Net Lending/Borrowing, 2021
Source: IMF, World Economic Outlook, April 2023. Note: See Annex A for the country codes.
(from -8.0% to +0.3%). Moreover, while only seven countries recorded a surplus in 2021 (Libya,
Qatar, Azerbaijan, the United Arab Emirates, Mauritania, Kuwait, and Turkmenistan), this number
increased to 15 in 2022, led by Qatar (14.2%) and followed by Kuwait (11.6%), the United Arab
Emirates (9.0%), Iraq (6.4%), and Oman (6.3%). On the other hand, Maldives had the largest fiscal
deficit as a percent of GDP in 2022, reaching as high as 12.0%, followed by Sierra Leone (10.9%),
Burkina Faso (10.4%), Pakistan (7.8%), and Togo (7.3%).
INTERNATIONAL FINANCE
Share of OIC countries in global FDI inflows up to 10.5% despite declining inflows
After a dramatic fall (43.7%) in 2020 due to the pandemic crisis, global FDI inflows increased by
half (53.7%) to US$ 1.5 trillion in 2021. This recovery was followed by a 12.4% decrease to US$ 1.3
trillion in 2022, resulting mainly from a 21.6% decrease in flows to developed countries,
compared to a 2.3% decrease in flows to developing countries. Following a fall of 15.2% to US$ 98
billion in 2020, flows to the OIC countries rebounded by 40.6% and reached as high as US$ 138
billion in 2021. A slight decrease of 1.7% to US$ 135 billion was recorded in 2022. The smaller
decline in flows to the OIC countries resulted in a slight increase in their share in flows to
developing countries, but a large increase in their share in global flows in 2022. The share of OIC
countries in flows to developing countries was measured at 19.7% in 2022, up from 19.5% in
2021. Similarly, their share in global FDI inflows reached a decade high of 10.5% in 2022,
compared to 9.3% in 2021 (Figure 2.30).
Greenfield investments3 are of particular importance to developing countries due to greater

growth and employment opportunities they have to offer. The value of announced greenfield FDI
projects further increased globally by 64.2% to US$ 1.2 trillion in 2022, following a rebound of

22.3% to US$ 739 billion in 2021 from a Figure 2.30: FDI Inflows to OIC Countries
record low level of US$ 604 billion in 2020. A
Billion US$ % of Developing
larger part (61.5%) of this significant
160 % of World 25%
increase in 2022 originated from the
140 20.1% 19.5% 19.7%
18.9% 19.4%
increase in investments going to developing 20%
120
countries. The OIC countries witnessed a
100
substantial improvement both in value and 15%
80 10.5%
in the number of announced greenfield FDI 10.2%
9.3%
7.8% 10%
projects (Figure 2.31). The number of 60 6.8%
projects increased by half (54%) to 2549 40
5%
while the value of the projects almost 20
107 115 98 138 135
tripled, rising by 189% to US$ 281 billion – 0 0%
the highest level seen since 2008. 2018 2019 2020 2021 2022
Accordingly, in terms of the number of Source: SESRIC staff calculation based on data from UNCTAD,
projects, the OIC countries accounted for World Investment Report 2023, Annex Tables.
14.5% of the world total in 2022, compared

with 10.8% in 2021, while their share in the total for developing countries increased from 29.4%
to 34.9% over the same period. In terms of the value of projects, their share in the world total
reversed its downward trend and increased to as high as 23.2% in 2022, while their share in the
total for developing countries increased to a record high of 46.8% in 2022.
With the developments above, global inward FDI stock reached US$ 44.3 trillion in 2022, 36.5%
up from the level in 2018. In the same 5-year period, FDI stocks increased by 18.4% to US$ 2.3
trillion in the OIC countries while they increased by 53.4% in non-OIC developing countries and
by 33.9% in developed countries (Figure 2.32). Thus, OIC countries hosted a slightly lower share
of the global inward FDI stocks in 2022 (5.3%) than in 2018 (6.1%). The bulk of global stocks
continued to be hosted by developed countries, which had a share of 73.8% in 2022.
Figure 2.31: Announced Greenfield Investment Projects Destined to OIC Countries
A. Number of Deals B. Value (Billion US$)

3000 50% 300 46.8% 50%
2500 250
34.9% 40% 35.2% 40%
31.5%
2000 29.4% 200 29.3%
25.9% 27.1% 26.3%
30% 30%
23.0% 23.2%
1500 150
17.8% 17.8%
14.5% 20% 15.4% 20%
1000 100 13.2%
9.9% 10.9% 10.0% 10.8%
10% 10%
500 50
1976 2166 1333 1655 2549 190 140 108 97 281
0 0% 0 0%
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
% of Developing % of World % of Developing % of World
Source: SESRIC staff calculation based on data from UNCTAD, World Investment Report 2023, Annex Tables.

48
Figure 2.32: Inward FDI Stock (US$, trillion) As is the case with other major
macroeconomic aggregates, inward FDI
▲33.9%
2018 2022 flows and stocks, too, exhibited a high level
32.6 of concentration among the OIC countries,
with the bulk of the flows persistently
24.4 directed to only a few of them. Inflows to
only the United Arab Emirates (US$ 22.7
billion), Indonesia (US$ 22.0 billion), and
▲53.4% Malaysia (US$ 16.9 billion) accounted for
45.5% of total inflows to all OIC countries in
9.3
▲18.4% 2022. This ratio reached 63.4% for the top
6.0
2.0 2.3 five countries and as high as 82.3% for the
OIC Non-OIC Developing Developed top ten countries (Figure 2.33.A). In the case
Source: SESRIC staff calculation based on data from UNCTAD,
of inward FDI stocks, the top five countries,
World Investment Report 2023, Annex Tables. as of 2022, hosted 46.4% of the OIC total
while the top ten countries accounted for a
share of 68.8% (Figure 2.33.B). With US$ 269 billion of inward FDI stocks (11.5% of the OIC total),
Saudi Arabia ranked first among the OIC countries. It was followed by Indonesia (US$ 263 billion,
11.2%), Malaysia (US$ 199 billion, 8.5%), United Arab Emirates (US$ 194 billion, 8.3%), and
Türkiye (US$ 165 billion, 7.0%).
Figure 2.33: OIC Countries with the Largest Inward FDI, 2022 (US$, billion)
A. Flows B. Stocks
22.7 269
UAE Saudi Arabia
(16.8%) (11.5%)
22.0 263
Indonesia Indonesia
(16.2%) (11.2%)
16.9
Malaysia 199 (8.5%) Malaysia
(12.5%)
Türkiye 12.9 (9.5%) 194 (8.3%) UAE
Egypt 11.4 (8.4%) 165 (7.0%) Türkiye
Saudi Arabia 7.9 (5.8%) 154 (6.6%) Kazakhstan
Kazakhstan 6.1 (4.5%) 149 (6.3%) Egypt
Guyana 4.4 (3.3%) 88 (3.8%) Nigeria
Oman 3.7 (2.7%) 71 (3.0%) Lebanon
Bangladesh 3.5 (2.6%) 63 (2.7%) Morocco
Source: UNCTAD, World Investment Report 2023, Annex Tables. Note: The numbers in brackets indicate the share of the respective
country in OIC total.
Total external debt stock up 4.1% to US$ 2.1 trillion in 2021

The total external debt stock of the OIC countries increased by US$ 81 billion or 4.1% to
US$ 2,064 billion in 2021 from US$ 1,983 billion in 2020. Use of IMF credit, which expanded by
US$ 45.7 billion or 60.7% to US$ 120.9 billion, contributed the most to this increase although it
was still the smallest component of the total external debt stock of the OIC countries (Figure
2.34). This type of debt made up 5.9% of the total external debt stock in 2021, up from 3.8% in
the previous year.

Figure 2.34: Total External Debt Stock of OIC Countries by Component

A. Value (Billion US$) B. Share in Total
2,500 2.8% 2.7% 2.8% 3.8% 100%
5.9%
2,064 15.4% 14.5% 14.5% 14.8% 90%
1,983 14.7%
1,875
2,000 1,798 120.9 80%
1,722
303.2 70%
1,500 46.2% 48.5% 49.9% 60%
51.3% 50.8%
50%
1,049.0
1,000 40%
30%
500 35.6% 20%
34.4% 32.8% 30.0%
Private nonguaranteed debt 591.3 28.6%
10%
0 0%
2017 2018 2019 2020 2021 2017 2018 2019 2020 2021
Source: SESRIC staff compilation based on data from World Bank, World Development Indicators. Data Coverage: 46 OIC countries
(excluding Bahrain, Brunei Darussalam, Kuwait, Libya, Malaysia, Oman, Palestine, Qatar, Saudi Arabia, Suriname, and the United
Arab Emirates).
Public and publicly guaranteed debt increased by US$ 30.7 billion or 3.0% in 2021 and continued
to be the largest component of the total external debt stock. However, its share decreased to
50.8% in 2021 from 51.3% in 2020 because of the much larger increase in the use of IMF credits.
Private nonguaranteed debt continued to decrease for the third consecutive year after peaking
at US$ 617.8 billion in 2018. In 2021, it fell by US$ 4 billion or 0.7% from the previous year and
amounted to US$ 591.3 billion. Thus, as the second largest component of total external debt
stock, it had a share of 28.6% in 2021, down from 35.6% in 2017. Overall, long-term debt stock,
comprising public, publicly guaranteed, and private nonguaranteed debt, amounted to US$ 1,640
billion in 2021, up US$ 26.7 billion or 1.7% from the previous year, and accounted for 79.5% of
the total external debt stock. Short-term debt reached US$ 303.2 billion in 2021, with an increase
of US$ 8.9 billion or 3.0% from the previous year, and maintained its share at around 15%.
From the OIC countries, Bangladesh’s total external debt stock increased the most in nominal
terms (by US$ 17.9 billion) over 2020/2021. Pakistan and Egypt followed with an increase of
US$ 14.7 billion and US$ 13.5 billion, respectively. On the other hand, 10 out of the 46 countries
with debt data recorded a decrease in their debt stock over the same period, namely Türkiye,
Lebanon, Kazakhstan, Sudan, Azerbaijan, Iraq, Mauritania, Turkmenistan, Indonesia, and
Morocco. As of 2021, Türkiye remained the most indebted OIC country in nominal terms with a
total external debt stock value of US$ 435 billion, accounting for 21.1% of the total external debt
stock of the OIC countries for which data were available. Türkiye was followed by Indonesia
(US$ 416 billion), Kazakhstan (US$ 160 billion), Egypt (US$ 143 billion), and Pakistan (US$ 130
billion) (Figure 2.35). Türkiye and Indonesia together accounted for more than two-fifths (41.6%)
of the total external debt stock of OIC countries in 2021.
In terms of the debt burden in relation to a country’s economic size, however, Mozambique was
by far the most indebted OIC country in 2021, with its external debt stock more than quadruple
its gross national income (GNI). To be more precise, it had a debt-to-GNI ratio of 406.9%. It was

50
Figure 2.35: Indebtedness of OIC Countries, 2021

450%
MOZ
400%
External Debt Stock (Percent of GNI)
350%
LBN
300%
250%
200%
150%
KGZ SEN
100% DJI JOR KAZ
MDV TUN
SDN
UGACIVUZB MAR TUR
50% PAKEGY Average = 38.6% IDN
IRQ NGABGD
DZAIRN
0%
0 50 100 150 200 250 300 350 400 450
External Debt Stock (Billion US$)
Source: SESRIC staff compilation based on data from World Bank, World Development Indicators. Note: See Annex A for the
country codes. Data coverage: 43 OIC countries (excluding Syria, Turkmenistan, and Yemen due to unavailable GNI data as well as
the 11 countries excluded from Figure 2.34).
followed by Lebanon (309.2%), Kyrgyzstan (111.6%), Senegal (107.7%), and Djibouti (96.4%)
(Figure 2.35). Debt-to-GNI ratio averaged at 38.6% for the OIC countries in 2021, decreasing 3.5
percentage points from the previous year’s average of 42.1%. While 23 out of 43 countries with
available data recorded a decrease, Sudan recorded the largest one, 24.3 percentage points,
followed by Maldives (22.2), Mauritania (19.9), Mozambique (18.8), and Kazakhstan (11.1). On
the other hand, Lebanon recorded the largest increase in the ratio, 84.9 percentage points,
followed by Senegal (10.5), Djibouti (9.4), Afghanistan (9.1), and Togo (7.3).
As the pandemic wreaked havoc on economies worldwide, governments called upon

expansionary fiscal policies to stimulate growth and tackle the economic downturn. However,
increased government spending led to a surge in debt levels, both domestic and external. As a
result, many countries are struggling with the burden of servicing their external debt obligations
and maintaining fiscal discipline. Policymakers are faced with the difficult task of striking a
balance between driving economic recovery and ensuring debt sustainability, while also
considering the potential spill over effects on global financial stability. Close monitoring and
effective implementation of fiscal policies will play a crucial role in managing external debt and
safeguarding sustainable economic growth in the post-pandemic world.
Reserves up 2%, but reserve adequacy deteriorated

At the outbreak of the COVID-19 crisis, developing countries faced unprecedented capital
outflows, driven by sales of portfolio assets by foreign investors (OECD, 2020a), a usual pattern
whereby international investors transfer capital back home or invest in safer assets during
periods of uncertainty. Policy makers have relied on a variety of policy tools, including making
use of international reserves, to cope with the pandemic crisis and the associated financial

instabilities. In the face of global dollar liquidity shortages, some central banks in developing
countries intervened in the foreign exchange market to support depreciating currencies, and
several central banks have established or expanded swap lines to improve their foreign exchange
reserves.
The capacity to use international reserves in times of crisis depends on the buffers built up over
time, as well as the funding needs. Therefore, the COVID-19 crisis and the associated financial
shocks have once again highlighted the need for having sufficient international reserve buffers to
help preserving macroeconomic and financial stability in the face of such shocks. In this respect,
given the differences in availability of reserves between countries, the shock has not been
uniform across countries and they have not entered the crisis in the same way.
Figure 2.36: Total Reserves Including Gold (US$, trillion) In line with the global economic
recovery from the pandemic,
Developed Developing World reserves and reserve adequacy levels
15.8
16 15.0 14.8 were expected to improve in 2022,
14 13.1
13.7 but this was not realized. Thus, the
strength to withstand potential
12
shocks and maintain financial
10 stability worsened. World total
8.4
7.3
7.6
8.1
7.4
8.0
international reserves4 amounted to
8 7.0 6.7
5.8
6.1 US$ 14.8 trillion in 2022, with a
6
decrease of US$ 1 trillion or 6.5%
4 from the previous year (Figure 2.36).
Two-thirds (68%) of this decrease
2
originated from developed countries,
0 of which reserves fell by US$ 689
2018 2019 2020 2021 2022
billion, or 9.3%, to US$ 6.7 trillion. In
Source: IMF, International Financial Statistics.
developing countries, reserves
decreased by US$ 332 billion, or 4.0%, to US$ 8.0 trillion. Accordingly, developed countries
decreased their share in global reserves from 47.0% in 2021 to 45.6% in 2022, while developing
countries continued to hold the greater part. For countries not having achieved sufficient reserve
levels and still facing challenges in strengthening their financial positions, it is important to
continue pursuing prudent risk management practices and implementing regulatory reforms to
further enhance their reserve adequacy levels.
In the OIC countries, the 2022 data available for 36 member countries indicate an increase in
reserves by 2.0% to US$ 1.66 trillion in 2022. Among half (18) of the countries that recorded an
increase in their reserves in 2022, Iraq took the lead with an increase of US$ 32.8 billion. It was
followed by Algeria (US$ 15.6 billion), Türkiye (US$ 14.2 billion), United Arab Emirates (US$ 7.3
billion), and Qatar (US$ 5.2 billion). The proportional increase was remarkable in the reserves of
Tajikistan (54%), Iraq (51%), Azerbaijan (35.9%), Algeria (27.8%), and Suriname (20.4%). Among
the countries with decreasing reserves in 2022, Pakistan recorded the largest decrease, US$ 12.9
billion, followed by Bangladesh (US$ 12.4 billion), Indonesia (US$ 7.7 billion), Egypt (US$ 7.7

52
billion), and Nigeria (US$ 4.9 billion). Proportionally, the largest decreases were recorded in the
reserves of Pakistan (56.5%), Sierra Leone (34%), Bangladesh (26.9%), Yemen (25.9%), and
Mozambique (22.3%). Overall, as of 2022, Saudi Arabia had the largest international reserves that
amounted to US$ 478.2 billion, followed by the United Arab Emirates (US$ 138.4 billion),
Indonesia (US$ 137.2 billion), Türkiye (US$ 123.7 billion), and Malaysia (US$ 114.7 billion).
While half of the OIC countries Figure 2.37: Total Reserves in Months of Imports
improved their reserves in 2022, the
reserves in months of imports5 30
Arabia
Saudi
deteriorated in most of them, as
shown in Figure 2.37 for the 20 25
2021
countries with available data. Given 2022
Uzbekistan
Algeria
20
that imports of goods and services
increased in all of them, behind this
Kuwait
15
deterioration was a decline in
Tajikistan
Bangladesh
Indonesia
Albania
Morocco
Kazakhstan
Mozambique
Azerbaijan
reserves in some cases6 or a higher
Suriname
Nigeria
Malaysia
Qatar
10
Türkiye
Pakistan
increase in imports than in reserves
Maldives
Palestine
in some other cases7. Only Algeria, 5
Tajikistan, and Suriname improved
their reserve adequacy in relation to 0
imports. Saudi Arabia, with reserves
Source: World Bank, World Development Indicators.
equivalent to 20.9 months of
imports, had the highest reserve adequacy in 2022. Algeria followed it with enough reserves to
cover 16.2 months of imports. In addition, Uzbekistan (11.0) and Kuwait (10.3) exceeded the
global average of 9.2 months.
Net ODA received up 5.7% to US$ 78.3 billion in 2021

Provided to promote economic development and welfare in recipient countries and territories,
Official Development Assistance (ODA) continues to be an important source of financing for many
developing countries, including the OIC countries. In 2021, net ODA flows received by the
developing world reached US$ 203.9 billion, its highest level ever, with an increase of US$ 9
billion, or 4.6%, from the previous year (Figure 2.38). According to the OECD (2023), this upward
trend is driven by both a rise in bilateral and multilateral aid, reflecting continued commitment
from donor countries to support developing nations. Key areas of focus for ODA include health,
education, and infrastructure development, with the aim of promoting sustainable and inclusive
growth in recipient countries. However, significant challenges remain, particularly with regard to
addressing the ongoing impacts of the pandemic, climate change, and humanitarian crises.
Ongoing efforts are necessary for sustained and equitable progress in achieving the Sustainable
Development Goals.
The flows that were reported at the individual country level decreased by 1.7% and amounted to
US$ 133.8 billion in 2021, accounting for 66% of the total ODA flows. ODA flows to the OIC
countries reached US$ 78.3 billion in 2021, up 5.7% from US$ 74.1 billion in 2020. Flows to non-

OIC developing countries, on the other hand, decreased by 10.5% to US$ 55.5 billion in 2021.
Accordingly, the OIC countries had a higher share of the total ODA flows to individual developing
countries in 2021 (58.5%) as compared to the previous year (54.5%). 8
Regarding the distribution of the ODA flows among the OIC countries in 2021, the largest five
recipients accounted for 40.2% of total ODA flows to the OIC countries, while this ratio reached
as high as 60.3% for the largest ten recipients. Syria, with total inflows of US$ 9.7 billion that
made up 12.4% of the OIC total, ranked first not only among the OIC countries but also among
all developing countries. It was followed by Egypt (US$ 8.2 billion, 10.5%), Bangladesh (US$ 5.0
billion, 6.4%), Afghanistan (US$ 4.7 billion, 5.9%), and Yemen (US$ 3.9 billion, 4.9%) (Figure 2.39).
Figure 2.38: Net ODA Received (US$, billion) Figure 2.39: Top ODA Recipient OIC Countries,
2021 (US$, billion)
225
203.9 Syria* 9.7
194.8
200
Egypt 8.2
165.1 167.6 163.5
175 53.6
Bangladesh 5.0
150 Unspecified
16.4 Afghanistan 4.7
125
Regional Yemen 3.9
55.5
100
Sudan 3.8
Non-OIC Developing
75
Jordan 3.4
50
OIC Countries Nigeria 3.4
74.1 78.3
62.2 64.8 61.8
25
Pakistan 2.7
0
Uganda 2.5
2017 2018 2019 2020 2021
Source: OECD.Stat. Note: Net total ODA received from official donors at current prices. Data coverage: 50 OIC countries (excluding
Bahrain, Brunei Darussalam, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) and 99 non-OIC developing
countries. For the period under consideration, about 33% of the annual total ODA value is reported as “unspecified” or “regional”,
not at the country level. (*) Membership to the OIC is currently suspended.
Personal remittance inflows up 4.6% to US$ 195 billion

