Digital trade is the fastest growing segment of international trade, with ICT services exports having expanded especially quickly in recent years. This article argues that while digital trade can offer an alternative path to economic development, it is also becoming increasingly concentrated within just a few countries. Policymakers seeking to leverage digital trade for development must create both the necessary digital infrastructure and the appropriate policy conditions, then jump on new waves of technological change like artificial intelligence and blockchain.
The rise in ICT services exports is driven primarily by exports of computer services which include software, cybersecurity, cloud computing, data management, and IT consulting services. Their share in ICT services exports rose from 65% to 86% between 2005 and 2024. Meanwhile, the share of telecom services exports dropped from 29% to 8%, while the share of information services exports remained stable. As technology has changed, so has trade.[GH1]
The development potential of ICT services exports
Exporting ICT services offers a scalable, remote, and efficient model for economic participation, particularly for developing economies. Microwork portals, online consulting, and cross-border app stores enable countries to bypass traditional trade infrastructure and integrate into global value chains. These mechanisms facilitate virtual labor mobility by decoupling workers from physical constraints and assigning tasks across borders based on skill availability. In fact, ICT services exports can deliver development outcomes traditionally associated with manufacturing.
The development opportunities from ICT services exports, and digital trade more generally, are well documented. Research shows a positive correlation between productivity growth and enhanced participation of businesses in global value chains. A recent study adds to this body of evidence by examining ICT services exports and their development impacts across 150 countries between 2005 and 2020. A few consistent patterns emerge: ICT services exports are associated with increased income per capita, strengthened integration into global value chains, increased productivity, and faster development of digital ecosystems.
Indeed, countries that moved to higher income groups between 2005 and 2020 were the ones that gained significant market share in global ICT services exports. Further, each percentage point increase in ICT services exports as a share of GDP was associated with half a percentage point rise in non-ICT services exports, an eighth percentage point increase in total factor productivity, and about a three percentage point increase in the share of adults using digital financial services.
Similar effects have been found in other studies. Another paper – this time using firm-level data from Peru – found that participation in online platforms boosts exports, particularly for small businesses and to less familiar destinations. The economic development opportunities presented by ICT services exports are also consistent with those of service exports more generally – as summarized in this review.
Rising concentration of ICT services exports and the pathway for developing countries
Despite this potential for development impact, ICT services exports are becoming increasingly concentrated within just a few countries. Statistical analysis shows that a small number of countries now account for the majority of global ICT services exports. For instance, Ireland’s global market share of ICT services exports increased by ten percentage points from 2005 to 2020. Over the same period, China’s ICT services exports market share grew by 6.5%, Poland’s 1.2%, and Ukraine’s 0.8%. Over the same period, developed economies like the United Kingdom, Italy, and Germany lost ground, with their market shares falling by -4.5%, -3.6%, and -2.4%, respectively[MOU2] [GH3] . Many other low- and lower-middle-income countries experienced stagnation or only marginal increases in their share of ICT services exports between 2005 and 2020.
A major driver of this concentration lies in disparities in domestic and international digital connectivity across countries. A further statistical analysis shows that leading exporters of ICT services have robust digital infrastructure such as submarine cable capacity – something crucial for international connectivity.
Other factors matter too: a country’s macroeconomic environment, especially foreign exchange market; the enabling legal, policy, and regulatory environment for businesses, including international companies specialized in computing services; the availability of skills, not only national talents, but also facilities to support international talent mobility; and innovation policies, including public support and intellectual property policy, all play a major role in driving ICT services exports.
The international market also carries a few features that facilitate concentration and a ‘winner-takes-the-most’ competition. The market for ICT services is global, with limited opportunities for geographic differentiation as well as high switching costs. Global technological innovations like cloud computing, artificial intelligence (AI), and blockchain remain the key channel through which lagging countries can catch up. This means that developing countries seeking to becoming leaders in ICT services exports need to establish the above prerequisites.
They must also seize new waves of technological innovation. Doing so can spur the growth of businesses involved in computer services exports and/or attract businesses relocating from a market that has become less competitive for older technologies. For instance, rising demand for low-latency cloud computing services due to AI could be an opportunity to support the development of export-oriented IT firms in lagging developing countries, while the automation of customer services is making countries with cheap labor less competitive. Navigating these technological changes will determine a country’s ability to leverage digital trade as a pathway to economic development.