The material is prepared based on speeches at the panel session ‘Building the new economy in Eurasia’.  Speakers of the session: Martin Bailey, Head of Unit for Digital Policy Development and Coordination in DC CONNECT, European Commission; Horton Beebe-Center, President Emeritus of Eurasia Foundation (moderator); Dimitar Bogov, Regional Lead Economist for Eastern Europe and Caucasus, EBRD; Arkadiy Dobkin, Founder and President of EPAM; Oleksandr Bornyakov, Deputy Minister of Digital Transformation of Ukraine; Dmytro Sholomko, Director of Google Ukraine.

The new economy resides at the convergence of manufacturing service and technologies that produce value-added products enabled for rapidly adapting industries. The term “new economy” is understood as moving from heavy industry to an economy based on new technologies – digital economy or knowledge economy, centered around production of goods and services based on knowledge.

The new economy presents a new opportunity for development, but the countries have to be able to seize these opportunities. McKinsey Global Institute estimates that by 2030 about 14% of all global workforce, which is close to 400 million workers, will have to find new occupations. One of the recent Bloomberg studies finds that 10% of workforce in 2030 will be in occupations nonexistent today. The countries should get prepared for this, as the countries that rely on routine jobs, which have very small share of university-educated population, face the highest risk of failing to evolve into new economy. The governments need to choose the right higher education, the right skills to offer to today’s kids in order to be able to drive the economies. The panelists agree that STEM education will be required in the future. But critical thinking, creativity and digital knowledge are essential elements as well.  When it comes to education, private public partnership schemes could work well. Such a way could help reach broader coverage of education; there are successful examples of such partnerships.

The main findings of the EBRD Knowledge Economy Index, which is based on 4 pillars – institutions for innovation, skills for innovation, innovation system and ICT infrastructure – demonstrate that Baltic states are certainly on the top of the list with a score of 7 to 8 out of 10. The six countries of Eastern Europe and Caucasus score significantly lower, with the exception of Belarus, which is at 11th place, all the others score between 4 and 5 and they are in the second half of the list. Central Asian countries are on the bottom of the list of 38 countries where EBRD operates and has conducted this research, and the scores are between 2 and 4.  Overall, Eurasian region is featuring very low in the innovation system.

At the same time, Eurasian countries have started elaborating policies towards shift to the new economy. Thus, in Ukraine, the policies towards building the new economy are already emerging. The new leadership of the country has set switching to industry 4.0 as one of the priorities. The mere fact of the formation of Ministry of Digital Transformation has sent a powerful signal to the citizens and businesses that the country paves the way to the new economy. One of the main goals the Ministry strives to achieve is to move 100% government services online, and specifically to make 20% of them completely automatic with no human involvement at any stage. The main tasks include also facilitating a better relationship between the government and citizens, refactoring the government procedures in interactions between government and citizen, make them really transparent and easy. Another ambitious task for the ministry is to cover 100% territory of Ukraine with broadband internet and synchronize IT infrastructures.

At the same time, digital transformation is impossible if people are not familiar with digital forms of interaction – if they are afraid of using online form of interaction, or do not know how to use smartphones. Therefore, another priority the ministry sets is to teach 6 million people basic digital skills.

The government of Ukraine seeks to double the share of IT services in GDP from 5% to 10%, and reshape the business processes. Today, the amount of IT companies in Ukraine is no so big. Instead, the country has IT brands that hire individual entrepreneurs, but the business model has to go beyond the serial hiring of independent consultants. The government is also elaborating policies on startup and venture capital industry ecosystem, functioning of crypto currencies.

Big international IT companies with offices in Ukraine admit that large software and services companies are trying to be headquartered where the real market is. They consider it would be a little naive to think that headquarters will start operating in Eurasian countries before emergence of a large enough market, as well as local economic stability. But on the other hand, the opportunity for creation of an even larger number of high paid jobs in the IT sector is really an option right now and it would be great to realize that opportunity sooner than later with supporting the right conditions for the industry to grow.

The key question is how to create an environment where doing business will be easy, where many companies operate and enjoy the full benefits of the new economy. In order to succeed, the governments should be inventive and innovative, focusing on institutions for innovation. But what is even more important, is building good governance, and effective systems of property rights protection.

The panelists agree taking the digital transformation a reality is an enormous challenge. What it requires is not only ensuring that the letter of the law is implemented and applied. It is also important to have a strong and independent regulator – that is important not only for the development of a stable framework within the country, but without that one will not win the trust of the international community. Two other things are critical. The first is leadership. Political leadership, which must show it believes in this process and is committed to this process. The other is creating an emotional bond with citizens, explaining that these steps will lead to an improvement in their lives with stronger economic ties with the rest of the world.

The participants of the discussion named several points that are critical for the development of the new economy.

• For the digital environment, there should be a predictable and stable regulatory environment. If there is no framework, one cannot have the benefits that come out from the digital economy.
• It is critically important for Eurasian countries to have a stable legal and regulatory framework, ensuring that the letter of the law is implemented and applied, and this is critical for the investors and for the immensely successful entrepreneurs. But that doesn’t mean just adopting the laws. It means having a stable and independent regulator that is free of political, financial or any other influence. Without the independent regulator you miss that vital element of trust from international communities. These are the necessary prerequisites for investments to take off.
• Introducing of effective system of collecting and analyzing the data. People in the government should not make decisions based on their emotions.
• The governments should introduce digital education from the early age; apply public private partnerships in the field of digital literacy, develop STEM education, as well as critical thinking and creativity.
• Project management is important too. Not only smart IT experts and the political support are needed. The new economy needs the project managers who can take things from the words who can take the ideas and turn them into very successful projects.