Despite the COVID-19 pandemic, remittance flows remained resilient in 2020 across the world
and improved afterwards. At the global level, officially recorded remittance flows reached
US$ 767 billion in 2022, up 3.7% from US$ 739 billion in the previous year. Inflows to the OIC
countries increased by 4.6% or US$ 8.6 billion to US$ 195 billion, while inflows to non-OIC
developing countries amounted to US$ 418 billion with an increase of 2.3%. Developed countries,
on the other hand, recorded a higher rate of growth in remittance inflows. Increasing by 6.5%
from 2021, these flows reached US$ 154 billion in 2022 (Figure 2.40.A). Accordingly, the share of
the OIC countries in world total remittance flows slightly increased to 25.4% in 2022, compared
with 25.2% in the previous year (Figure 2.40.B).
In 2022, of the 50 OIC countries for which data are available, 20 experienced a decrease in
remittance inflows from the previous year. Egypt (US$ 3.2 billion), Pakistan (US$ 1.4 billion),
Kuwait (US$ 785 million), Bangladesh (US$ 702 million), and Senegal (US$ 597 million)

54
Figure 2.40: Personal Remittances Received (US$, billion)
A. Value (Billion US$) B. Share in World Total

450 100%
19.5%
20.0%
20.2%
20.6%
20.8%
400 90%
350 80%
70%
300
60%
55.3%
54.5%
54.7%
54.3%
54.3%
250
50%
200
40%
150
30%
100 20%
25.4%
25.2%
25.1%
25.1%
24.9%
50
133
158
344
132
165
357
135
165
360
186
409
144
195
418
154
10%
0 0%
2018 2019 2020 2021 2022 2018 2019 2020 2021 2022
OIC Non-OIC Developing Developed
Source: SESRIC staff compilation based on data from World Bank, World Development Indicators.
Note: Data on the group OIC countries exclude Bahrain, Chad, Iran, Libya, Syria, Turkmenistan, and the United Arab Emirates.
experienced the largest decreases while Uzbekistan (US$ 7.5 billion), Tajikistan (US$ 2.4 billion),
Azerbaijan (US$ 2.4 billion), Nigeria (US$ 644 million), and Indonesia (US$ 557 million) reported
the largest increases.
As of 2022, a significant proportion of remittance flows to the OIC countries was still
concentrated in a few members. Flows to Pakistan, despite a decrease of 4.6% from the previous
year to US$ 29.9 billion, was the largest among the OIC countries, accounting for 15.3% of the
OIC total. It was followed by Egypt (US$ 28.3 billion), Bangladesh (US$ 21.5 billion), Nigeria
(US$ 20.1 billion), and Uzbekistan (US$ 16.7 billion). These five countries together accounted for
59.8% of total remittances received by the OIC countries in 2022, while this ratio reached as high
Figure 2.41: Personal Remittance Inflows to OIC Countries, 2022

60
TJK
50
Remittance Inflows (Percent of GDP)
40
30 KGZ
GMB
COM SOM PSE UZB

20
GNB JOR
10 TGO ALBSEN MAR PAK
SLE MLI TUN EGY
AZE NGA BGD
Average = 2.41%
IDN
0
0 5 10 15 20 25 30
Remittance Inflows (Billion US$)
Source: SESRIC staff compilation based on data from World Bank, World Development Indicators.
Note: See Annex A for the country codes. Data coverage: 47 OIC countries (excluding Afghanistan, Lebanon, and Yemen due to
unavailable GDP data as well as the 7 countries excluded from Figure 2.40).

as 79.2% for the largest ten recipients. Nevertheless, in four of the top five countries, the share
of remittance inflows in GDP was less than 10% and much lower than in many other member
countries with a smaller amount of inflows. The top recipients in terms of the share of
remittances in GDP in 2022 included Tajikistan (50.9%), Kyrgyzstan (29.5%), Gambia (27.1%),
Somalia (21.4%), Palestine (21.2%), Comoros (20.9%), and Uzbekistan (20.8%). On average,
remittance inflows accounted for 2.4% of GDP in the recipient OIC countries in 2022 (Figure 2.41).

56
Chapter 2: Production, Growth and Employment
SPECIAL COVERAGE
SPECIAL COVERAGE:
THE RISE OF THE DIGITAL
ECONOMY AND BRIDGING
THE DIGITAL DIVIDE

SPECIAL COVERAGE: The Rise of Digital Economy and BridgingThe
theRise of the
Digital Digital Economy and Bridging the Digital Divide
Divide
CHAPTER THREE
3 Changing Patterns of
Production and Trade
with Rising Digitalization

58
Chapter 3: Changing Patterns of Production and Trade with Rising Digitalization
T
he world economy is witnessing a new form of transformation characterized mainly by
rising digitalization, automation and artificial intelligence. Unlike other technological
innovations, digitization builds on the evolution of network access technologies,
semiconductor technologies, software engineering and the spillover effects resulting from their
use (ITU, 2020a). They not only change the production processes but also significantly affect the
nature of work, which requires a thorough review of the emerging challenges and opportunities
to develop appropriate policy responses at individual country level. In this connection, this
chapter aims to establish the linkages between technological development, innovation and
industrialization, and provides some broad discussions on the importance of emerging
technologies.
3.1 Revisiting Industrial Development in a Digital World

Industrialization has been a key driver for the expansion of production and trade over the last
century. Fall in trade, transport, and communication costs has facilitated its further
fragmentation into parts and tasks, and contributed to regional and economic integration of
countries around the world through the creation of value chains, ultimately lifting millions of
people out of poverty. Specialization in production helped countries to benefit from scale
economies with greater competitiveness and productivity advantages. Countries with a broad
and robust domestic manufacturing base achieved a diversified economy, which generated
productive linkages with other sectors of the economy, further driving technological progress.
On the other hand, countries with limited sophistication of production and trade structure
experienced losses in competitiveness and witnessed widening income gaps with frontier
economies.
Over the last few decades, production and trade have been heavily dominated by international
production networks, which require the combination of parts and components from many
different locations and suppliers. This offered opportunities for developing countries to integrate
into the global economy by investing in capacities to meet the global demands for intermediate
goods at competitive prices and quality. Some countries with effective industrialization and
investment promotion policies succeeded in transforming their economies towards more value-
added production. Investment in skills development, institutional quality, effective allocation of
resources and promotion of innovation and technological development all contributed to this
achievement.
A well-diversified manufacturing industry is considered as an important catalyser of better

economic performance. It has been where the technological progress takes place, as it is the
most research and development (R&D) intensive industry. The manufacturing sector also tends
to be the strongest driver for the employment of wageworkers, especially in developing countries
(ILO, 2014). Even though there have been historically many attempts by developing countries to
develop their economies through industrialization, many of the interventions failed to produce
the desired outcomes. Similarly, many OIC economies could attain limited success in creating a
diversified manufacturing industry. The digitalization of economies now offers a new set of
opportunities and challenges for the OIC countries.

SPECIAL COVERAGE: The Rise of Digital Economy and Bridging the Digital Divide
3.1.1 Widening Gaps with Industrial Revolutions

Manufacturing industries have been a driver of development over the last two centuries, thanks
to continuous investment in R&D. Advancements in science, technology and innovation
stimulated industrial development and economic growth. Industrialisation began with the
introduction of mechanical manufacturing equipment at the end of the 18 th century, when
machines revolutionised the production process. It was followed by a second one that began
around the turn of the 20th century with the introduction of electrically powered mass production
of goods based on the division of labour. This was superseded by the third industrial revolution
that started during the early 1970s, which employed electronics and information technology (IT)
to achieve increased automation of manufacturing processes (ISRA, 2013). The fourth industrial
revolution was triggered by the entry of the internet into industrial organisations (Figure 3.1).
Figure 3.1: A History of Industrial Revolutions
1st Industrial 2nd Industrial 3rd Industrial 4th Industrial

Revolution Revolution Revolution Revolution
Beginning of 20th
Late 18th Century 1970s-2000s 2010 onward
Century
Through introduction of Through introduction of Through application of On the basis of cyber-

mechanical production mass production with electronics and IT to physical production (CPP)
facilities with the help of the help of electrical further automate systems, merging of real and
water and steam power energy production virtual worlds
Source: Compiled by author from various sources.
The fourth industrial revolution, or Industry 4.0 or smart manufacturing, was used to describe a
situation where technological advances made a paradigm shift in conventional production
process logic. Industrial production machinery no longer simply processes the product, but the
product communicates with the machinery to tell it exactly what to do (GTAI, 2014). In other
words, Industry 4.0 is a state in which manufacturing systems and the objects they create are not
simply connected, but also communicate, analyse, and use that information to drive further
intelligent action back in the physical world to execute a physical-to-digital-to-physical transition
(DUP, 2016).
Unlike the previous industrial revolutions, Industry 4.0 and digital transformation not only affect
how economic activities are organized, but also shape social interactions and government
services. When the steam engine was invented, for example, its impacts on large segments of
society were more limited. Today, infrastructure for digital services is expanding rapidly and
becoming more accessible in many parts of the world. Even if this reduces the divide among the

60
countries in terms of accessibility, significant disparities remain in transforming the digital

infrastructure into productive capacities.
New technological inventions significantly contributed to the growth in outputs and income
levels. However, the benefits of industrial revolutions are not evenly distributed across the globe.
With each revolution, the gaps between technologically more advanced and less advanced
countries expanded. Technologically advanced countries were able to transform their production
structures and processes to generate greater welfare for their citizens. During the second half of
the last century, a number of developing countries, mainly in East Asia, were able to narrow the
gap by joining global value chains and taking advantage of export-led industrialization.
Though there is a growing divergence in technological capabilities, easier access to digital

infrastructure provides an opportunity to catch up with the global economic and technological
frontiers. In order to tap on this opportunity, developing countries, including OIC countries, need
to invest in human capital, support research and development, and identify areas to achieve
incremental improvements in their industrial activities. Even if the tensions over global
imbalances in trade flows remain vibrant, new technologies are likely to enable even higher levels
of interconnectedness across the globe.
3.1.2 Economically Disruptive Technologies: Threats or Opportunities

Technological breakthroughs brought by the steam engine, electricity, internal combustion and
information technologies had transformative impacts on the entire economy. However, it is not
always needed to wait for technological breakthroughs to attain higher economic growth.
Developing countries can invest in incremental innovations to build upon their previous
achievements. Perhaps, this largely explains how China is succeeding in achieving growth and
reducing poverty. Incremental innovation in the context of developing countries starts with the
absorption and imitation of foreign technologies. The capability to adapt them to the local
context would demonstrate the potential of a country to make incremental innovation. It is even
argued that the cumulative impact of incremental innovations on long-run economic and social
change may be even greater than that of radical innovations (UNIDO, 2016). Such a development
policy for developing economies is possible thanks to the rapid diffusion of new technologies in
today’s world.
The next wave of global economic growth is likely to be driven by new technologies. Economically
disrupting technologies emerging from digital transformation are expected to have a massive
impact in years to come. Artificial Intelligence (AI), Internet of Things (IoT), cloud computing, 3D
printing, automation and advanced robotics are some of the technologies that are expected to
shape future economic activities (see Table 3.1 for a brief description of emerging technologies).
It is difficult to argue that developing countries are well prepared to take advantage of these
technologies. Nevertheless, the ongoing digitalization of economic activities brings new
opportunities for developing countries.
In the case of diversification of global value chains (GVCs), digitalization of the supply chain is
pivotal. Digitalization allows multinational enterprises (MNEs) to extract further efficiencies from
international production networks, by reducing governance and transaction costs and enhancing

centralized coordination and control. Applications of digital technologies to foster international

diversification and build supply chain resilience include real-time visibility into the availability of
raw materials and finished goods; enhanced control over processes, people and assets, including
the tracking of external suppliers down to the bottom of the supply chain. It also includes the use
of AI and machine learning to ensure more timely responses to shocks and discontinuities.
Table 3.1: Brief Description of Emerging Technologies

Technology Description
AI is normally defined as the capability of a machine to engage in cognitive activities typically
performed by the human brain. AI implementations that focus on narrow tasks are widely
Artificial
available today, used for example, in recommending what to buy next online, for virtual
intelligence (AI)
assistants in smartphones, and for spotting spam or detecting credit card fraud. New
implementations of AI are based on machine learning and harness big data.
IoT refers to myriad Internet-enabled physical devices that are collecting and sharing data.
Internet of Things
There is a vast number of potential applications. Typical fields include wearable devices, smart
(IoT)
homes, healthcare, smart cities and industrial automation.
Big data refers to datasets whose size or type is beyond the ability of traditional database
Big data structures to capture, manage and process. Computers can thus tap into data that has
traditionally been inaccessible or unusable.
A blockchain refers to an immutable time-stamped series of data records supervised by a
Blockchain cluster of computers not owned by any single entity. Blockchain serves as the base technology
for cryptocurrencies, enabling peer-to-peer transactions that are open, secure and fast.
5G networks are the next generation of mobile internet connectivity, offering download
5G speeds of around 1-10 Gbps (4G is around 100 Mbps) as well as more reliable connections on
smartphones and other devices.
3D printing, also known as additive manufacturing, produces three-dimensional objects based
3D printing on a digital file. 3D printing can create complex objects using less material than traditional
manufacturing.
Robots are programmable machines that can carry out actions and interact with the
environment via sensors and actuators either autonomously or semi-autonomously. They can
Robotics
take many forms: disaster response robots, consumer robots, industrial robots,
military/security robots and autonomous vehicles.
A drone, also known as an unmanned aerial vehicle (UAV) or unmanned aircraft system (UAS),
is a flying robot that can be remotely controlled or fly autonomously using software with
Drones
sensors and GPS. Drones have often been used for military purposes, but they also have
civilian uses such as in videography, agriculture and in delivery services.
Source: UNCTAD (2023b).
AI, automation and advanced robotics are the factors that are expected to change the nature of
work substantially. This has implications not only on workers but also on the operations of
businesses and overall production activities. Automation has often been an engine of economic
growth as part of technological advances. Acemoglu (2021) notes that automation was part of a
broad technology portfolio in the past and its limited negative effects on labour markets could
be offset by other technologies providing other employment opportunities. He argues that the
next phase of automation, relying on AI and AI-powered machines, may be even more disruptive,
especially if it is not accompanied by other more human-friendly technologies. Growing
automation in isolation could still boost human productivity in many sectors, but it could also
worsen job losses and economic disruption.
The wider use of the IoT can bring fundamental changes in the management of value chains with
sensors able to provide real-time data on different stages of production, monitor inventory levels,
and assess the usage and functionality of products (Strange and Zuccella, 2017). It thereby allows

62
a greater integration of data between firms, suppliers and customers. It is also expected to reduce
the transaction costs associated with international production, and facilitate an ever-deeper
international division of labour across borders. Yet, the implementation of the IoT comes with
significant concerns about cybersecurity.
Similarly, big data and analytics enable firms to monitor emerging trends and opportunities in
foreign markets, and to optimise their supply, production and distribution activities more
effectively around the world. As discussed earlier, the improvements in robotics and automation
are likely to reduce the importance of low labour costs, leading to the reshoring of global
production activities. Additive manufacturing (3-D printing) may also change the nature of GVCs
as it may reduce the need to establish value chains in certain markets, but may favour local value
chains (LVCs) and a co-location of production and consumption (Laplume et al., 2016). In LVCs,
firms benefit from proximity to customers with diversified demands and needs (UNIDO, 2019).
Evidently, rising digitalization and automation present many potential benefits for industrial
development, but there are also important costs and risks. There will be winners and losers,
requiring policy interventions to make adjustments. Issues like cybersecurity, intellectual
property and data privacy pose major challenges. Like any previous innovations, recent
technological innovations will change attitudes and systems substantially, and yet again,
interventions will be needed to counterbalance the negative impacts on the affected people and
businesses.
Despite the challenges, there is a growing interest in the implementation of Industry 4.0 in
manufacturing processes and supply chains in developed countries. It makes it possible to
manufacture entirely new things in entirely new ways and revolutionize supply chains,
production, and business models. Considering the new developments and opportunities,
manufacturers all around the world must decide how and where to invest in new technologies,
and identify which ones will drive the most benefit for them. Governments should support
manufacturers in their efforts to implement the Industry 4.0 approach to achieve productivity
and competitiveness in global markets. Moreover, capabilities of people, firms and countries
differ significantly in benefiting from these future technologies. Therefore, special policies are
needed to ensure that the new technological advances in the form of AI, automation and
advanced robotics do not widen the economic divides between people of varying income, firms
of different sizes, and countries of different development levels.
3.1.3 Towards a Digitalizing World

Digital technologies are shaping the behaviour of individuals, firms and governments. Digitization
refers to the transformation of the techno-economic environment and socio-institutional
operations through digital communications and applications (ITU, 2020a). Such transformations
reflect an ever-widening scope of a digital economy. The digital economy is broadly defined as
the application of internet-based digital technologies to the production and trade of goods and
services (UNCTAD, 2017).
Rising digitalization has implications on many fronts. One is that human behaviour has never been
recorded in such detail by big tech companies. Mobile phones, smartwatches, computers and

many other devices keep track of physical activities, social media activities, shopping preferences
and other interests of individuals. The collected data play an increasingly greater role in the
modern economy and generate enormous economic value. Even if the concerns over individual
privacy grow day by day, the big data on human behaviour, interactions and interest are being
processed quickly to generate targeted ads, assess the credit worthiness or create any other
commercial value. It is not only the human activities that are traced and stored, but also business
activities that are reorienting towards digital platforms.
When we look at the number of people using the internet, it is observed that the number expands
every year and a greater share of people in developing countries obtain access to the internet.
According to the International Telecommunication Union (ITU), the share of people with internet
access globally reached 66% in 2022 as compared to 40% in 2015. The number of individuals
using the internet grows particularly fast in developing countries, which enables faster access and
adaption of people living in developing countries to new digital products and services. However,
internet access was still below 50% in lower middle-income countries and only 20% in low-income
countries in the world in 2021. Other key indicators of digitalization in the world indicate that
there is a rapid growth in the coverage of various digital technologies. Since 2015, the population
covered by at least an LTE/WiMAX mobile network expanded from 43.4% to 87.7%, and active
mobile broadband subscriptions grew from 44.6% to 86.9% (Figure 3.2).
OIC countries demonstrate high heterogeneity in terms of development levels, resources and
growth potentials. While there are significant opportunities in enhancing multilateral
cooperation and development, often there are serious challenges in fostering economic relations
among the OIC countries. Over the last several decades, the industrial development process in
OIC countries, as a group, has been rather sluggish (SESRIC, 2017). In certain aspects, the digital
economy would provide a level playing field for many developing countries to catch up with
pioneering countries. This will require, among many others, substantial investment in human
capital and institutions, improving innovation systems, and upgrading industrial clusters and
global value chains.
Figure 3.2: Key ICT Indicators for the World (2015 vs 2022), %
Individuals using the Internet 66.3 2022

40.0
2015
Population covered by at least an LTE/WiMAX mobile 87.7
network 43.4
Population covered by at least a 3G mobile network 94.8
78.3
Population covered by a mobile-cellular network 97.3
94.8
Active mobile-broadband subscriptions 86.9
44.6
Mobile-cellular telephone subscriptions 108.0
97.3
Fixed-broadband subscriptions 17.6
11.4
Fixed-telephone subscriptions 10.8
14.0
0 20 40 60 80 100 120
Source: ITU World Telecommunication/ICT Indicators database. Version November 2022, for Facts and Figures 2022

