Technology and Innovation Report 2023

We are at the beginning of a technological revolution based on green and Industry 4.0 technologies – and developing countries must catch the wave early. As shown in previous technological revolutions, early adopters can move ahead quicker and reap the advantages for longer.

Now is the moment for developing countries to take advantage of the high increases in productivity associated with this new technological revolution and catch up economically, while helping to protect the planet.

Missing this green technological wave because of insufficient policy attention or a lack of investment targeted at building skills and capacities would have long-lasting negative consequences.

The 17 frontier technologies covered in the report such as artificial intelligence, Internet of Things and green hydrogen already represent a $1.5 trillion market, which could grow to over $9.5 trillion by 2030 – about three times the current size of the Indian economy.

But so far, developed economies are seizing most of the opportunities, leaving developing economies further behind.

The total exports of green technologies from developed countries jumped from around $60 billion in 2018 to over $156 billion in 2021. In the same period, exports from developing nations rose from a similar starting line of $57 billion to only about $75 billion. In three years, developing countries’ share of global exports has fallen from over 48% to under 33%.

Frontier technologies can increase productivity and improve livelihoods. For example, artificial intelligence combined with robotics can transform production systems, while 3D printing allows faster and cheaper low-volume manufacturing.

But few developing countries have the capacities needed to take advantage of frontier technologies, which rely on digitalization and connectivity. They include blockchain, drones, gene editing, nanotechnology and solar power.

The report assesses countries’ preparedness for frontier technologies. It presents a “readiness index” ranking 166 countries based on five “building blocks”: ICT deployment, skills, research and development (R&D) activity, industry activity and access to finance.

The index shows that countries in Latin America, the Caribbean and sub-Saharan Africa are the least ready to use, adopt or adapt to frontier technologies and are at risk of missing current technological opportunities.

In general, those most ready are high-income economies, notably the United States, Sweden, Singapore, Switzerland and the Netherlands. China, the most-ready developing country, ranked 35, followed by Brazil (40), India (46) and South Africa (56).

China's lower-than-expected position, when compared to its capacities to produce and innovate in frontier technologies, is due primarily to urban-rural disparities in internet coverage and broadband speed.

The report highlights that developing countries can use frontier technologies to leapfrog previous innovations and quickly move ahead, providing examples of those already doing so.

The readiness index shows, for example, that some developing countries in Asia – notably India, the Philippines and Viet Nam – are performing better than expected.

Their overperformance is measured as the difference between the actual index rankings and the projected rankings based on per capita income. In general, it results from increased investment in infrastructure, enhanced technical skills and a conducive business climate.

India remains the greatest overperformer ranking at 67 positions better than expected, followed by the Philippines (54 positions better) and Viet Nam (44 better).

India performs well for R&D and ICT. This reflects their abundant supplies of qualified and highly skilled human resources available at a comparatively low cost.

The Philippines and Viet Nam have a high ranking for industry. This reflects high levels of foreign direct investment in high-technology manufacturing, particularly electronics.

Green innovation opportunities are time-bound and can only be seized through changes in policy, without which the windows may close.

Countries that have taken advantage of the opportunities, such as Brazil and China, have done so through strong responses that include government policies, like China’s 2006 renewable energy law that stimulated the initial development of the biomass industry. It was supported by solar energy subsidies, demonstration programmes and private sector initiatives.

If developing countries are to capture the economic gains associated with new technologies, their firms must have the required capabilities. This includes not just scientific or technical skills but also the necessary policies, regulations and infrastructure.

But developing countries can’t take advantage of green windows of opportunity on their own. They need an enabling international economy, in which trade rules are consistent with the Paris Agreement on climate change. Otherwise, new green sectors will struggle to emerge and grow in developing economies, and cleaner and more productive production will remain out of their reach.