64
3.2 Brief Review of Latest Advances in Key Components of Digital

Economy and Industrial Transformation
The integration of digital technologies and advanced robotics is transforming the manufacturing
process and driving the Fourth Industrial Revolution (Industry 4.0). These technologies can be
grouped into two categories, each playing a crucial role in revolutionizing the manufacturing
landscape (Figure 3.3).
Smart Manufacturing and Service Technologies: This category focuses on the automation and
decentralization of tasks within manufacturing processes. Advanced robotics introduces
sophisticated machines capable of handling complex tasks with precision and efficiency. 3D
printing enables the creation of three-dimensional objects layer by layer, revolutionizing rapid
prototyping and customization. The IoT connects physical devices, machines, and sensors to
facilitate real-time monitoring, data collection, and optimization of production processes.
Together, these technologies enhance manufacturing capabilities, improve productivity, and lead
to more flexible and adaptive production systems.
Data Processing and Communication Technologies: This category involves the interconnection and
exchange of data across various components of the manufacturing process. Big data analytics
processes and analyses vast amounts of data, providing valuable insights for decision-making,
process optimization, and quality control. Blockchain technology ensures secure and transparent
data exchange and transaction recording, enhancing supply chain management and traceability.
Cloud computing offers on-demand access to shared computing resources, enabling scalability
and storage for large datasets. Machine learning and AI enable machines to learn from data and
make intelligent decisions, further enhancing process automation and efficiency.
The novelty of all these technologies lies in their seamless integration and the convergence of
hardware, software, and connectivity in complex production systems. This integration creates
Figure 3.3: Classification of Latest Technologies for Digital Transformation
Smart Manufacturing and Service Data Processing and Communication

Technologies Technologies
Automation and advanced robotics Big data analytics

3D printing
Blockchain technologies
Internet of things
Artificial intelligence and machine
E-commerce
learning
Digital supply networks
Cloud computing
Fintech
Drones 5G technologies
Source: Author’s compilation.

interconnected and intelligent manufacturing ecosystems, where data-driven decisions and

automation lead to more efficient, agile, and responsive manufacturing processes. As a result,
businesses can achieve higher levels of productivity, reduced production costs, faster time-to-
market, and increased product customization, ultimately driving economic growth and
competitiveness across GVCs.
These technologies are crucial for OIC economies as they bring about significant advancements
in productivity, efficiency, and innovation across industries. By harnessing these technologies'
potential, OIC countries can stimulate growth, create new job opportunities, and position
themselves at a competitive place on the global stage. To this end, this section reviews major
advancements in these technologies with a view to having a better understanding to assess their
implications for OIC economies. A summary of key information can be found in Table 3.2 at the
end of this section.
3.2.1 Smart Manufacturing and Service Technologies

Automation and advanced robotics
Automation refers to the use of technology, such as computer software, machines, or other
systems, to perform tasks that were previously done by humans. This can include tasks ranging
from simple repetitive actions to more complex operations. Advanced robotics, on the other
hand, refers to machines or systems that are capable of accepting high-level commands or
instructions and performing complex tasks in a semi-structured environment with minimal
human intervention. These robots are often equipped with advanced sensors, artificial
intelligence, and machine learning capabilities, allowing them to perceive and interact with their
surroundings, make decisions, and adapt to changing conditions (Deloitte, 2018).
Robotics encompasses a wide range of applications beyond automation, including areas such as
exploration, medical robotics, human-robot interaction, and research purposes (Dellot and
Wallace-Stephens, 2017). Robotics involves developing machines that can operate in complex
and dynamic environments, interact with humans, or perform tasks that require physical
dexterity and adaptability. Table 3.2 highlights some of the recent advancements in automation
and advanced robotics that are being used in manufacturing and services.
In line with the growing automation of production processes, robot installations rose steeply to
over 517 thousand units in 2021, representing a growth rate of 31% over the previous year
(Figure 3.4a). This trend is expected to continue over the coming period and reach almost 700
thousand by 2025, according to the International Federation of Robotics (IFR, 2022). The five
major markets for industrial robots, China, Japan, the United States, the Republic of Korea, and
Germany, accounted for 78% of global robot installations, where China alone accounted for 52%
of global robot installations in 2021. Data also shows that the electrical/electronics industry has
the highest share of new installation of robots in 2021 with a share of 26.4%, followed by the
automotive industry (23.1%), whereas the food industry accounted for just 3.1%. The stock of
robots provides a relatively good indication of current trends in automation in industries,

66
especially in assembly lines. The operational stock of industrial robots estimated by IFR (2022)
was almost 3.5 million units, which had been increasing by 14% on average each year since 2016
(Figure 3.4b).
Table 3.2: Recent Advancements in Automation and Advanced Robotics

Collaborative Collaborative robots are designed to work alongside humans, assisting them in various tasks.
Robots These robots are equipped with advanced sensors and safety features that allow them to
(Cobots) operate safely in close proximity to humans. They are being used in industries such as
manufacturing, healthcare, and logistics.
Autonomous The development of self-driving cars, trucks, and delivery drones has seen significant progress.
Vehicles Companies like Tesla, Waymo (Google), and Uber are actively working on autonomous vehicle
technology. These vehicles utilize advanced sensors, machine learning algorithms, and artificial
intelligence to navigate and make decisions on the road.
Warehouse Warehouses and distribution centres are increasingly adopting advanced automation
Automation technologies. Autonomous robots are used for tasks like order picking, sorting, and inventory
management. These robots are capable of operating in complex environments, optimizing
workflows, and improving overall efficiency.
AI-Powered Artificial intelligence is playing a crucial role in advancing robotics. Machine learning algorithms
Robotics are being used to train robots to perform complex tasks, adapt to changing environments, and
learn from experience. This enables robots to handle more sophisticated operations and make
autonomous decisions.
Exoskeletons Exoskeletons are wearable robotic devices that can enhance human strength and endurance.
They find applications in industries like manufacturing and healthcare, where they can assist
workers in lifting heavy objects or provide support during physical rehabilitation.
Soft Robotics Soft robotics is an emerging field that focuses on developing robots made from flexible
materials. These robots are more adaptable and can handle delicate tasks with greater
precision. Soft robotics has applications in areas such as medical procedures, exploration, and
human-robot interaction.
Industrial Industries are increasingly adopting advanced automation technologies, such as robotic arms,
Automation automated assembly lines, and machine vision systems. These systems improve production
efficiency, reduce errors, and enable higher levels of customization.
Agriculture Robotics is being used in agriculture for tasks like planting, harvesting, and monitoring crops.
Robotics Autonomous drones equipped with imaging technologies are used for crop monitoring, while
robots with specialized arms are developed for tasks like fruit picking.
Source: Author’s compilation from various sources.
Figure 3.4a: Annual Installations of Industrial Robots Figure 3.4b: Operational Stock of
(Thousands) Industrial Robots (Thousands)
3477
800 4000
690
3035
700 653 3500

614
2740
570
600 3000
2441
517
2125
500 2500
423
1838
400 391 394

1632
400 2000
1472
1332
304
1235
1153
300 254 1500

221
200 166 159 178 1000
100 500
0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022*
2023*
2024*
2025*
Source: International Federation of Robotics. (*) Projected.

According to Acemoglu and Restrepo (2022), the adoption and development of these
technologies are receiving a powerful boost from demographic changes throughout the world
and especially from rapidly aging countries such as Germany, Japan, and South Korea. They show
that the relative scarcity of middle-aged workers with the skills to perform manual production
tasks increases the value of technologies that can substitute for them, leading to industrial
automation. This may also explain why Japan, Korea and Germany are among the top countries
in the world investing in industrial robots and automation (see Box 3.1)
The advancements in automation and advanced robotics are expected to have significant impacts
on economies worldwide, which can vary across people, industries and regions. Among the most
expected benefits is the increased efficiency, productivity and growth. Automation and robotics
can streamline processes, reduce human error, and operate at higher speeds, leading to higher
output levels and reduced costs for businesses. These technologies can encourage entrepreneurs
to develop new applications and solutions, fostering technological advancements and creating
new business opportunities. It can also give rise to new industries and markets, such as the
autonomous vehicle industry, creating opportunities for various sectors such as manufacturing,
software development, and infrastructure. These
emerging industries can drive economic growth, BOX 3.1: Japan’s New Robot Strategy
generate employment, and contribute to technological In Japan, the “New Robot Strategy” aims to
advancements. Efficiency improvements in producing make the country the world´s number one
goods and services arising from automation would also robot innovation hub. More than 930.5
million USD in support has been provided
help developing countries to expand their participation
by the Japanese government in 2022. Key
in GVCs. sectors are manufacturing (77.8 million
USD), nursing and medical (55 million USD),
There are also challenges and risks that need to be
infrastructure (643.2 million USD) and
taken into consideration in policy-making. The most agriculture (66.2 million USD). The action
critical one is job displacement and skills mismatch. As plan for manufacturing and service includes
discussed in SESRIC (2023), tasks in certain sectors, projects such as autonomous driving,
advanced air mobility or the development
particularly repetitive and routine tasks, can be easily
of integrated technologies that will be the
automated and cause job losses for certain core of next-generation artificial
occupations. This requires policies to encourage intelligence and robots. A budget of 440
workers to move to more complex tasks and adapt to million USD was allocated to robotics-
related projects in the “Moonshot Research
the changing job market through reskilling and
and Development Program” over a period
upskilling. In general, sectors heavily reliant on manual of 5 years from 2020 to 2025. According to
labour may experience shifts in employment patterns the statistical yearbook "World Robotics"
and potentially face challenges. This calls for proactive by IFR, Japan is the world´s number one
industrial robot manufacturer and
measures to manage the transition, including policies
delivered 45% of the global supply in 2021.
for job creation, social safety nets, and income
Source: https://www.automation.com/en-
redistribution to ensure a fair and inclusive economic us/articles/january-2023/report-how-asia-europe-
outcome. america-invest-robotics
Additive Manufacturing and 3D Printing
Additive manufacturing and 3D printing are considered highly disruptive technologies, as they
have revolutionized the manufacturing process by offering novel and versatile approaches to

68
creating three-dimensional objects. Additive manufacturing is widely accepted as a fast and cost-
effective method for producing functional prototypes during product development and testing.
Its benefits include faster production, cost efficiency, customization, and reduced downtime,
making it a transformative technology across various industries (McKinsey, 2022). It allows for
complex designs, customization, and rapid prototyping, making it a game-changer in
manufacturing. 3D printing is one of the specific techniques falling under the umbrella of additive
manufacturing. While these terms are often used interchangeably, 3D printing is more commonly
associated with non-industrial applications, including personal or small-scale projects.
Both additive manufacturing and 3D printing have a profound impact across industries. They can
reduce production time, minimize material wastage, and enable the creation of complex
geometries that are not feasible with traditional manufacturing methods. These technologies
have found applications in aerospace, automotive, healthcare, consumer goods, architecture,
and many other sectors. As they continue to advance, additive manufacturing and 3D printing
are expected to drive innovation, transform supply chains, and empower businesses to meet
evolving customer demands more efficiently and sustainably. Their potential to disrupt
traditional manufacturing processes and enable new possibilities positions them as key drivers of
the ongoing industrial revolution.
Due to a lack of widespread availability of Figure 3.5: Global 3D Printing Products and
data on additive manufacturing, there are Services Market Size (Billion US$)
varying estimations on the size of the 40 37.2
market. Estimations on the current size of 35
the market for 3D printing products and
30
services range around US$ 14-18 billion. 24.9
25
According to Statista, the industry is
20 17.4
expected to triple between 2020 and 2026
15 12.6
to reach over US$ 37 billion (Figure 3.5).
10
Using extensive primary and secondary
5
research, IDTechEx estimates the industry to
0
reach a US$ 41 billion market size in 2033 2020 2022* 2024* 2026*
(IDTechEx, 2023).
Source: Statista. https://www.statista.com/statistics/315386/global-
market-for-3d-printers/
Overall, the sector remains extremely
dynamic, with more than 200 players competing to develop new hardware, software, and
materials (McKinsey, 2022). Top users by sector, measured by spending on 3D printing
technology, were industrial manufacturing (especially automotive, aerospace and defence
industries), healthcare and education. The cost of 3D printing has dropped markedly in recent
years. Currently, an entry-level 3D printer can cost as low as US$ 100, while an industrial 3D
printer starts at US$ 10,000 (UNCTAD, 2023b). On the other hand, the industry’s demand for
labour is also increasing. It is estimated that the industry will create 3-to-5 million new skilled jobs
in 3D-printing-enabled manufacturing globally (UNCTAD, 2023b).

Internet of Things
The Internet of Things (IoT) refers to an ecosystem in which applications and services are driven
by data collected from devices that sense and interface with the physical world. In IoT, devices
and objects have communication connectivity, either a direct connection to the internet or
mediated through local or wide area networks (OECD, 2016). IoT is experiencing widespread
adoption and transforming economic activities across various sectors. The proliferation of
connected devices and sensors enables businesses to collect vast amounts of data, leading to
data-driven decision-making and improved operational efficiency. Together with the benefits IoT
may deliver, new policy and regulatory challenges may emerge in some areas, including
privacy/security concerns, as well as interoperability, numbering and standardisation issues.
Thus, creating indicators to inform policymaking in these areas should be a priority (OECD, 2018).
IoT's applications in manufacturing, healthcare, agriculture, logistics, and smart cities contribute
to increased productivity, reduced costs, and enhanced customer experiences (Ejaz and
Anpalagan, 2019). Moreover, IoT-driven innovations have given rise to new business models and
startups, fostering job creation and economic growth. As IoT continues to grow, it is expected to
play an increasingly pivotal role in shaping the economies of the future by driving technological
advancements and fostering a more interconnected and data-centric world (Prasanna et al.,
2017). To this end, IoT is driving the development of smart cities, where interconnected devices
and systems improve the quality of life for residents. Smart infrastructure, such as smart grids
and traffic management, enhances resource utilization and reduces operational costs, leading to
more sustainable economic activities (Bellini et al., 2022).
According to Statista, the IoT market worldwide was worth around US$ 182 billion in 2020, and
it is forecast to rise to more than US$ 621 billion in 2030, tripling its revenue in ten years. Not
only this, but the number of IoT connected devices worldwide is forecast to triple during this span
of time. The Smart Home technologies segment accounts for the biggest share, comprising 97%
of worldwide revenues as it is increasingly used by consumers. Compared to other segments,
Smart Home technologies grow fastest, also supported by home improvements during the
lockdowns in the COVID-19 pandemic (Statista, 2023). McKinsey estimates that IoT could enable
US$ 5.5 trillion to US$ 12.6 trillion in value globally by 2030, up from US$ 1.6 trillion in 2020,
including the value captured by consumers and customers of IoT products and services
(McKinsey, 2021). While the developed world is expected to account for around 55% of the
estimated IoT economic value in 2030, China could be responsible for around 26% of the total
and other emerging economies could account for 19% of global economic value enabled by the
IoT (McKinsey, 2021). The average cost of an IoT sensor has dropped from US$ 1.40 in 2004 to
US$ 0.38 in 2020 (UNCTAD, 2023b). Cost reductions and rising demand for advanced consumer
electronics will drive the growth of IoT in emerging markets. By 2027, there will likely be more
than 29 billion IoT connections, up from 16.7 billion active endpoints in 2023 (IoT Analytics).
E-commerce
Electronic commerce, or e-commerce, is defined by the OECD as the sale or purchase of goods
or services, conducted over computer networks by methods specifically designed for the purpose

70
of receiving or placing orders (OECD, 2019a). E-commerce is reshaping the way businesses
operate and interact with consumers. It has played a crucial role in digital transformation,
encouraging businesses to adopt new technologies, improve their online presence, and invest in
cybersecurity to remain competitive and relevant in the digital age. With the ability to shop online
from the comfort of their homes or on the go, e-commerce has revolutionized the way people
make purchases, becoming an integral part of their daily routines.
Additionally, e-commerce has broken down geographical barriers, allowing businesses to reach
customers globally. Even small enterprises can now have a global presence, expanding their
market reach and customer base beyond traditional physical boundaries. This accessibility offers
equal opportunities to businesses of all sizes and fosters healthy competition. The efficiency of
e-commerce processes has transformed the entire supply chain, from order processing to
fulfilment. With automation and digitalization, businesses can optimize their operations, improve
inventory management, and enhance customer service. Furthermore, the data generated by e-
commerce platforms provides valuable insights into customer behaviour and preferences.
Businesses can leverage this data to analyse trends, personalize offerings, and refine marketing
strategies, leading to more targeted and effective campaigns. The continuous growth of e-
commerce has also spurred innovation and competition among businesses (OECD, 2019a).
Its convenience, global reach, efficiency, and innovation make it a critical driver of economic
growth, empowering businesses and consumers alike in the digital era. In addition to its economic
impact, e-commerce has created new job opportunities in various fields, including logistics, digital
marketing, customer support, and technology development. It has also contributed to the growth
of the gig economy with the rise of freelance and remote work. The COVID-19 pandemic further
underscored the significance of e-commerce, as it enabled businesses to continue operating
during lockdowns and restrictions, highlighting its resilience and adaptability in times of crisis.
Over the past few years, UNCTAD has Figure 3.6: Retail E-Commerce Sales Worldwide (Billion
gathered figures related to the US$)
monetary value of e-commerce sales
9000 8,148
in different economies as a basis for 8000 7,528
6,913
deriving estimates of global e- 7000 6,310
commerce sales. For example, it was 6000 5,717
5,211
estimated that global e-commerce 5000 4,248
sales jumped to US$ 26.7 trillion 4000 2,982
3,351
globally in 2019, up 4% from 2018 3000 2,382

1,845
(UNCTAD, 2021). As noted by 2000 1,548
UNCTAD (2023c), such estimates are 1000
0
subject to major limitations, mainly 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
because exhaustive and
Source: Statista. https://www.statista.com/statistics/379046/worldwide-retail-e-
internationally comparable national commerce-sales/
statistics on the value of e-commerce

sales are not widely available. Therefore, estimations on retail e-commerce from other research
centres vary significantly, and are more conservative, typically estimated at around $5 trillion for

2022. Yet, it is expected to grow by an annual growth rate of around 10% over the coming years
(Figure 3.6).
Digital Supply Networks
Digital supply networks (DSNs) are a key component of Industry 4.0, leveraging digital
technologies to revolutionize supply chain management and operations. In traditional supply
chains, inefficiencies in one stage can result in a cascade of similar inefficiencies in subsequent
stages. Stakeholders often have little, if any, visibility into other processes, which limits their
ability to react or adjust their activities (Mariani et al., 2015). DSNs overcome the delayed action-
reaction process of the linear supply chain by employing real-time data to better inform
decisions, provide greater transparency, and enable enhanced collaboration across the entire
supply network (Deloitte, 2016). Real-time data and analytics empower businesses to respond
swiftly to changes, optimize inventory management, and streamline processes, ultimately
reducing costs and improving customer satisfaction.
One of the key strengths of DSNs lies in fostering collaboration and synchronization among supply
chain partners. DSNs facilitate more efficient working relationships and collective process
optimization, benefiting all stakeholders involved. In addition to efficiency gains, DSNs enhance
supply chain resilience through proactive risk management and contingency planning. The ability
to identify vulnerabilities and potential disruptions in real-time empowers businesses to develop
strategies to mitigate the impact of unforeseen events, ensuring continuity of operations and
customer service (Büyüközkan and Göçer, 2018). Moreover, DSNs contribute to sustainability
efforts by optimizing supply chain routes, reducing unnecessary transportation, and facilitating
better tracking of product origins and materials.
Fintech
Fintech, the application of digital technology to financial services, is revolutionizing payments,

lending, investment, insurance, and other financial products and services. Global financial
account ownership and digital payment usage have significantly increased in recent years, but
many still lack essential financial services. The latest World Bank Findex data show global financial
account ownership grew to 76% from 51% between 2011 and 2021 and the share of adults
making or receiving digital payments grew to 57% in 2021 from 35% in 2014 (World Bank, 2022a).
Embracing fintech opportunities and implementing policies that promote safe financial
innovation and adoption can bridge the gap across regions and empower individuals and
businesses to thrive (World Bank, 2023c).
Fintech's impact on economies is far-reaching and multifaceted. By leveraging technology to

enhance financial services, fintech is fostering financial inclusion, empowering individuals and
businesses with access to savings, credit, and insurance. This inclusion drives economic growth,
as more people can actively participate in the formal financial system. Additionally, fintech
optimizes financial processes, reducing operational costs for businesses and institutions, leading
to increased efficiency and competitiveness. Its data-driven approach enables personalized
financial solutions, benefiting businesses with better risk assessment and decision-making.
Furthermore, fintech innovations facilitate cross-border payments, enhancing international trade

72
and remittances, and promoting global economic integration. Overall, fintech's ability to
stimulate innovation, competition, and economic resilience makes it a critical driver of economic
development and progress in the digital age.
The joint IMF/World Bank (2019) paper finds that while there are important regional and national
differences, countries are broadly embracing the opportunities of fintech to boost economic
growth and inclusion, while balancing risks to stability and integrity. While fintech is having a
global impact on the provision of financial services, mobile payments have been a key early
developer with broad implications for inclusion. To this end, governments are seeking to provide
an enabling environment, including open and affordable access to core digital services and
infrastructures, but important infrastructural gaps and regulatory impediments remain. The best
way to keep fintech risks within tolerable levels, while still promoting innovation, is to put in place
regulatory and supervisory frameworks that are well targeted and proportionate to the risks
identified (World Bank, 2022b).
Drones
Drones play a vital role in Industry 4.0 by offering transformative solutions to various industries.
Their automation capabilities enhance efficiency by automating tasks that were once manual and
time-consuming. Drones enable remote monitoring and inspections of infrastructure,
equipment, and hard-to-reach locations, reducing the need for human intervention and
minimizing errors. Equipped with sensors and cameras, drones collect vast amounts of data,
enabling data-driven decision-making and process optimization through advanced analytics. In
agriculture, they support precision farming practices by monitoring crop health, analyzing soil
conditions, and applying targeted treatments, leading to increased productivity and resource
optimization. Drones also have significant implications for logistics and supply chain
management, enabling last-mile deliveries and enhancing connectivity in remote areas.
Additionally, their application in hazardous environments improves safety and risk management
while extending communication capabilities to isolated regions. As technology continues to
advance, drones are poised to become even more critical in driving progress and transforming
industries during the fourth industrial revolution.
The drone industry is currently shaped by military and commercial drones. The global military
drone market is projected to grow from US$ 14.1 billion in 2023 to US$ 35.6 billion by 2030.9 The
increasing growth of artificial intelligence and autonomous systems will likely boost the market.
This development is expected to lead to strong growth in the global military unmanned aircraft
market in the future. For example, Türkiye has made tremendous strides in developing
indigenous unmanned aerial vehicles and smart munitions in the last decade (Duz, 2021). By early
2023, Turkish drone-maker Baykar exported Bayraktar TB2 to 28 countries, as reported by news
agencies.10
Similarly, the global commercial drone market growth was valued at US$ 8.8 billion in 2022 and
it is projected to grow from US$ 11 billion in 2023 to US$ 54.8 billion by 2030.11 There are
significant investments in designing and developing lightweight commercial drones for various
commercial applications such as medical emergency transportation, inspection and
maintenance, filming and photography, mapping, surveillance, and precision agriculture
(UNCTAD, 2023b).

3.2.2 Data Processing and Communication Technologies

Big data analytics
Big data refers to a dataset whose size or type is beyond the ability of traditional databases to
capture, manage and process (UNCTAD, 2023c). It is a term widely used to describe the
exponential growth of data, particularly the data flowing from ubiquitous mobile phones,
satellites, ground sensors, vehicles and social media. Big data analytics explains the rise of
computing technologies and algorithms that harness big data for valuable insights (World Bank,
2017). In 2020, 64.2 zettabytes of data were created, that is a 314% increase from 2015. 12 In
2023, it will be generated nearly three times the volume of data generated in 2019. The global
big data analytics market was valued at over US$ 240 billion in 2021, which is expected to reach
over US$ 650 billion by 2029.13
Big data analytics is a foundational pillar of Industry 4.0, providing businesses with the capability
to process and analyse vast and complex datasets in real-time. Its importance lies in enabling
data-driven decision-making, enhancing efficiency, and boosting productivity through the
identification of patterns and insights within the data. By leveraging big data analytics, businesses
can personalize customer experiences, predict future trends, and uncover new opportunities for
innovation. Additionally, it facilitates supply chain optimization and risk management, and drives
advancements in healthcare and scientific research. Big data analytics is a transformative tool
that empowers organizations to make informed decisions, adapt to changing market conditions,
and remain competitive in the digital era (UNCTAD, 2023b).
The potential for big data to transform government is vast. Big data analytics can be used by
governments to improve existing services and to draw on novel datasets to drive entirely new
public services. It is possible to use satellite imagery, cell phone data and more to produce
alternative economic indicators for new – and real-time – policy insights. By applying machine
learning to online and social media, governments can be more responsive to citizen sentiment,
ushering in a new dimension of civic engagement (World Bank, 2017).
Blockchain technologies
Blockchain is a technology that enables the secure sharing of information. Blockchain

technologies are decentralized and secure digital ledgers that offer transparency, trust, and
automation. They eliminate the need for intermediaries, reducing costs and enabling direct peer-
to-peer interactions. Blockchain facilitates secure cross-border transactions, supports smart
contracts, and promotes financial inclusion. Additionally, it enhances data privacy, enables asset
tokenization, and fosters decentralized finance, driving innovation across industries (McKinsey,
2022b).
Several implementations of blockchain technology are extensively used in modern-day business

and each implementation has its distinct strength in various industries, ranging from IoT and
finance to supply chain management, health-care, and reputation systems (Gad et al., 2022). In
a new report released by the World Bank, blockchain technology is being examined as a potential
game-changer for infrastructure projects, including roads, power plants, and renewable energy

74
initiatives (World Bank, 2023d). Yet, one major use of blockchain technology that has garnered
perhaps the most attention are cryptocurrencies, with the biggest name among these being
Bitcoin.
According to Statista, global spending on blockchain solutions is projected to surge from US$ 4.5
billion in 2020 to an estimated US$ 19 billion by 2024. A significant majority of surveyed business
leaders worldwide have expressed investment intentions for blockchain in their organizations,
with over 60% of respondents planning a budget of at least US$ 1 million for distributed ledger
technology. While the financial sector holds approximately 30% of the market value of blockchain
in 2020, the technology's adoption has extended across various industries, ranging from
healthcare to agriculture.14 This widespread integration of blockchain reflects its growing
importance and potential to revolutionize business processes and transactions worldwide.
However, challenges relating to scalability and security, regulatory uncertainty, and difficulties
with integrating the technology within existing applications act as potential market constraints
(UNCTAD, 2023b).
Artificial intelligence and machine learning
Artificial Intelligence (AI) is the ability of a machine to perform cognitive functions typically
associated with human minds, such as perceiving, reasoning, learning, interacting with the
environment, and problem solving. Examples of AI technologies include robotics, autonomous
vehicles, computer vision, language, virtual agents, and machine learning (McKinsey, 2022c).
Machine learning (ML) models use big data to learn and improve predictability and performance
automatically through experience and data, without being programmed to do so by humans
(OECD, 2021). AI and ML automate repetitive tasks and processes, leading to increased efficiency
and reduced operational costs. Businesses can streamline operations, optimize resource
allocation, and accelerate decision-making, ultimately boosting productivity.
Their applications span across industries, driving digital transformation and reshaping the future
of work and interactions in the digital age. In healthcare, AI and ML revolutionize diagnosis and
treatment, while in cybersecurity, they detect fraud and protect against threats (IFC, 2021). In
the financial sector, AI and ML improve risk assessment, fraud detection, and credit scoring,
making financial services more efficient and accessible (OECD, 2021). They also drive the
development of new products, services, and business models, promoting entrepreneurship and
economic expansion.
AI and ML present both opportunities and challenges for developing economies, including OIC
countries. On the positive side, they have the potential to drive economic growth and
productivity by enhancing financial inclusion, improving healthcare and education, and boosting
agricultural productivity. They offer an opportunity to reach the underserved by lowering costs
and barriers to entry for entrepreneurs and businesses, creating innovative business models, and
leapfrogging traditional technologies (IFC, 2021). However, there are concerns about job
displacement and the skills gap, necessitating investment in education and training to prepare
the workforce for the digital economy. Ensuring widespread access to AI technologies requires

addressing infrastructure limitations and affordability issues. The market for AI (US$ 65 billion in
2020) is growing rapidly. Private investment increased 103% in 2021 compared to 2020 (from
US$ 46 billion to US$ 96.5 billion) (UNCTAD, 2023c).
Cloud computing
Cloud computing has a transformative impact on economic activities, providing cost savings,
scalability, and innovation opportunities. It is a form of on-demand computing, which allows users
to get continual access to shared computing resources, such as servers, storage, and sometimes
services (World Bank, 2016). The importance of cloud computing in boosting economic activities
is rooted in its cost-effectiveness, flexibility, and provision of advanced technologies to
businesses of all sizes. It eliminates the need for expensive physical infrastructure, enabling
businesses to pay only for the services they use, reducing operational expenses, and promoting
resource efficiency. Cloud services foster innovation by offering easy access to cutting-edge tools
and technologies, enabling rapid deployment of new applications and products, ultimately
reducing time-to-market and driving economic growth (Alshareef, 2023). The global accessibility
and collaboration facilitated by cloud services improve productivity and support seamless
communication among remote teams and partners. Moreover, cloud computing enhances
business continuity and resilience by automatically backing up data and enabling continuous
operations during disruptions (McKinsey, 2022c).
Cloud computing has been in use before the global pandemic, but its significance became even
more evident during the crisis. Businesses and organizations across various sectors harnessed the
cloud's power and utility to adapt and innovate. Examples include a restaurant chain seamlessly
handling a surge in online orders during lockdowns, a biotech company delivering a COVID-19
vaccine candidate quickly using scalable cloud data storage, and banks using cloud solutions for
customer service and fraud analytics. Automakers also benefited by consolidating real-time data
and tracking logistics through a common cloud platform, reducing costs and promoting
innovation (McKinsey, 2022c). For the year 2022, cloud infrastructure spending is estimated to
grow 19.6% to US$ 88.1 billion,15 whereas global end-user spending on public cloud services is
forecast to grow 21.7% to total US$ 597.3 billion in 2023, up from US$ 491 billion in 2022.16
Following this trend, large enterprises aspire to have roughly 60% of their environment in the
cloud by 2025 (McKinsey, 2022d).
5G Technology
5G is the fifth generation of wireless networks, building upon the previous generations (2G, 3G,
and 4G). It aims to provide significantly higher download and upload speeds, reaching up to 20
Gbps and 10 Gbps respectively, with incredibly low latency of one millisecond. Compared to 4G
LTE networks, 5G is expected to be 200 times faster in download speeds and 100 times faster in
upload speeds, while offering one-tenth of the latency. 5G is designed for three primary use case
scenarios: enhanced mobile broadband for faster and more reliable internet access, massive
machine type communications to connect a vast number of IoT devices, and ultra-reliable and
low latency communications for applications that require instantaneous responsiveness (OECD,
2019b).

76
In this connection, the spread of 5G technology is set to revolutionize economic activities by

providing faster data transmission, enhanced connectivity, enabling real-time communication
and collaboration, fostering more efficient business operations, and driving innovation. Industries
will benefit from the widespread adoption of the IoT, smart manufacturing, and augmented/
virtual reality applications. 5G's ability to connect a massive number of devices simultaneously
will accelerate the growth of IoT applications. This will enable industries to deploy IoT solutions
on a large scale, optimizing processes, enhancing automation, and unlocking new revenue
streams.
It is estimated that US$ 13.2 trillion in global economic value will be made possible by 2035,
generating 22.3 million jobs in the 5G global value chain alone. PwC estimates 5G’s economic
impact in 2022 to be US$ 150 billion and projects that it will reach US$ 1.3 trillion by 2030. The
rollout of 5G will take time, approximately five years to achieve broad coverage. It is already
widespread though, with Ericsson predicting one billion subscriptions by the end of 2022 and 4.4
billion by 2027 (UNCTAD, 2023b).
Table 3.3: Key Indicators of Major Technological Advancements

AI IoT Big Data Blockchain
Publications 438,619 139,805 119,555 27,964
Patents 214,365 147,906 72,184 63,767
Market Size US$ 65 billion US$ 740 billion US$ 73 billion US$ 1 billion (2020)
(2020) US$ 1,582 (2020) US$ 4,422 (2020) US$ 252 US$ 88 billion
billion (2030) billion (2030) billion (2030) (2030)
Major Providers Alphabet, Amazon, Accenture, TCS, Amazon, Microsoft, Alibaba, Amazon,
IBM, Microsoft, IBM, EY, Capgemini, IBM, Google, IBM, Microsoft,
Alibaba and HCL and Cognizant Oracle, SAP and HP Oracle and SAP
Tencent
3D Printing Robotics Drones 5G
Publications 36,367 276,027 23,526 13,045
Patents 70,799 122,940 48,613 32,412
Market Size US$ 12 billion US$ 12 billion US$ 19 billion US$ 6 billion (2020)
(2020) US$ 51 (2020) US$ 150 (2020) US$ 102 US$ 621 billion
billion (2030) billion (2030) billion (2030) (2030)
Major Providers Stratasys, 3D ABB, Fanuc, KUKA, 3D Robotics, DJI Ericsson, Huawei,
Systems, and Yaskawa, Innov., Parrot, Nokia, ZTE,
Materialise NV, EOS Alphabet/ Waymo, Yuneec, Boeing, Samsung, and NEC
GmbH, General Aptiv, GM, Tesla Lockheed Martin,
Electric Northrop Grumman

theRise of the
Divide
CHAPTER FOUR
4 Issues and Challenges for
Digital Economic
Transformation in OIC
Countries

78
Chapter 4: Issues and Challenges for Digital Economic Transformation in OIC Countries
P
revious chapter provided an overview of the emerging technologies including automation,
advanced robotics, additive manufacturing, AI, digital supply networks, fintech, big data
analytics, blockchain, and IoT as crucial drivers of innovation and efficiency across
industries. These technologies present opportunities for economic growth, improved
productivity, and enhanced competitiveness for all countries. Embracing these technologies
strategically and investing in infrastructure and human capital can lead to inclusive and
sustainable development in OIC countries, making them innovation hubs and attracting
investment. In order to evaluate the existing capacities towards utilizing these technologies, this
chapter investigates the major indicators reflecting the overall state of digital infrastructure and
capacities in OIC countries.
4.1 Current State of Digital Infrastructure

There are several indicators that are used to measure the level of digital infrastructure in the
economies. International Telecommunication Union (ITU) provides a list of core indicators agreed
upon through a consultation process involving governments, international organisations, and
experts. This list includes more than 60 indicators focusing on different aspects of digital
development (ITU, 2022). Considering this list and also the commonly used indicators in the
literature for measuring digital infrastructure, we focus mainly on the number of internet users,
mobile and fixed broadband subscriptions as well as network coverage.
The digital economy is tightly connected to the internet. Providing a greater share of the
population with internet access enables these people to learn and interact through online tools,
and become active members of the digital economy. Figure 4.1 demonstrates the progress in OIC
countries in increasing the internet users measured per 100 inhabitants over the last decade. In
five GCC countries, almost all individuals have access to internet, with a particularly sharp rise
Figure 4.1: Internet Users per 100 Inhabitants, Total
2011 2021
100
90
80
70
World average in 2021: 62.6
60
50
40
30
World average in 2011: 31.0
20
10
0
Qatar
Guyana
Niger
Lebanon
Togo
Maldives
Türkiye
Cameroon
Chad
Kazakhstan
Djibouti
Indonesia
Senegal
Malaysia
Albania
Iran
Egypt
Iraq
Guinea
Mozambique
Côte d'Ivoire
Bangladesh
Benin
Saudi Arabia
UAE
Kuwait
Brunei DS
Mauritania
Bahrain
Oman
Mali
Morocco
Gabon
Nigeria
Comoros
Azerbaijan
Jordan
Kyrgyzstan
Uzbekistan
Burkina Faso
Uganda
Algeria
Tunisia
Suriname
Pakistan
Guinea-Bissau
Gambia
Source: ITU. SDG Indicators Database 17.8.1.

observed in Saudi Arabia from 47.5 in 2011 to 100 in 2021. In 26 OIC countries, the share of
internet users is above the world average of 62.6 in 2021. The most significant improvement was
observed in Djibouti, where the number of internet users per 100 inhabitants increased by 61.9,
followed by Kyrgyzstan (60.4), Iran (59.6) and Uzbekistan (58). The least progress was observed
in Uganda, where there were only 10.3 internet users per 100 inhabitants in 2021.
Table 4.1 provides the statistics on some other major indicators measuring digital infrastructure
in OIC countries for the year 2021. It includes country level statistics on mobile and fixed
broadband subscriptions and mobile-cellular subscriptions per 100 inhabitants. It also provides
information on the share of the population covered by various mobile network technologies.
Obviously, there are huge differences across OIC countries in their digital infrastructure. Being
relatively more important for speedy access to the internet, fixed broadband subscriptions
remain relatively low in most of the OIC countries. The highest share is observed in United Arab
Emirates (38.2%), Saudi Arabia (29.5%), Uzbekistan (22%), Türkiye (21.4%) and Suriname (20.1%).
In 20 OIC countries, this share is below 1%.
While the fifth generation of wireless networks (5G) are still under development, access to 4G
the mobile network currently provides significantly higher download and upload speeds, enabling
people and devices to communicate faster. Although many OIC countries have good
infrastructure in terms of 4G coverage, this technology was not available in Palestine and Yemen
at all in 2021. In 17 OIC countries, less than half of the population was covered by 4G networks.
On the other hand, nine OIC countries achieved to provide coverage for more than 99% of their
population with 4G mobile network, including Bahrain, Kuwait, Maldives, Saudi Arabia, United
Arab Emirates, Qatar, Lebanon, Morocco and Jordan.
Improving digital infrastructure is pivotal from both consumption and creation perspectives,
representing a dual benefit for individuals and economies. On the consumption front, a robust
digital infrastructure ensures that people have easy access to a plethora of information and
services online. This access is the gateway to a world of knowledge, from online education and
healthcare services to government resources and entertainment. In essence, digital
infrastructure improves people's quality of life by offering convenience and essential resources.
Furthermore, digital infrastructure is a powerful tool for economic inclusion. It opens doors to
economic opportunities, allowing individuals to participate in the digital economy.
On the creation side, digital infrastructure serves as the backbone of innovation and
entrepreneurship. It provides the necessary tools and platforms for entrepreneurs to create new
businesses and develop innovative products and services. This is a driving force for economic
growth, as startups and innovative ventures are often at the forefront of technological
advancements and job creation. Small businesses, in particular, can leverage digital infrastructure
to compete on a level playing field with larger enterprises. Additionally, in the world of work,
digital infrastructure enables remote collaboration, which helps to tap into a more diverse talent
pool. Lastly, digital infrastructure plays a significant role in research and development. It allows
researchers and scientists to collaborate across borders, sharing data and insights, which is
critical for addressing global challenges.

80
Table 4.1: Digital Infrastructure Indicators in OIC Countries (2021)

Per 100 inhabitants Population covered by (%)
Active mobile- Fixed A mobile- At least a 3G At least a 4G
Mobile-cellular
broadband broadband cellular mobile mobile
subscriptions
subscriptions subscriptions network network network
Afghanistan 18.5 0.1 56.6 90.0 57.0 26.0
Albania 72.0 19.6 92.3 99.9 99.2 98.9
Algeria 97.1 9.5 106.4 98.2 98.2 79.9
Azerbaijan 68.8 19.9 104.9 100 99.5 94.0
Bahrain 135.2 11.4 131.4 100 100 100
Bangladesh 54.7 6.6 108.9 99.6 98.2 98.2
Benin 33.4 0.2 98.0 98.0 80.0 46.0
Brunei DS 136.8 17.8 135.5 99.0 96.0 95.3
Burkina Faso 60.9 0.1 111.7 92.6 53.2 36.6
Cameroon 38.2 2.1 80.0 79.9 25.8 13.5
Chad 7.3 0.0 60.2 86.1 59.0 22.0
Comoros 42.0 0.1 103.9 92.0 87.0 85.0
Côte d'Ivoire 79.3 1.2 162.2 97.7 96.4 64.5
Djibouti 35.9 1.3 44.3 90.0 90.0 90.0
Egypt 61.4 9.9 94.7 99.8 99.5 98.0
Gabon 96.3 2.7 134.3 99.0 98.0 98.0
Gambia 50.3 0.2 101.4 98.0 88.0 7.5
Guinea 23.4 0.0 101.9 88.0 40.0 29.0
Guinea-Bissau 52.9 0.2 108.5 100 43.0 23.0
Guyana 33.8 11.8 106.4 97.3 93.2 50.0
Indonesia 114.8 4.5 133.7 97.8 93.9 96.2
Iran 104.5 12.1 154.6 96.5 85.0 81.0
Iraq 47.5 14.7 93.6 100 96.9 95.9
Jordan 65.3 6.4 65.3 99.8 99.8 99.0
Kazakhstan 93.8 14.3 127.5 98.2 96.0 83.5
Kuwait 136.6 1.7 162.8 100 100 100
Kyrgyzstan 119.3 4.4 130.4 99.3 91.0 85.0
Lebanon 77.8 7.7 76.7 99.6 99.6 99.2
Libya 17.0 4.9 43.4 78.0 98.0 40.0
Malaysia 125.1 11.1 140.6 98.5 95.4 95.4
Maldives 46.4 14.7 135.4 100 100 100
Mali 40.0 0.7 111.1 100 68.0 47.0
Mauritania 70.8 0.4 141.1 96.6 43.7
Morocco 82.0 6.1 137.5 99.8 99.3 99.1
Mozambique 19.3 0.2 42.7 85.0 85.0 50.0
Niger 5.5 0.0 56.4 92.0 24.0
Nigeria 36.6 0.0 91.4 92.9 84.6 61.9
Oman 112.6 11.6 135.1 100 100 97.8
Pakistan 46.5 1.3 81.6 89.1 78.1 75.4
Palestine 19.7 8.0 77.6 98.0 59.0 0.0
Qatar 144.0 11.6 144.2 100 100 99.8
Saudi Arabia 119.5 29.5 126.4 100 100 100
Senegal 94.1 1.2 117.7 99.4 99.4 83.1
Sierra Leone 21.2 0.0 97.7 93.2 79.9 48.6
Somalia 2.6 0.7 51.8 80.0 70.0 30.0
Sudan 42.0 0.1 75.6 90.4 78.6 35.0
Suriname 79.0 20.1 147.8 100 92.0 87.0
Tajikistan 24.3 0.1 118.8 90.0 90.0 80.0
Togo 34.3 0.8 72.4 98.0 97.0 83.0
Tunisia 81.3 12.2 127.6 99.0 99.0 95.0
Turkmenistan 13.9 0.2 98.6 97.9 75.8 67.0
Türkiye 82.6 21.4 101.8 99.8 98.8 96.8
Uganda 52.2 0.1 65.7 98.0 85.0 31.0
UAE 241.2 38.2 194.7 100 100 99.8
Uzbekistan 105.5 22.0 102.9 99.4 95.0 75.0
Yemen 5.0 1.2 46.0 88.9 95.0 0.0
Source: ITU Digital Development Database, January 2023.

In essence, digital infrastructure acts as a catalyst for both individual empowerment and
economic development. It is not merely about enabling passive consumption of digital content
but also fostering an ecosystem where individuals and businesses can consume, create, innovate,
and contribute to economic and societal growth. In order to assess the current level of digital
infrastructure for the facilitation of innovation, the Global Innovation Index (GII) of the World
Intellectual Property Organization (WIPO) is used. The GII reveals the most innovative economies
in the world, ranking the innovation performance of 132 economies, 39 of which are OIC
countries, highlighting their innovation strengths and weaknesses, and pinpointing any gaps in
their innovation metrics.
Figure 4.2: Infrastructure for Innovation
According to the GII, the existing infrastructure,
including both digital and general infrastructure, is OIC Developed Non-OIC Developing
not very conducive to innovation in a significant
80
number of OIC and non-OIC developing countries.
In fact, only the United Arab Emirates, Qatar, 70
SWE
Bahrain and Kuwait possess a digital infrastructure ARE
60
BHR QAT CHN
that is given a score above 50 (out of 100). The KWT
50
United Arab Emirates ranks 7th in the global
rankings, showing its strong base for innovation in 40
the digital age (Figure 4.2). 30
Towards adapting to digitalization and automation 20 GIN

of economies, an important ingredient, besides
10
infrastructure development, is the regulatory
environment, which captures perceptions on the 0
ability of the government to formulate and Source: WIPO Global Innovation Index 2022.
implement cohesive policies that promote the
development of the private sector and evaluate the Figure 4.3: Regulatory Environment for
Innovation
extent to which the rule of law prevails. According
to the GII, the majority of OIC countries have a score OIC Developed Non-OIC Developing
above 50, but most of them fall behind even the 100 SGP
worst performing developed country. United Arab 90
Emirates, Brunei Darussalam, Jordan and Bahrain ARE BRN MUS
80
have the highest scores within the OIC region JOR BHR
70
(Figure 4.3).
60
In order to assess the preparedness of countries for 50
frontier technologies, including artificial 40
intelligence, the Internet of Things and electric
30
vehicles, we also employ the Frontier Technology
20 IDN
Readiness Index (FTRI) of the UNCTAD, which ranks
10
166 countries, including 50 OIC countries, based on
0
five “building blocks”: ICT deployment, skills,
research and development (R&D) activity, industry Source: WIPO Global Innovation Index 2022.

82
activity and access to finance. The index shows that countries in sub-Saharan Africa are the least
ready to use, adopt or adapt to frontier technologies and are at risk of missing current
technological opportunities. Index values for OIC countries are provided in Table 4.2.
Table 4.2: Frontier Technology Readiness Index

Total Ranks (Total Score and Sub-Indices)
Score group
score 2022 2021 ∆ ICT Skills R&D Industry Finance
Malaysia 0.76 32 31 -1 30 64 28 7 16 High
UAE 0.74 37 42 5 29 50 34 32 38 High
Saudi Arabia 0.65 47 50 3 46 44 20 119 77 Upper middle
Kuwait 0.64 51 58 7 44 75 70 52 37 Upper middle
Türkiye 0.62 53 55 2 75 48 26 77 49 Upper middle
Bahrain 0.58 60 56 -4 48 58 87 94 50 Upper middle
Oman 0.57 64 74 10 52 86 51 91 63 Upper middle
Tunisia 0.56 66 60 -6 88 61 66 42 45 Upper middle
Qatar 0.55 67 72 5 36 115 56 115 15 Upper middle
Kazakhstan 0.55 68 62 -6 82 36 69 69 124 Upper middle
Brunei DS 0.55 69 69 0 54 38 95 97 93 Upper middle
Morocco 0.55 70 76 6 73 113 53 55 33 Upper middle
Iran 0.53 75 71 -4 78 74 35 118 62 Upper middle
Lebanon 0.51 77 63 -14 84 76 77 86 26 Upper middle
Jordan 0.51 80 64 -16 80 101 61 64 43 Lower middle
Egypt 0.49 83 87 4 91 66 47 90 119 Lower middle
Indonesia 0.49 85 82 -3 102 107 50 47 97 Lower middle
Albania 0.46 88 85 -3 68 81 109 99 98 Lower middle
Azerbaijan 0.4 96 100 4 81 94 85 141 121 Lower middle
Algeria 0.4 97 98 1 112 83 65 162 111 Lower middle
Suriname 0.4 99 92 -7 92 62 160 110 127 Lower middle
Maldives 0.37 103 114 11 98 60 149 158 79 Lower middle
Iraq 0.35 107 126 19 104 100 44 164 158 Lower middle
Guyana 0.35 110 108 -2 113 119 160 87 95 Lower middle
Gabon 0.35 111 94 -17 105 98 149 76 148 Lower middle
Kyrgyzstan 0.34 113 115 2 107 103 119 111 113 Lower middle
Nigeria 0.32 119 124 5 119 108 68 157 153 Low
Libya 0.31 122 117 -5 151 99 97 145 104 Low
Pakistan 0.28 125 123 -2 149 159 43 82 138 Low
Bangladesh 0.28 126 112 -14 148 131 67 135 90 Low
Senegal 0.27 128 118 -10 116 155 92 116 112 Low
Cameroon 0.25 135 132 -3 137 120 101 117 146 Low
Cote d’Ivoire 0.23 136 131 -5 114 146 128 125 132 Low
Uganda 0.22 138 128 -10 133 137 91 120 147 Low
Burkina Faso 0.21 140 148 8 128 162 126 129 115 Low
Togo 0.19 142 129 -13 144 130 146 134 120 Low
Benin 0.19 143 139 -4 152 128 126 124 142 Low
Mali 0.19 145 141 -4 138 165 118 100 123 Low
Tajikistan 0.17 149 143 -6 160 118 140 138 151 Low
Djibouti 0.17 150 146 -4 135 163 160 68 135 Low
Mozambique 0.16 152 149 -3 140 156 123 154 125 Low
Mauritania 0.16 153 147 -6 139 160 137 150 128 Low
Comoros 0.14 156 142 -14 157 132 160 140 145 Low
Guinea 0.14 157 153 -4 154 158 149 130 156 Low
Yemen 0.1 159 156 -3 165 154 90 121 164 Low
Gambia 0.09 160 157 -3 145 151 149 161 159 Low
Sierra Leone 0.09 161 151 -10 158 149 131 143 163 Low
Sudan 0.08 163 155 -8 156 157 99 165 160 Low
Afghanistan 0.08 164 152 -12 164 150 114 151 165 Low
Guinea-Bissau 0.04 165 NA NA 163 147 160 166 140 Low

There are only two OIC countries that are classified within the ‘high’ score group, namely
Malaysia and United Arab Emirates, which rank among the top 40 in the world. Compared to the
earlier year, Iraq made the largest stride in its rankings from 126 in 2021 to 107 in 2022. Oman
also demonstrated a 10-step increment in its rankings. Overall, 15 OIC countries were able to
improve their places in the global rankings of FTRI. It is discouraging to observe that 33 OIC
countries fell back in their rankings. Among the building blocks of the index, OIC countries
perform relatively better in the R&D category, where there are 8 OIC countries ranked among
the top 50 in the world. It is important to tap into this opportunity to further improve their
capacity in research and Figure 4.4: Global Innovation vs Income Levels
development and achieve better Non-OIC OIC
prospects in frontier technologies. Linear (Non-OIC) Linear (OIC)
Some OIC countries are also Thousands

140
OIC: y = 1909.4x - 24826
relatively strong in the finance 120 Non-OIC: y = 1503.2x - 22482
category, demonstrating their
100 QAT
greater capability to provide
financing for emerging technologies. 80
GDP Per capita
ARE
This is in fact evident from the BRN
60
BHR
relationship that countries with KWT
SAU
40
higher income levels have higher OMN
KAZ
TUR
MYS
innovation scores (Figure 4.4). 20
IRN
0
Overall, there is a strong relationship
10 20 30 40 50 60 70
between what countries put in -20
innovation and what they achieve. Global Innovation Index
This is particularly visible in the GII.

Source: WIPO Global Innovation Index 2022.
Associating the two main sub-indices
of GII reveals that countries that
Figure 4.5: Innovation Inputs vs Innovation Outputs
invest in their innovation capacities
Non-OIC OIC
tend to have greater success in Linear (Non-OIC) Linear (OIC)
coming up with innovative outputs. 70
OIC: y = 0.63x - 7.54
More technically, countries with Non-OIC: y = 1.04x - 17.53
60
higher innovation inputs scores get
high scores in innovation outputs 50
Innovation Outputs
(Figure 4.5). This relationship is

40
stronger in non-OIC countries as TUR
compared to OIC countries, implying 30 IRN MYS
a smaller generation of innovation MAR ARE
TUN SAU
20 QAT
outputs from the same amount of BHR
innovation inputs in the case of OIC 10 KAZ
countries. This requires concerned BRN

0
OIC countries to identify the 10 20 30 40 50 60 70 80
Innovation Inputs
challenges in creating greater
innovation outputs and address them

84
with appropriate policy measures. The reasons can be diverse and complex, but their discussion
is beyond the scope of this report.
Figure 4.6: Secure Internet Servers (per 1 million To guide the challenges, one example would
people) be the security of internet services. Secure
internet servers are crucial because they
Brunei DS 15597.9
World 11416.3 safeguard data, privacy, and digital
Malaysia 7306.2
Suriname 6859.2
operations, preventing unauthorized access,
Turkiye 6776.1 data breaches, and cyberattacks, which can
Kazakhstan 3307.4
Iran 2330.5 have severe consequences for individuals,
Indonesia 1889.1
UAE 1496.8 businesses, and society. They positively
Maldives 1123.6
OIC 907.4 impact innovation outputs by fostering a
Albania 884.8
Libya 765.4 safe environment for digital collaboration,
Palestine 535.7
Uzbekistan 468.7 data sharing, and the development of new
Qatar 451.7
Bahrain 451.4 technologies. When we look at the number
Morocco 442.1
Kyrgyz Rep. 421.1
of secure internet servers per 1 million in
Kuwait 405.9 OIC countries, we observe that there is only
Lebanon 324.6
Tunisia 319.2 one OIC country that is above the world
Azerbaijan 299.3
Oman 261.9 average (Figure 4.6). The OIC average is
Saudi Arabia 221.6
Bangladesh 137.9 below 0.1%, whereas the world average is
Jordan 126.7
Tajikistan 92.2 1.1%.
Nigeria 73.2
Pakistan 71.7
Guyana 60.2 Lower innovation output capacity is
Cote d'Ivoire 55.7
Algeria 48.5
reflected in trade figures as well. Countries
Turkmenistan 45.8 with better innovation output capacities will
Djibouti 44.9
Gabon 42.7 be able to export greater value of goods and
Egypt 41.9
Uganda 35.4 services related to digital technologies. Total
Afghanistan 34.9
Mozambique 29.4 exports of OIC countries in ICT related goods
Gambia 27.2
Senegal 26.8 have been increasing steadily, which has
Togo 25.9
Benin 17.9 doubled between 2016 and 2021 to reach
Iraq 16.9
Cameroon 16.8 US$ 145 billion (Figure 4.7). Figure 4.7 also
Mauritania 14.4 shows that while total imports of OIC
Mali 10.2
Comoros 9.9 countries have been higher than their
Guinea 6.7
Sudan 6.3 exports, the trade deficit tends to decline
Sierra Leone 6.3
Burkina Faso 5.8 over the years. In this connection, their
Somalia 4.3
Guinea-Bissau 3.0 share in total exports of communication
Niger 1.4
Chad 1.3 equipment increased from around 1.9% to
0 5000 10000 15000 20000 6% during the same period (Figure 4.8).
Source: World Development Indicators, World Bank.
Figure 4.9 shows the trade balance of OIC
countries in total ICT goods and its
subcategories. In aggregate, OIC countries witnessed a trade deficit at an amount of around US$
34 billion during 2011-2020, which fell to US$ 21 billion in 2021. Despite the rise in their share of
global exports of communication equipment, this category remains the one with the largest trade

Figure 4.7: Total Exports and Imports of OIC Figure 4.8: Share of OIC Countries in Global
Countries in ICT Goods (Billion US$) Exports of Communication Equipment
180 166.5 7%
157.3 6.0%
160 149.4
144.4 140.2 6%
140 128.4 5.0%
121.0 120.9
115.1 145.3 5%
120
4.0% 4.9%
119.8 117.9 121.3 4%
100
4.2%
101.5
80 3%
84.2 88.5
79.3 2.0%
60 74.3
2%
40 2.1% 2.2% 1.9%
Exports
1%
20
Imports
0 0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: UNCTADstat, UNCTAD. Source: UNCTADstat, UNCTAD.
deficit. It is encouraging to observe that OIC countries have an increasingly higher trade surplus
in electronic components, an important ingredient of digital technologies. They have also a
surplus in consumer electronic equipment and miscellaneous ICT products.
There is also a growing trend in the trade of ICT services. OIC countries also managed to increase
their total exports in ICT services over the years to reach US$ 32.5 billion in 2021. Exports of ICT
services account for 8.7% of total services exports of OIC countries. On the other hand, despite
the growth in total services exports, the share of OIC countries in global ICT exports has been
falling continuously over the years since 2014 to reach 3.8% in 2021 (Figure 4.10). Obviously,
there are significant improvements in the capacity of OIC countries in producing and exporting
ICT related goods and services, but there is a need for greater efforts to improve the capacities
further and become more competitive in global markets.
Figure 4.9: Trade Balance of OIC Countries in ICT Goods (Billion US$)
20
2011-15 2016-20 2021 11.4
10 5.8
3.7
1.9 0.5 0.9
0
-0.3 -1.8
-10 -6.1 -7.0 -5.0
-10.8
-20
-21.2
-30 -24.6
-27.1
-31.0
-34.1 -34.3
-40
Total ICT goods Computers and Communication Consumer Electronic Miscellaneous
peripheral eq. eq. electronic eq. components
Source: UNCTADstat, UNCTAD. 2011-15 and 2016-2020 show the period averages.

86
Figure 4.10: Total Exports of OIC Countries in ICT Services (US$ at 4.2 Access to Digital
current prices in billions) Technologies and
Total ICT Exports % of World % of Total Trade in Services Services
35 32.5 12
The current state of digital
30 10 infrastructure in OIC countries
25 shows some promising
8
8.7 developments in some OIC
20
6 countries, but demonstrates
15
4 major challenges in the
10
3.8 majority of other OIC
5 2
countries, particularly those
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
in sub-Saharan Africa. This
section provides some further
Source: UNCTADstat, UNCTAD. insights on digital
infrastructure development
mainly from the viewpoint of access to digital services. Table 4.1 already provides some
information on the network coverage of mobile technologies, which is critical in understanding
the access to services through mobile networks. Perhaps a more fundamental indicator is access
to electricity, without which it is not possible to carry the discussions on digital technologies
forward.
Figure 4.11: Access to Electricity

Globally, access to electricity
is improving, which is
2011 2021 estimated to reach 91.4% in
98.4
100 92.4 91.4
87.7
90.8
87.0
2021. OIC countries were also
90 84.5 84.1 84.6
76.5 able to increase the share of
80
70
the population that has access
60 50.5
to electricity from 76.5% in
50 41.2 2011 to 84.5% in 2021.
40 However, the average access
30
rate in OIC countries
20
10
continues to remain below
0 the world average. This is in
OIC Non-OIC World OIC-Africa OIC-Arab OIC-Asia fact largely driven by the
Developing
lower access ratios in sub-
Source: World Development Indicators, World Bank. Weighted averages of 56 OIC,
39 developed and 119 non-OIC developing countries. Saharan African countries of
the OIC, which have an
average rate of 50.5%. OIC counties in the Asia region has an average access rate of electricity
above 98% (Figure 4.11).
Limitations in access to electricity will definitely impact the development objectives of the sub-
Saharan African countries. Having access to a technology requires the ability to use that

Figure 4.12: ICT Access vs ICT Use (2020) technology as well.

10 Overall, there is a strong
9
OIC correlation between
Developed SAU these two indicators,
8 Non-OIC Developing BRN ARE
BHR
KWT
MYSQAT according to the GII
7 IRNKAZ
UZB TUR
OMN indicators. Developed
6 JOR TUNAZE MAR
ALB IDN
DZA KGZ countries have greater
ICT Use
5 EGY access to ICT and they

CMR MRT CIV BGD
4
NGA SEN IRQ are able to make use of
PAK
3 UGA
BEN
it better. However, OIC
TGO
MLI
2 MOZ BFA countries demonstrate
GIN TJK
1 a mixed picture, where
NER YEM
0
there are countries at
3 4 5 6
ICT Access
7 8 9 10 varying levels of ITC
Source: WIPO Global Innovation Index 2022. access and use.
Generally, higher
income countries within the OIC have higher levels of ICT access and use (Figure 4.12). In essence,
access is the foundation that enables ICT use, and increased use can, in turn, drive the need for
improved access. Bridging the digital divide and promoting equitable access to ICT is essential for
ensuring that the benefits of technology are accessible to all.
A critical indicator of digital inclusion is the share of individuals using the internet, as it indicates
that people are engaging with the online world for communication, information retrieval, social
networking, and more. Individual country statistics on internet usage are already provided in
Figure 4.13: Individuals using the Internet Figure 4.14: Individuals using the Internet (% of
in OIC Countries (% of population), population) vs Fixed broadband subscriptions (per 100
Distribution of Countries, 2021 people), 2021
60
Developed countries
Fixed broadband subscriptions (per 100 people)
50
UAE, 100.0,
40 38.2
Saudi Arabia,
100.0, 29.5
30
Uzbekistan,
76.6, 22.0
20
Türkiye,
81.4, 21.4
10 OIC countries
0
0 20 40 60 80 100
Individuals using the Internet (% of population)

88
Table 4.1 in the previous section. Figure 4.13 shows the distribution of OIC countries with respect
to the share of the population
Table 4.3: ICT Price Baskets (2021), % of GNI using the internet over 20
Mobile data Fixed-
and voice broadband
Data-only mobile- percentage point intervals.
broadband basket
basket basket Diversity across the OIC countries
Afghanistan 21.5 15.2 12.1
is again quite visible in terms of
Albania 3.5 1.5 2.2
Algeria 2.9 4.7 0.9 internet usage. However, beyond
Azerbaijan 2.3 1.7 1.7 having access to the internet, it is
Bahrain 1.4 2.4 1.1
Bangladesh 2.0 2.0 1.4 also important to ensure quality
Benin 14.7 26.1 6.5 and speed of these services. Fixed
Brunei DS 0.6 1.1 0.3
Burkina Faso 19.3 32.7 10.5 broadband offers greater stability,
Cameroon 21.2 21.0 4.0 speed, and reliability compared to
Chad 41.3 24.1
Comoros 14.3 29.6 7.9 other forms of internet access like
Côte d'Ivoire 6.9 15.7 2.6 mobile data.
Djibouti 10.1 8.6 6.1
Egypt 1.9 3.0 1.1 The relationship between
Gabon 4.0 8.0 2.2
Gambia 25.4 12.2 individuals using the internet and
Guinea 9.1 11.0 5.7 foxed broadband subscriptions
Guinea-Bissau 8.5 71.1 8.5
Guyana 5.7 6.1 4.0 underscores the importance of
Indonesia 2.5 7.6 0.9 both individual adoption and
Iraq 5.0 2.5
Jordan 4.2 11.0 3.7 infrastructure development in a
Kazakhstan 1.4 0.8 0.9 digital society. High levels of
Kuwait 0.8 1.6 0.5
Kyrgyzstan 2.8 3.6 2.8
individuals using the internet
Lebanon 11.1 1.9 6.3 indicate the prevalence of digital
Libya 6.2 4.5 3.6
Malaysia 1.3 2.3 1.0
literacy and the relevance of
Maldives 3.0 4.2 3.0 online services in people's lives.
Mali 17.6 25.0 10.1
Meanwhile, a robust network of
Mauritania 9.0 19.1 3.8
Morocco 2.3 4.2 1.3 fixed broadband subscriptions
Mozambique 19.9 35.8 11.9 signifies a technologically
Niger 38.4 15.3
Nigeria 3.9 21.5 2.0 advanced and connected
Oman 1.8 3.5 1.2 environment, capable of
Pakistan 4.4 15.7 0.6
Palestine 6.3 7.8 2.4 supporting advanced digital
Qatar 0.4 2.2 0.4 applications. Figure 4.14 shows
Saudi Arabia 1.4 3.6 0.9
Senegal 5.7 18.5 2.9 that despite having similar shares
Sierra Leone 39.9 14.4 of individuals using internet, fixed
Somalia 19.4 38.7 7.7
Sudan 2.2 3.4 broadband subscriptions are at
Suriname 12.1 4.9 3.6 comparably lower levels in many
Tajikistan 5.5 7.0 7.5
Togo 27.5 56.8 11.4
OIC countries than in developed
Tunisia 1.8 3.1 1.2 countries. This requires OIC
Türkiye 0.7 1.5 0.7
Turkmenistan 2.4 4.7 5.1
countries to expand their
Uganda 25.7 8.0 infrastructure with a view to
UAE 0.9 0.6 0.6 generating a thriving digital
Uzbekistan 1.1 2.1 1.1
World 2.9 3.0 1.3 ecosystem that supports
Source: ITU. Mobile data and voice basket includes high consumption basket
of 140 min + 70 SMS + 2 GB. Fixed broadband basket includes 5GB internet.
innovation, economic growth, and
Data-only mobile-broadband basket includes 2GB internet societal progress.

Affordability is a critical factor in impacting the decisions of both individuals and organizations in
subscribing the better quality services. Lower ICT prices can encourage technology adoption,
investment in digital infrastructure, and broader use of digital services. Affordable ICT products
and services make digital resources more accessible, bridging the digital divide and promoting
digital inclusion. They also affect business models and global competitiveness, as reduced costs
can drive innovation and attract investment. Therefore, ICT prices play a crucial role in shaping
the pace of digitalization and the extent to which individuals, businesses, and countries can
harness the benefits of technology. Table 4.3 compares three alternative price baskets
comprising data and voice packages in OIC countries. Obtaining mobile data and voice basket
that includes high consumption basket of 140 min + 70 SMS + 2 GB would require 41.3% of and
individual income in Chad, 39.9% in Sierra Leone and 38.4% in Niger. In Guinea Bissau, a fixed
broadband basket with 5GB internet would cost 71.1% of individual income. Data-only mobile
packages cost relatively less, encouraging people to have access to the internet through mobile
devices.
On another front, there is a need to acquire the necessary software to better make use of digital
and technological tools. Software spending underpins the functioning of businesses,
governments, and individuals, enabling efficiency, productivity, and innovation. Businesses rely
on software for operations, analytics, and customer engagement, gaining a competitive edge and
driving economic growth. Governments use software for improved service delivery and
governance, enhancing transparency and citizen engagement. On an individual level, software
supports education, communication, and access to essential services. Yet, OIC countries on
average spend less than 0.2% of their income on software, whereas this share is mostly between
0.3% and 0.6% in developed countries (Figure 4.15).
Figure 4.16: Generic Top-level Domains (TLDs),

Figure 4.15: Software Spending (% of GDP, 2021) 2021 (per 1000 population at age 15–69)

90
Moreover, generic Top-level Domains (TLDs), such as .com, .org, and .net, are vital in the digital
age as they provide unique online identities and help establish trust on the internet. These TLDs
enable individuals, businesses, and organizations to create memorable web addresses that
represent their brand or purpose. Having access to a variety of TLDs fosters online innovation, e-
commerce, and digital entrepreneurship. For every 1000 people aged 15 to 69, there is a very
limited number of TLDs in OIC counties, typically below 10, whereas this ratio is over 100 in many
developed countries (Figure 4.16).
Facing with relatively higher ICT prices, lower software spending, limited broadband
subscriptions, and lower availability of TLDs, it is crucial for OIC countries to recognize the urgent
need for digital infrastructure development. High ICT costs and limited software access hinder
economic growth and digital inclusion. Therefore, concerted efforts are needed to reduce ICT
costs, increase investment in software and digital services, expand broadband access, and
promote the availability of diverse TLDs. This requires collaborative public-private initiatives,
policy reforms, and investments in digital infrastructure to bridge the digital divide, foster
innovation, and unlock the full potential of the digital age for all.
4.3 Skills for Digital Transformation

There is an emerging challenge for all countries with the rise of digitalization and automation,
which will have extensive impacts on many fronts, including the labour market. Because of
changing production processes, demand for certain skills will increase, creating new occupations
and rising wages for them, but some other skills and occupations will become redundant. This
requires a solid understanding of the needs of the industries for future production processes and
accordingly planning investments in the required skills to achieve industrial and economic
development in the face of rising digitalization and automation.
As highlighted in SESRIC (2023), a majority of the working force in OIC countries is stuck in
vulnerable jobs, but with the rise of manufacturing activities there are greater opportunities for
decent jobs with more social security and more stable income flows. A typical feature of
Figure 4.17: Learning Adjusted Years of Schooling (2020)
industrialization is that it
enables resources to move
12 11.1 from labour-intensive
OIC Sub-regions activities towards more
10
7.8 capital and technology-
8 7.3
6.8 intensive activities. To
6.4
6
4.6
accelerate this process, OIC
4
countries need to increase
their absorptive capabilities
2
to better utilize foreign
0 technology by investing in
OIC Developed Non-OIC OIC-Africa OIC-Arab OIC-Asia education and skills. The
Developing
availability of certain skill sets
Source: World Development Indicators, World Bank. Simple averages of 49 OIC, 36
developed and 89 non-OIC developing countries. will encourage foreign

investors to bring new investments to the country, which in turn helps to upgrade the
technological intensity of local manufacturing and facilitates participation in regional and global
value chains. Timely investments in skills also avoid skills mismatch, labour underutilization and
unemployment.
A common indicator measuring the investment in skills is the learning adjusted years of schooling
(LAYS). In the digital age, it is not enough to have more years of schooling; individuals need
relevant, practical skills. Learning-adjusted years recognize the importance of adaptable,
technology-focused curricula that prepare students for the demands of the digital workforce.
These metrics drive educational institutions to produce graduates who can actively contribute to
digital innovation and competitiveness, ultimately shaping the success of digital transformation
efforts in a society. According to the latest data provided by the World Bank, the LAYS is 6.4,
whereas this is 7.3 in non-OIC developing countries and 11.1 in developed countries (Figure 4.17).
Within the OIC, Asian countries outperform African countries with average LAYS values of 7.8 and
4.6, respectively. Therefore, OIC countries need to invest in improving the quality of education
to meet the skills requirement of the digital age.
Figure 4.18: Human Capital and This lack of investment in quality education is reflected
Research for Innovation in the GII sub-index of human capital and research.
United Arab Emirates, Saudi Arabia, Malaysia and
OIC Developed Non-OIC Developing
Türkiye are relatively better performing countries in
70
KOR
terms of human capital and research (Figure 4.18).
Their performance is comparable to that of developed
60
ARE countries. Yet, the majority of OIC countries, lack
CHN
50 sufficient expenditure on education, learning materials,
SAU and research and development.
40 MYS
TUR
As a result, OIC countries collectively account for only
30 9.5% of scientific and technical journal articles in the
world (Figure 4.19a). China alone produces journal
20
articles more than twice the articles produced by all OIC
countries. Within the OIC, Iran, Türkiye, Indonesia,
10
GIN Malaysia and Egypt are the countries with the highest
0 number of scientific journal articles, which collectively
account for 63% of all journal articles produced by OIC
countries (Figure 4.19b). A greater number of scientific
academic journal articles reflect a society's commitment to research, innovation, and knowledge
creation. It signifies a thriving academic and scientific community, often supported by robust
educational and research institutions. OIC countries need to increase their research output to
foster economic growth, technological advancements, and societal progress.
In the same line of reasoning, a higher number of patent applications signifies a culture of
innovation, entrepreneurship, and competitiveness, as well as an environment where research
and development thrive. Patent filings can also reflect a nation's economic potential, as they
often lead to the creation of new industries, job opportunities, and economic growth. However,

92
Figure 4.19a: Scientific and Technical Journal Figure 4.19b: Scientific and Technical Journal
Articles (by group, 2020) Articles (in thousands, 2020)
OIC, China 669.7

275073, United States 455.9
(9.5%)
India 149.2
Top five countries
Germany 109.4 account for 51% of
world total
Non-OIC UK 105.6
publications
Developing,
1180438,
(40.7%) Iran 57.8
Developed, Top five OIC countries
1445315, Türkiye 42.6
account for 63% of all
(49.8%) Indonesia 32.6 publications by OIC
Malaysia 21.9
Egypt 18.5
0 200 400 600 800

Source: World Development Indicators, World Bank. Thousands
OIC countries collectively account for only 1.8% of global patent applications, demonstrating the
lack of skills and quality institutions to support innovation and technological development (Figure
4.20a). Globally, China takes the lead in patent applications, followed by the United States and
Japan. Within the OIC, Iran, Indonesia, Türkiye, Malaysia and Saudi Arabia are the top countries
in patent applications, collectively accounting for 71% of all patent applications in the OIC region
(Figure 4.20b).
Overall, analyses in this section signal significant challenges for transforming economies,
indicating collectively a lack of innovation capacity, which is critical in the digital age. Without
skilled workers, innovative ideas, and investments in research and development, countries are
likely to struggle to keep pace with technological advancements, hindering their ability to
compete in the global digital economy. To adapt to digitalization successfully, OIC countries must
Figure 4.20a: Patent Applications, Residents and Figure 4.20b: Patent Applications, Residents and
Non-residents (by group, 2020 or LYA) Non-residents (in thousands, 2020 or LYA)
OIC, China 1,497.2

54320, United States 597.2
(1.8%) Top five countries
Japan 288.5 account for 87% of
Korea 226.8 world total patent
applications, with
Germany 62.1 China accounting
Non-OIC almost half
Developed,
Developing,
1354528, Iran 12.0
1679413,
(43.9%) Top five OIC countries
(54.4%) Indonesia 8.2
account for 71% of all
Türkiye 8.2 patent applications by
Malaysia OIC
6.8
Saudi Arabia 3.6
0 500 1000 1500 2000

Source: World Development Indicators, World Bank. Thousands

prioritize education, innovation, and technology investment to build the necessary foundations
for economic transformation in the digital era.
4.4 Assessing the Preparedness for Industry 4.0

The above discussions highlight important opportunities as well as challenges for OIC countries
in adapting to the changing nature of work in association with digitalization and automation.
Significant disparities exist across OIC countries in terms of availability, accessibility, quality and
reliability of digital infrastructure and services. There are OIC countries with well-advanced
infrastructure and better readiness for future economic transformation, but on aggregate, OIC
countries fall behind the world average performances in many indicators. This requires closer
collaboration among OIC countries to facilitate knowledge sharing and capacity development.
In general, countries with robust manufacturing sectors embracing Industry 4.0 technologies are
likely to see substantial productivity gains, while skilled workers stand better positioned for the
transition, potentially mitigating labour market disruptions. Economies excelling in high-skill,
technology-intensive exports and high-skill employment are poised to benefit initially, but the
extent to which these technologies reduce or exacerbate global inequalities will hinge on factors
like access to resources, adaptability, and investment in technology (UNCTAD, 2022). This
requires policymakers to address disparities and facilitate a more equitable global transition to
Industry 4.0.
Figure 4.21 shows a simplified version of this analysis based on UNCTAD (2022), considering how
countries perform in high-skill and technology-intensive manufacturing exports (as a share of
total exports) and high-skill employment (as a share of the working population), thereby dividing
countries into four groups. One group of economies, including two OIC countries (Kazakhstan and
Malaysia) and many advanced economies in North America, Europe and South-East Asia,
comprises economies with high levels of opportunity for the diffusion of industry 4.0
technologies, due to their specialization in high-skill and technology-intensive manufacturing,
and with large shares of high-skill employment. These economies are more likely to benefit the
most from industry 4.0 in manufacturing relative to their populations and exports.
A second group of economies, including, for example, China, India, Mexico, Thailand and Viet
Nam, comprises economies with high levels of opportunity given their share of high-technology
exports, but shares of high-skill employment that are below the global average, indicating that
the lack of skills may be an obstacle in broadly diffusing industry 4.0 technologies in
manufacturing. There is no OIC country classified under this category.
A third group of economies comprises economies with shares of high-skill employment that are
above the global average, indicating the potential for workers to adapt to industry 4.0 in
manufacturing, but low levels of opportunity in terms of firms in high-technology sectors. These
economies may find it difficult to broaden the use of industry 4.0 technologies in manufacturing
beyond the pockets of high-skill and technology-intensive manufacturing sectors. There are
twelve OIC countries classified under this group including United Arab Emirates, Saudi Arabia,

94
Maldives, Brunei Darussalam, Nigeria, Suriname, Lebanon, Egypt, Kuwait, Palestine, Uzbekistan,
and Türkiye, ranked according to the levels of high skilled labour shares.
Figure 4.21: Assessing the Preparedness for Industry 4.0: High Skilled Labour vs High-Tech Exports
80%
Share of High Technology Exports in Total Manufacturing
High levels of opportunities High levels of skills and

70% but low levels of skills (no OIC opportunities (2 OIC
country) countries)
60%
Malaysia
50%
12 OIC countries
(United Arab Emirates,
40% Saudi Arabia, Maldives,
Kazakhstan Brunei Darussalam,
30% Nigeria, Suriname,
Lebanon, Egypt,
Kuwait, Palestine,
20%
Low levels of skills and Uzbekistan, Türkiye
opportunities (33 OIC
10% countries) High levels of skills but low
levels of opportunities
0%
0% 10% 20% 30% 40% 50% 60% 70%
Share of Skilled Labor in Total Employment
Source: World Bank World Development Indicators and ILO Modelled Estimates. Concept adopted from UNCTAD (2022). Note: Blue
dots represent OIC countries (n=47), orange dots developed countries (n=36) and gray dots non-OIC developing countries (n=77).
Solid gray lines represent the global averages. Data are for 2021 or latest year available.
A fourth group of economies, including most OIC and non-OIC developing countries, comprises
economies with shares under both indicators that are below global averages; they do not have
many high-technology sectors in the economic structure nor many high-skill jobs, and the
diffusion of industry 4.0 technologies could therefore be slower. The remaining 33 OIC countries
are classified under this category, reflecting their lack of readiness for transforming economies
in the face of rising digitalization and automation.
This preliminary analysis suggests that the initial diffusion of industry 4.0 technologies is more
likely to widen inequalities between countries. To address this, policymakers should focus on
several key policy options. First, they need to invest in digital infrastructure and provide
incentives for technology adoption in underdeveloped regions. They also need to prioritize
workforce training and education to ensure a skilled labour force capable of harnessing Industry
4.0 capabilities. Additionally, it is necessary to promote international collaboration and
technology transfer to help less developed countries catch up. Finally, policies are needed to
establish regulations that ensure responsible and equitable deployment of these technologies,
preventing monopolies and exploitation while fostering fair competition. These policies can help
mitigate the initial disparities and enable more balanced global benefits from Industry 4.0.

theRise of the
Divide
CHAPTER FIVE
5 Policy Options for
Bridging the Digital
Divide in OIC Countries

96
Chapter 5: Policy Options for Bridging the Digital Divide in OIC Countries
B
ridging the digital divide in OIC countries involves a multifaceted approach that begins with
assessing the current digital landscape, identifying priority areas, and engaging
stakeholders to understand the specific challenges faced by underserved communities.
This process encompasses addressing demographic and geographic disparities, boosting digital
literacy, tackling socioeconomic factors hindering digital access, and ensuring adequate digital
infrastructure. Moreover, it requires reforming regulatory and policy frameworks, focusing on
educational and healthcare needs, considering economic opportunities, and actively involving
the public in decision-making. Through a comprehensive, data-driven strategy and collaboration
with public and private sectors, countries and regions can effectively prioritize and invest in
initiatives aimed at reducing the digital divide, fostering inclusive digital development, and
promoting equitable access to the benefits of the digital economy.
In this connection, this report offers a set of comprehensive policy options under seven steps, as
demonstrated in the chart below, for OIC countries to adapt to the growing digitalization of
economic activities and benefit from its mounting importance. This includes how to identify the
priority areas to invest, how to finance the digital infrastructure investments, how to improve
access to digital technologies, how to regulate the digital economy, how to ensure cyber security,
how to support firms and entrepreneurs to better utilize digital technologies, and how to upgrade
skills to increase productivity and minimize job losses.
Bridging the Digital Divide
7 1
Upgrade skills to increase Identify the priority areas
productivity and minimize to invest
job losses
6 2
Support firms and Finance digital
entrepreneurs to better infrastructure
utilize digital technologies investments
5 3
Ensure cyber security Improve access to digital
technologies
4
Regulate digital economy

STEP ONE – Identify the Priority Areas to Invest
The first step in bridging the digital divide is to identify the gaps and priority areas to invest. This
requires a thorough assessment of the specific needs and challenges within a given country or
region. A systematic approach would help policymakers to identify the areas to make
interventions and bridge the gap. In this connection, the following actions are proposed:
 Conduct a Digital Divide Assessment: Start by conducting a comprehensive assessment

of the current state of digital access and inclusion in the country or region. This should
include data on internet penetration rates, digital literacy levels, and the availability of
digital infrastructure in urban and rural areas.
 Engage Stakeholders: Involve key stakeholders, including government agencies, local

communities, non-governmental organizations, and technology providers, in the
assessment process. Their insights and expertise can provide a more holistic view of the
digital divide. Also, conduct public consultations and surveys to gather input from
citizens and communities about their digital needs and priorities.
 Analyse Demographics and Geographic Disparities: Analyse demographic data to identify

vulnerable populations, such as low-income households and people with disabilities.
Understand their specific digital needs and barriers. Examine geographic disparities to
determine which regions or areas lack adequate digital infrastructure and access.
 Assess Digital Literacy and Skills Gaps: Evaluate the digital literacy levels of the
population. Identify gaps in digital skills and knowledge that need to be addressed
through training and education programs (more specific policy options are provided in
step 7).
 Consider Socioeconomic Factors: Analyse socioeconomic factors that contribute to the

digital divide, such as income inequality, employment opportunities, and access to
education and healthcare. Prioritize areas where these factors intersect with limited
digital access.
 Examine Educational and Healthcare Needs: Assess the impact of the digital divide on
education and healthcare. Prioritize areas where lack of access hinders online learning
and access to critical services.
 Evaluate Infrastructure Gaps: Identify areas with inadequate digital infrastructure,

including regions lacking reliable broadband internet connectivity or access to
electricity.
 Understand Regulatory and Policy Challenges: Analyse existing regulatory and policy
frameworks related to digital access and inclusion. Identify any regulatory barriers that
hinder investment and expansion of digital infrastructure (more specific policy options
are provided in step 4).

98
 Consider Economic Opportunities: Assess the potential economic benefits of bridging the
digital divide. Prioritize areas where digital inclusion can stimulate economic growth and
job creation.
 Assess Cybersecurity and Data Privacy Needs: Consider the cybersecurity and data
privacy implications of expanding digital access. Prioritize areas where these concerns
need to be addressed (more specific policy options are provided in step 5).
 Prioritize Based on Impact and Feasibility: Evaluate the potential impact of investments
in different areas. Prioritize projects that have the greatest potential to reduce the
digital divide and improve overall quality of life. Consider the feasibility of
implementation, including cost-effectiveness, available resources, and technical
feasibility.
 Develop a Comprehensive Digital Inclusion Strategy: Based on the assessment, create a

comprehensive digital inclusion strategy that outlines specific initiatives, targets, and
timelines for bridging the digital divide in priority areas. Continuously monitor the
progress of digital inclusion initiatives and make adjustments as needed based on
ongoing assessments and feedback.
Tracking these steps and taking a data-driven approach would help to identify the priority areas
where investments will have the most significant impact on bridging the digital divide and
fostering inclusive digital development.
STEP TWO – Seek Alternative Options to Finance Digital Infrastructure Investments
After identifying the priority areas and preparing a comprehensive strategy to address the digital
divide, it is important to identify potential funding sources, including government budgets,
international aid, private sector investments, and public-private partnerships, to support digital
divide reduction efforts and enable economies to adapt to rising digitalization. The followings are
a set of traditional as well as innovative options to finance digital infrastructure investments:
 Government Budgets: Allocate a portion of the national budget to fund digital inclusion
initiatives. Prioritize these initiatives as part of the country's development agenda.
 Public-Private Partnerships (P-PPs): Collaborate with private sector companies to co-

finance and implement digital infrastructure projects. P-PPs can leverage private sector
expertise and resources while sharing risks.
 International Aid and Grants: Seek financial support from international organizations,
development banks, donor countries, and philanthropic organizations that support
initiatives related to digital inclusion, education, and economic development.
 Development Loans: Secure low-interest loans or grants from international financial

institutions, such as the World Bank, Islamic Development Bank or other regional
development banks, for digital infrastructure projects.
 Tax Incentives and Subsidies: Offer tax incentives to private companies investing in digital
infrastructure or providing affordable digital services in underserved areas. Also,

subsidize the cost of digital devices and internet connectivity for low-income
households.
 Digital Impact Bonds: Explore the possibility of issuing digital impact bonds, where
investors provide upfront funding for digital projects, and returns are based on the
project's success in achieving specific social and economic outcomes.
 Technology Funds and Venture Capital: Establish technology funds or encourage venture
capital firms to invest in startups and innovative digital projects that can contribute to
digital inclusion and economic growth.
 Crowdfunding and Community Financing: Encourage crowdfunding campaigns and

community-driven initiatives to raise funds for local digital infrastructure projects.
 Earmarked Taxes or Levies: Consider imposing small taxes or levies on digital services or
transactions to generate funds specifically designated for digital inclusion initiatives.
 Digital Ecosystem Support: Create an enabling environment for the growth of digital
industries (e.g., e-commerce, IT services) to generate economic value that can support
digital inclusion efforts through increased tax revenue.
 Revenue-Sharing Models: Negotiate revenue-sharing agreements with telecom

operators or digital service providers to allocate a portion of their earnings towards
digital inclusion projects.
 Other Innovative Financing Models: Explore other innovative financing models, such as
blockchain-based financing or social impact bonds, to attract investment for digital
inclusion projects.
Benefiting from these financing sources and mechanisms can enable to access the necessary
resources to invest in priority areas for bridging the digital divide and facilitating economic
adaptation to digitalization. It is essential to implement policy reforms to create a favourable
regulatory environment that attracts private sector investment in digital infrastructure and
services. Engaging in public awareness campaigns to highlight the importance of digital inclusion
may also encourage public and private sector contributions. To achieve the objectives, it is also
critical to ensure transparent and accountable use of funds through effective monitoring and
evaluation mechanisms to track the impact and effectiveness of digital inclusion investments.
STEP THREE – Improve Access to Digital Technologies
While developing digital infrastructure is crucial, it is also imperative to ensure that all population
have access to these technologies. Improving access to digital technologies requires a multi-
pronged approach that addresses infrastructure, affordability, digital literacy, and inclusion.
Some policy options are the following:
 Affordable Data Plans and Tools: Work with telecom providers to offer affordable data
plans and packages, especially for low-income individuals and families. Implement also
programs that subsidize the cost of digital devices like smartphones, tablets, and
computers for low-income populations.

100
 Digital Literacy Programs: Develop comprehensive digital literacy and skills training
programs for all age groups, emphasizing basic digital skills as well as advanced skills for
employment. Integrate digital literacy into formal education curricula.
 Broadband Infrastructure: Invest in building and upgrading broadband networks,

especially in underserved and rural areas. Promote the deployment of high-speed
internet technologies like fiber-optic cables.
 Mobile Connectivity: Extend mobile network coverage to remote and rural regions.
Encourage the development of affordable, low-cost smartphones to facilitate internet
access.
 Online Government Services: Offer essential government services online, such as

healthcare, education, and public welfare programs. Implement user-friendly e-
government platforms for easy access to services.
 SMEs: Encourage digital adoption of SMEs by supporting them through subsidies and
incentives. Promote digital ecosystems and industries that can generate economic value
and create an environment where firms can readily access and utilize digital
technologies to drive economic growth and competitiveness.
 Competition: Implement policies that promote competition among internet service

providers to reduce costs and improve service quality.
 Internet Access in Public Spaces: Establish public Wi-Fi hotspots in urban areas and major
public spaces, preferably free. Set up also community internet access centres equipped
with computers and internet connections, particularly in underserved areas. Ensure
these centres provide digital literacy training and support services.
 Digital Inclusion Vouchers: Provide digital inclusion vouchers or subsidies to help low-
income households cover the costs of internet access, devices, and digital skills training.
 Inclusive Content Development: Encourage the creation of digital content and services
that cater to diverse linguistic and cultural needs. Promote content that addresses local
challenges and enhances digital engagement.
 Assistive Technologies: Ensure digital technologies are accessible to people with

disabilities by incorporating accessibility features and standards, and promote the use
of assistive technologies and software.
Improving access to digital technologies is a long-term effort that requires coordination among
governments, private sector stakeholders, civil society, and international organizations. It is
essential to address both the supply and demand sides of digital access, ensuring that people not
only have access to technology but also the skills and resources to use it effectively. In this
process, it is beneficial to establish metrics to monitor progress in improving access and regularly
evaluate the impact of digital inclusion initiatives, and adjust strategies based on data and
feedback.

STEP FOUR – Regulate Digital Economy
While implementing policies to improve access to digital technologies, governments should

create a regulatory framework to manage digital transformation. Regulating the digital economy
is a complex and evolving task that involves balancing innovation and economic growth with the
protection of consumers, privacy, competition, and security. To begin with, it is essential to gain
a deep understanding of the digital economy, including the various sectors and technologies
involved, such as e-commerce, fintech, artificial intelligence, and data analytics. Following are
some key considerations and strategies for regulating the digital economy:
 Legal Frameworks: Establish clear and comprehensive legal frameworks that address
issues specific to the digital economy, including data privacy, cybersecurity, intellectual
property, and online commerce. Ensure that regulations are technology-neutral and
adaptable to rapid technological advancements.
 Data Privacy and Protection: Enact data protection laws that safeguard individuals'
privacy and give them control over their personal data. Establish mechanisms for data
breach notification and penalties for non-compliance.
 Cybersecurity Regulations: Implement cybersecurity regulations and standards to

protect critical infrastructure and digital assets from cyber threats. Promote best
practices for cybersecurity across industries.
 Antitrust and Competition Regulation: Monitor and regulate digital platforms and tech
giants to prevent monopolistic practices, anti-competitive behavior, and unfair market
dominance. Encourage competition and innovation in the digital marketplace.
 Consumer Protection: Develop consumer protection laws and regulations that address
issues such as fraudulent online activities, digital product safety, and transparent
pricing. Ensure platforms have mechanisms for dispute resolution and customer
support.
 Taxation and Revenue Collection: Create a fair and effective tax framework for digital
businesses to ensure they contribute to public revenues. Consider digital sales taxes or
value-added taxes on digital goods and services.
 Cross-Border Data Flow: Establish rules and agreements for cross-border data flow while
balancing privacy and security concerns. Promote international data transfer
mechanisms like Standard Contractual Clauses or Binding Corporate Rules of the EU.
 Intellectual Property Rights: Strengthen intellectual property protection for digital

innovations and content. Develop mechanisms to address copyright infringement,
piracy, and counterfeiting online.
 Regulate Platform Liability: Define the liability and responsibility of online platforms for
user-generated content. Consider intermediary liability protections that strike a balance
between freedom of expression and content moderation.

102
 Digital ID and Authentication: Develop secure digital identity and authentication systems
to combat online fraud and enhance digital trust. Ensure user consent and data
protection in digital ID systems.
 Regulate Emerging Technologies: Establish guidelines and regulations for emerging

technologies like artificial intelligence, blockchain, and biotechnology. Encourage
responsible and ethical development and use of these technologies.
 Transparency and Accountability: Promote transparency in digital algorithms and

decision-making processes, especially in areas like credit scoring, hiring, and content
curation. Hold digital companies accountable for algorithmic bias and discriminatory
practices.
 International Collaboration: Collaborate with other OIC as well as non-OIC countries and
international organizations to develop common standards and regulations for the digital
economy. Address cross-border issues, such as cybercrime and data sharing, through
regional and international agreements and treaties.
 Enforcement and Compliance: Establish effective enforcement mechanisms and

penalties for non-compliance with digital regulations. Invest in regulatory agencies'
capabilities to monitor and enforce regulations effectively.
Regulating the digital economy is a constant process requiring flexibility, adaptability, and a deep
understanding of the evolving technological landscape. It is important to recognize that
regulations in the digital economy must evolve to keep pace with technological advancements.
Striking the right balance between fostering innovation and protecting the interests of society is
crucial for effective digital regulation. Governments should also involve industry experts, civil
society, and academia in the regulatory process to ensure a balanced and informed approach.
STEP FIVE – Ensure Cyber Security
Ensuring cybersecurity and data privacy is essential in the digital age to protect individuals,
organizations, and nations from cyber threats and data breaches. It ensures the confidentiality,
integrity, and availability of information, protecting individuals, organizations, and nations from
financial losses, reputation damage, and potential harm to critical infrastructure. Here are steps
and best practices to help achieve this:
 National Cybersecurity Strategy: Develop a comprehensive national cybersecurity

strategy that outlines objectives, policies, and responsibilities for cybersecurity.
Continuously assess and improve cybersecurity policies and measures based on evolving
threats and technologies.
 Cybersecurity Laws and Regulations: Enact and enforce cybersecurity laws and
regulations that set standards for data protection, incident reporting, and critical
infrastructure security. Enforce strict penalties for cybercriminals to deter malicious
activities. Enforce data protection laws that require organizations to secure and protect
personal and sensitive data.

 Cybersecurity Agency: Establish a dedicated national cybersecurity agency or authority

responsible for coordinating cybersecurity efforts, incident response, and public
awareness.
 Secure Government Systems: Strengthen the cybersecurity of government systems,

including e-government platforms and digital services. Conduct regular cybersecurity
audits and assessments of government and critical infrastructure systems.
 Capacity Building: Invest in cybersecurity research and development to stay ahead of

evolving cyber threats. Invest also in cybersecurity education and training programs for
professionals, law enforcement, and the public to enhance cybersecurity skills and
awareness.
 Critical Infrastructure Protection: Identify and protect critical infrastructure assets, such
as power grids, financial systems, and healthcare networks, from cyber threats. Develop
and regularly test a national incident response plan to ensure a swift and coordinated
response to cyber incidents.
 Secure Digital Identity: Develop secure digital identity systems to reduce identity theft
and fraud. Encourage businesses to invest in cyber insurance to mitigate financial losses
from cyber incidents.
 Awareness Campaigns: Launch public awareness campaigns to educate citizens and

businesses about cybersecurity best practices and emerging threats. Promote good
practices among citizens and businesses to prevent common cyber threats like phishing
and malware.
 International Cooperation: Collaborate with other OIC countries and international

partners on cybersecurity initiatives, sharing threat intelligence and cooperating on
cybercrime investigations.
Consideration of these measures can help countries to establish a strong foundation for
cybersecurity, allowing them to confidently engage in the digital economy and protect their
digital infrastructure and assets from cyber threats. Building a culture of security and privacy
awareness can be as important as implementing technical safeguards. In this process,
collaboration government and the private sector to share threat intelligence, best practices, and
resources can be critical.
STEP SIX – Support Firms and Entrepreneurs to Innovate and Better Utilize Digital Technologies
An integral part of digital transformation is innovation and effective participation of the private
sector in this process. Supporting firms and entrepreneurs to innovate and better utilize digital
technologies is crucial for integrating into global economies and achieving a competitive
economy. Below are several strategies and initiatives that can be employed to encourage and
facilitate innovation in the digital space:
 Innovation Ecosystems: Foster collaboration between startups, established firms,

universities, research institutions, and government agencies to create dynamic

104
innovation ecosystems. Develop physical spaces, such as innovation hubs and

technology parks, where entrepreneurs can work, collaborate, and access resources.
 Incubators and Accelerators: Establish and support incubators and accelerators that
provide mentorship, resources, and funding to startups and entrepreneurs working on
digital innovations and emerging technologies. Strengthen intellectual property
protection to incentivize innovation and protect the rights of digital entrepreneurs and
firms.
 Access to Capital: Ensure that startups and SMEs have access to various sources of
capital, including venture capital, angel investors, and crowdfunding platforms. Provide
grants, subsidies, and tax incentives for R&D activities focused on emerging technologies
and solutions.
 Export and Trade Promotion: Support startups and firms in expanding their digital
products and services to international markets through trade missions and export
promotion initiatives. Support market research and analysis to help firms identify
emerging trends and opportunities in the area of digital transformation of businesses
and production processes.
 Industry-Specific Initiatives: Tailor support programs to specific industries with high

potential for digital innovation, such as healthcare, agriculture, or fintech. Promote data
sharing and access policies that enable firms, especially startups, to leverage data for
innovation while ensuring data privacy and security.
 Regulatory Sandboxes: Create regulatory sandboxes that allow startups and

entrepreneurs to test new digital products and services with some regulatory leniency,
fostering innovation while maintaining consumer protection.
 Public Procurement Initiatives: Encourage public-sector organizations to procure digital

solutions from startups and innovative firms, providing them with a valuable reference
and initial revenue. Give preference to local startups and innovative firms when
awarding government contracts, stimulating local innovation.
 Digital Skills Training: Offer training programs and educational resources to help
entrepreneurs and employees acquire the digital skills needed for innovation and
competitiveness.
 Support for Digital Infrastructure: Invest in digital infrastructure, such as high-speed

broadband and cloud computing services, to provide the necessary foundation for
digital innovation.
 Impact Investment and Social Entrepreneurship: Encourage impact investors to fund

social entrepreneurs and firms that address critical societal challenges through digital
solutions.
In an increasingly digitized world, fostering innovation not only drives economic prosperity but
also ensures a country's resilience and relevance in the face of rapid technological change,

ultimately improving the quality of life for its citizens. By creating a supportive ecosystem,
governments can empower firms and entrepreneurs to innovate and harness the full potential
of emerging technologies for economic growth and social progress.
STEP SEVEN – Upgrade Skills to Increase Productivity and Minimize Job Losses
Benefiting from rising digitalization and advanced robotics requires implementing effective
policies to upgrade skills and boost productivity while minimizing job losses. This is crucial for
economies to gain and maintain competitiveness in certain technologies and avoid widespread
erosion and disruption of productive capacities. Here are some key policy measures that
governments can adopt to this end:
 Skills Assessment and Gap Analysis: Conduct regular skills assessments and gap analyses
to identify the specific skill shortages and surpluses within the labour market. This
informs targeted skill development efforts.
 Investment in Education and Training: Increase funding for education and vocational
training institutions to improve the quality and accessibility of learning opportunities.
Promote STEM (Science, Technology, Engineering, and Mathematics) education to meet
the demands of emerging industries.
 Subsidized Training Programs: Offer subsidies or financial incentives to individuals and

businesses for participation in skill development and training programs. Also, encourage
the participation of individuals in the Massive Open Online Courses (MOOCs) to acquire
new skills.
 Recognition of Prior Learning: Establish mechanisms to formally recognize and credit

prior work experience and skills gained through informal learning.
 Skills for Emerging Technologies: Prioritize training and education in emerging

technologies like artificial intelligence, cybersecurity, and data analytics to prepare the
workforce for the jobs of the future. Establish industry-specific skill councils or advisory
boards to identify skill needs, develop standards, and guide training programs. Then,
tailor training programs to specific industry sectors and local economic needs, ensuring
that skills are relevant and in demand.
 Apprenticeship, Certification and Credentialing: Promote apprenticeship and internship

programs, providing practical training opportunities in collaboration with employers.
Develop and promote industry-recognized certifications and credentials to validate and
standardize skills. Encourage individuals to pursue relevant certifications and credentials
to enhance their employability.
 Income Support and Tax Incentives: Consider providing financial support or wage
replacement for individuals participating in training programs, especially for those who
face job displacement. Strengthen social safety nets to provide income support during
job loss and career transitions, reducing the fear of skill development. Offer tax

106
incentives to businesses that invest in employee training and skill development

programs.
 Labour Market Information and Job Counselling Services: Support individuals to

determine the skills that are most relevant to their current job and industry. Provide
accessible and up-to-date labour market information to help individuals make informed
decisions about skill development and career choices. Offer job placement assistance
and career counselling services to support individuals in their transition to new
employment opportunities.
 Lifelong Learning Culture: Encourage a culture of lifelong learning, with policies that
promote continuous skill development and retraining throughout one's career. Launch
digital literacy campaigns and initiatives to ensure that citizens have the basic digital
skills required for modern jobs.
Effective skill development policies require careful planning, collaboration with stakeholders, and
the flexibility to adapt to evolving economic conditions. Therefore, fostering collaboration
between government, educational institutions, and private sector employers is essential while
designing and implementing skill development programs aligned with industry needs. A well-
designed and executed skill development strategy can not only enhance productivity but also
reduce the negative impacts of job losses during economic shifts. In this process, it is critical to
regularly evaluate the effectiveness of skill development policies and programs and make
necessary adjustments based on outcomes and feedback.

Annex
Annex: Country Classifications

A. Major Country Groups used in the Report
OIC Countries (57)*
Code Name Code Name Code Name
AFG Afghanistan GUY Guyana PAK Pakistan
ALB Albania IDN Indonesia PSE Palestine
DZA Algeria IRN Iran QAT Qatar
AZE Azerbaijan IRQ Iraq SAU Saudi Arabia
BHR Bahrain JOR Jordan SEN Senegal
BGD Bangladesh KAZ Kazakhstan SLE Sierra Leone
BEN Benin KWT Kuwait SOM Somalia
BRN Brunei Darussalam KGZ Kyrgyz Republic SDN Sudan
BFA Burkina Faso LBN Lebanon SUR Suriname
CMR Cameroon LBY Libya SYR Syria*
TCD Chad MYS Malaysia TJK Tajikistan
COM Comoros MDV Maldives TGO Togo
CIV Cote d'Ivoire MLI Mali TUN Tunisia
DJI Djibouti MRT Mauritania TUR Türkiye
EGY Egypt MAR Morocco TKM Turkmenistan
GAB Gabon MOZ Mozambique UGA Uganda
GMB Gambia NER Niger ARE United Arab Emirates
GIN Guinea NGA Nigeria UZB Uzbekistan
GNB Guinea-Bissau OMN Oman YEM Yemen
* Membership of Syria to the OIC is currently suspended.
Developed Countries* (41)

Andorra France Lithuania Slovak Republic
Australia Germany Luxembourg Slovenia
Austria Greece Macao SAR Spain
Belgium Hong Kong SAR Malta Sweden
Canada Iceland Netherlands Switzerland
Taiwan Province of
Croatia Ireland New Zealand
China
Cyprus Israel Norway United Kingdom
Czech Republic Italy Portugal United States
Denmark Japan Puerto Rico
Estonia Korea San Marino
Finland Latvia Singapore
* Refers to “advanced economies” as classified by the IMF. Last update April 2023.
Developing Countries
Includes all countries other than those classified as developed countries.

108
Annex
B. Geographical Classification of OIC Countries

High Income* (8)
Bahrain Guyana Oman Saudi Arabia
Brunei Darussalam Kuwait Qatar United Arab Emirates
Upper Middle Income* (13)

Albania Iraq Maldives Palestine
Azerbaijan Kazakhstan Suriname
Gabon Libya Türkiye
Indonesia Malaysia Turkmenistan
Lower Middle Income* (21)

Algeria Djibouti Lebanon Tajikistan
Bangladesh Egypt Mauritania Tunisia
Benin Guinea Morocco Uzbekistan
Cameroon Iran Nigeria
Comoros Jordan Pakistan
Côte d'Ivoire Kyrgyz Republic Senegal
Low Income* (15)**

Afghanistan Guinea-Bissau Sierra Leone Togo
Burkina Faso Mali Somalia Uganda
Chad Mozambique Sudan Yemen
Gambia Niger Syria**
* Country grouping by income level is based on World Bank classification by GNI per capita in 2022. Accordingly;
 Low-income countries: with a GNI per capita of $1,135 or less,
 Lower middle-income countries: with a GNI per capita between $1,136 and $4,465,
 Upper middle-income countries: with a GNI per capita between $4,466 and $13,845, and
 High-income countries: with a GNI per capita of $13,846 or more.
** Membership of Syria to the OIC is currently suspended.

Annex
References
Acemoglu, D. and P. Restrepo (2022). Duz, S. (2021). Unpacking the Debate on Turkish
Demographics and Automation. The Review of Drones. SETA Foundation for Political, Economic
Economic Studies. Vol 89(1): 1–44. and Social Research. Ankara.
https://doi.org/10.1093/restud/rdab031.
Ejaz, W. and A. Anpalagan (2019). Internet of
Alshareef, H.N. (2023). Current Development, Things for Smart Cities: Technologies, Big Data
Challenges and Future Trends in Cloud and Security; Springer: Berlin/Heidelberg,
Computing: A Survey. International Journal of Germany.
Advanced Computer Science and Applications,
Gad, A.G., D.T. Mosa, L. Abualigah, A.A.
Vol. 14, No. 3.
Abohany (2022). “Emerging Trends in
Bellini, P., P. Nesi, G. Pantaleo (2022). IoT- Blockchain Technology and Applications: A
Enabled Smart Cities: A Review of Concepts, Review and Outlook.” Journal of King Saud
Frameworks and Key Technologies. Applied University - Computer and Information
Sciences 12/1607:1-21. Sciences. Volume 34(9), pgs.: 6719-6742.
Büyüközkan, G. and Göçer, F. (2018), “Digital IDTechEx (2023). 3D Printing and Additive
supply chain: literature review and a proposed Manufacturing 2023-2033: Technology and
framework for future research”, Computers in Market Outlook. IDTechEx Research. Boston.
Industry, Vol. 97 No. 4, pp. 157-177.
IFC (2021). Artificial Intelligence in Emerging
Calì M. and G. Presidente (2021). Automation Markets: Opportunities, Trends, and Emerging
and Manufacturing Performance in a Business Models. Washington, D.C.:
Developing Country. Policy Research Working International Finance Corporation
Paper 9653. World Bank.
IHS Markit (2019). The 5G Economy: How 5G
Dellot and Wallace-Stephens (2017) … Will Contribute to the Global Economy.
November 2019.
Deloitte (2016). The rise of the digital supply
https://www.qualcomm.com/media/documents/files/
network: Industry 4.0 enables the digital ihs-5g-economic-impact-study-2019.pdf.
transformation of supply chains. Available at
https://www2.deloitte.com/tw/en/pages/manufacturi ILO (2023). ILO Monitor on the world of work.
ng/articles/digital-supply-networks.html. Eleventh edition. A Global Employment Divide:
Low-Income Countries Will be Left Further
Deloitte (2018). Exponential technologies in
Behind Without Action on Jobs And Social
manufacturing: Transforming the future of
Protection.
manufacturing through technology, talent, and
the innovation ecosystem. Deloitte IMF (2021). Fiscal Monitor: A Fair Shot.
Development LLC. Washington, DC: International Monetary Fund,
April.

110
References
IMF (2022a). Global Financial Stability Report hat%20is%20blockchain/what%20is%20blockch

(2022). October. ain.pdf
IMF (2022b). World Economic Outlook: War McKinsey (2022c). The future is now: Unlocking
Sets Back the Global Recovery. Washington, DC: the promise of AI in industrials. McKinsey Global
International Monetary Fund, April. Publishing.
IMF (2023a). World Economic Outlook Update: McKinsey (2022c). What is cloud computing?
Near-Term Resilience, Persistent Challenges, McKinsey Global Publishing.
July 2023.
McKinsey (2022d). Projecting the global value of
IMF (2023b). World Economic Outlook: A Rocky cloud: $3 trillion is up for grabs for companies
Recovery. Washington, DC: International that go beyond adoption. McKinsey Global
Monetary Fund, April. Publishing.
IMF (2023c). Global Financial Stability Report: OECD (2016). Internet of Things - Seizing the
Safeguarding Financial Stability amid High Benefits and Addressing the Challenges.
Inflation and Geopolitical Risks. Washington, Ministerial Meeting on the Digital Economy
DC, April. Background Report. OECD Digital Economy
Policy Papers DSTI/ICCP/CISP(2015)3/FINAL.
IMF/World Bank (2019). Fintech: The
Experience So Far. Available at OECD (2018). IOT Measurement and
https://documents1.worldbank.org/curated/en/1302 Applications. Ministerial Meeting on the Digital
01561082549144/pdf/Fintech-The-Experience-so-Far- Economy Background Report. OECD Digital
Executive-Summary.pdf Economy Policy Papers No: 271.
IoT Analytics (2023). State of IoT 2023. Available DSTI/CDEP/CISP-MADE(2017)1/FINAL.
at https://iot-analytics.com/number-connected-iot- OECD (2019a). Unpacking E-commerce:
devices/ (as of July 2023).
Business Models, Trends and Policies. OECD
ITU et al. (2022). Core List of ICT Indicators. Publishing. Organisation for Economic
March 2022 version. Available at Cooperation and Development.
https://www.itu.int/en/ITU-
OECD (2019b). The Road to 5G Networks:
D/Statistics/Documents/coreindicators/Core-List-of-
Experience to Date and Future Developments.
Indicators_March2022.pdf
OECD Publishing. Organisation for Economic
Mariani, J., E. Quasney, and M.E. Raynor (2015). Cooperation and Development.
“Forging links into loops: The Internet of Things’
potential to recast supply chain management,” OECD (2020). COVID-19 and Global Capital
Deloitte Review 17, Deloitte University Press. Flows. OECD Policy Responses to Coronavirus
(COVID-19). Available at:
McKinsey (2021). The Internet of Things: https://www.oecd.org/coronavirus/policy-
Catching up to an accelerating opportunity. responses/covid-19-and-global-capital-flows-
McKinsey Global Publishing. 2dc69002/
McKinsey (2022a). The mainstreaming of OECD (2021). Artificial Intelligence, Machine

additive manufacturing. McKinsey Global Learning and Big Data in Finance: Opportunities,
Publishing. Challenges, and Implications for Policy Makers.
OECD Publishing. Organisation for Economic
McKinsey (2022b). What is blockchain?
Cooperation and Development.
December 2022. McKinsey Global Publishing.
https://www.mckinsey.com/~/media/mckinsey/ OECD (2023). ODA Levels in 2022 – preliminary
featured%20insights/mckinsey%20explainers/w data, Detailed summary note. Available at:

References
https://www.oecd.org/dac/financing-sustainable- UNCTAD (2022). Industry 4.0 for Inclusive

development/ODA-2022-summary.pdf Development. United Nations Conference on
Prasanna,L.D., S. Mangalam, M.R. Yuce, S.C. Trade and Development. Geneva.
Beisswenger, M. Lukac (2017). Internet of UNCTAD (2023a). World Investment Report
things: the new government to business 2023. Investing in Sustainable Energy For All.
platform - a review of opportunities, practices, Geneva.
and challenges. Washington, D.C.: World Bank
Group. UNCTAD (2023b). Technology and Innovation
Report 2023. United Nations Conference on
PwC (2021). The Global Economic Impact of 5G. Trade and Development. Geneva.
PricewaterhouseCoopers. Available at
https://www.pwc.com/gx/en/tmt/5g/global- WEF (2020). The Impact of 5G: Creating New
economic-impact-5g.pdf. Value across Industries and Society. World
Economic Forum.
SESRIC (2017). OIC Economic Outlook: Industrial
Development for Structural Transformation. The World Bank (2016). Cloud Readiness Pilot
Statistical, Economic and Social Research and Assessment Report.
Training Centre for Islamic Countries. Ankara.
World Bank (2017). Big data in action for
SESRIC (2021). OIC Women and Development government: big data innovation in public
Report 2021: Progress towards the services, policy, and engagement. Solutions
Implementation of the OIC Plan of Action for the brief. Washington, D.C.: World Bank Group.
Advancement of Women (OPAAW). Ankara
World Bank (2020). Global Economic Prospects,
SESRIC (2022). Socio-Economic Impacts of the June 2020. Washington, DC: World Bank.
COVID-19 Pandemic in OIC Countries: Pathways
World Bank (2022a). The Global Findex
for Sustainable and Resilient Recovery. Ankara.
Database 2021: Financial Inclusion, Digital
SESRIC (2023). OIC Labour Market Report 2023 - Payments, and Resilience in the Age of COVID-
Implications of Rising Digitalization and 19. By Demirgüç-Kunt, A., L. Klapper, D. Singer,
Automation on Employment. The Statistical, and S. Ansar. Washington, D.C.: World Bank
Economic and Social Research and Training Group.
Centre for Islamic Countries. Ankara.
World Bank (2022b). Regulation and Supervision
Statista (2023). Internet of Things - Market data of Fintech: Considerations for EMDE
analysis & forecasts. Policymakers. Washington, D.C.: World Bank
Group.
UN (2021). World Economic Situation and
Prospects: July 2021. Briefing, No. 151. World Bank (2023a). Commodity Markets
Outlook in Eight Charts. World Bank,
UN (2022). Black Sea Grain Initiative Joint
Washington, DC.
Coordination Centre. Available at:
https://www.un.org/en/black-sea-grain- World Bank (2023b). Commodity Markets
initiative. Outlook: Lower Prices, Little Relief, April 2023.
World Bank, Washington, DC.
UNCTAD (2021). Estimates of Global E-
Commerce 2019 and Preliminary Assessment of World Bank (2023c). Fintech and the Future of
Covid-19 Impact on Online Retail 2020. UNCTAD Finance: Market and Policy Implications. By
Technical Notes on ICT for Development No:18. Feyen,E., H. Natarajan, M. Saal Washington,
D.C.: World Bank Group.

112
References
World Bank (2023d). Infrastructure OECD, OECD.Stat Database

Tokenization: Does blockchain have a role in the SESRIC OIC-STAT Database, August 2023
financing of infrastructure? Washington, D.C.:
World Bank Group. UN COMTRADE Database, August 2023
UN Services Trade Database, August 2023
UNCTAD Online Database and World
Main Data Sources Investment Report Annex Tables, August 2023
ILO ILOSTAT Database, UNSD National Accounts Main Aggregates
IMF Direction of Trade Statistics (DOT) Database, September 2023
Database, September 2023 WTO Database, September 2023
IMF, International Financial Statistics (IFS) World Bank World Development Indicators,
Database, September 2023 September 2023
IMF World Economic Outlook Database, April
and June 2023
Footnotes
1
Excluding the financial centres in the Caribbean.
2
A high employment-to-population ratio means that a large proportion of a country's working age population is
employed, while a low ratio means that a large share of the population is not involved directly in market-related activities,
because they are either unemployed or out of the labour force altogether.
3 A form of FDI where a parent company starts a new venture in a foreign country by constructing new operational
facilities from the ground up instead of buying an existing facility in that country. These investment types are crucial for
the development of productive capacity and infrastructure and for the prospects for a sustainable recovery (UNCTAD,
2021).
4 Total reserves comprise holdings of monetary gold, special drawing rights (SDRs), reserves of IMF members held by the
IMF (reserve position in the IMF), and holdings of foreign exchange under the control of monetary authorities.
5
A traditional indicator of reserve adequacy that shows the number of months a country can continue to support its
current level of imports if all other inflows and outflows cease.
6
Mozambique, Pakistan, Bangladesh, Morocco, Nigeria, Indonesia, Albania, and Malaysia.
7
Maldives, Uzbekistan, Palestine, Saudi Arabia, Türkiye, Qatar, Kazakhstan, Kuwait, and Azerbaijan.
8 The share of OIC countries in world total ODA flows (including those reported at country and regional levels as well as
unspecified flows) was 38.4% as of 2021, compared with 38.1% in 2020.

9 https://www.fortunebusinessinsights.com/military-drone-market-102181
10
https://www.aa.com.tr/en/economy/turkish-drone-maker-baykar-exports-bayraktar-tb2-to-28-countries/2791055
11 https://www.fortunebusinessinsights.com/commercial-drone-market-102171
12 https://www.un.org/en/global-issues/big-data-for-sustainable-development
13 https://www.statista.com/statistics/1336002/big-data-analytics-market-size/
14
https://www.statista.com/topics/5122/blockchain/#topicOverview
15 https://www.idc.com/getdoc.jsp?containerId=prUS50037523
16 https://www.computerworld.com/article/3693951/global-cloud-spending-expected-to-jump-217-as-iaas-leads-the-
way.html

OI
C ECONOMI
C
OUTLOOK
TheRi
s
andBr
eoft
i
dgi
heDi
ngt
gi
heDi
t
alEc
gi
t
onomy
alDivi
de
2023
CECONOMI
OI OOK2023
COUTL
ORGANI
SATI
ON OFI
SLAMI
CCOOPERATI
ON
STATI
STI
CAL,ECONOMI
CANDSOCI
ALRESEARCH
ANDTRAINI
NGCENTREFORI
SLAMICCOUNTRI
ES

Economic Outlook Oic

Uploaded by

Copyright:

Available Formats

Economic Outlook Oic

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Economic Outlook Oic

Uploaded by

Copyright:

Available Formats

OI

OIC ECONOMIC OUTLOOK 2023

Kudüs Cad. No: 9, Diplomatik Site, 06450 Oran, Ankara –Türkiye

Telephone +90–312–468 6172

Cover design by Savaş Pehlivan, Publication Department, SESRIC.

For additional information, contact Research Department, SESRIC through research@sesric.org

Inner Photo Credit: https://e.huawei.com/tr/publications/global/ict_insights/201908281022/special-report/201911081512

Acronyms ................................................................................................................... iii

Foreword .................................................................................................................. vii

Executive Summary .............................................................................................................. 1

1 Recent Developments in the World Economy: Trends and Prospects ........9

2 Recent Economic Developments in OIC Countries ...................................... 26

SESRIC | OIC ECONOMIC OUTLOOK 2023

3 Changing Patterns of Production and Trade with Rising Digitalization ....58

4 Issues and Challenges for Digital Economic Transformation in OIC

Annex: Country Classifications ................................................................................. 108

References ............................................................................................................... 110

SESRIC | OIC ECONOMIC OUTLOOK 2023

ADB Asian Development Bank

SESRIC | OIC ECONOMIC OUTLOOK 2023

SESRIC | OIC ECONOMIC OUTLOOK 2023

SESRIC | OIC ECONOMIC OUTLOOK 2023

Hissein Brahim TAHA

SESRIC | OIC ECONOMIC OUTLOOK 2023

SESRIC | OIC ECONOMIC OUTLOOK 2023

Zehra Zümrüt SELÇUK

SESRIC | OIC ECONOMIC OUTLOOK 2023

RECENT DEVELOPMENTS IN THE WORLD ECONOMY

PRICES & INFLATION

SESRIC | OIC ECONOMIC OUTLOOK 2023

CURRENT ACCOUNT BALANCE

FOREIGN DIRECT INVESTMENT

SESRIC | OIC ECONOMIC OUTLOOK 2023

RECENT ECONOMIC DEVELOPMENTS IN OIC COUNTRIES

GDP per capita

Structure of GDP: Value Added by Sector

Structure of GDP: Expenditures

SESRIC | OIC ECONOMIC OUTLOOK 2023

SESRIC | OIC ECONOMIC OUTLOOK 2023

Intra-OIC Merchandise Trade

CURRENT ACCOUNT BALANCE

SESRIC | OIC ECONOMIC OUTLOOK 2023

FDI Flows and Stocks

Official Development Assistance (ODA)

SESRIC | OIC ECONOMIC OUTLOOK 2023

SESRIC | OIC ECONOMIC OUTLOOK 2023

Issues and Challenges for Digital Economic Transformation in OIC Countries

Policy Options for Bridging the Digital Divide in OIC Countries

SESRIC | OIC ECONOMIC OUTLOOK 2023

SESRIC | OIC ECONOMIC OUTLOOK 2023

W orld economic recovery is threatened by persistent inflation, increasing interest

A sluggish economic growth recorded in 2022 after a strong rebound in 2021

SESRIC | OIC ECONOMIC OUTLOOK 2023

Figure 1.2: Revisions to World Real GDP Growth Projections (%)

Earlier Projection Latest Projection

According to the IMF data, in 2020,

SESRIC | OIC ECONOMIC OUTLOOK 2023

Divergence in economic prospects across countries remains a major concern

SESRIC | OIC ECONOMIC OUTLOOK 2023