EU digitalizes its industry: Lessons for Ukraine

Author : Vesta Malolitneva

Ukraine needs to develop a roadmap to adapt national legislation to EU standards in digital sphere
22:03, 24 November 2016

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In the age of information technology, transition to the digital economy is inevitable. Those who quickly realizes the main trends of the international community will get more benefits.

EU calculated that it would lose around 600 billion euros a year in case of slow implementation of digital transformation and defined completion of the digital single market among the 10 policy priorities.

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Why digital market?

According to calculations, the single digital market can bring 415 billion euros to the European economy, investment, innovations, and jobs. One of the priorities is put on providing better access to consumer and business digital products and services in Europe.

It has been studied that in 2014, 15% of consumers bought goods over the Internet in other EU countries, while 44% bought them in their own countries.

European consumers will be able to save 11.7 billion euros a year if they can choose from a full range of products and services when buying in the Internet. Only 7% of small and medium-sized undertakings sell their products in other Member States.

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Small business on the Internet that wants to trade in another EU country must bear 9 thousand euros of additional costs to adapt to the domestic laws of that country.

If Europe adopts the same rules for electronic commerce, which would be applied to all EU Member States, 57% of businesses start or expand their e-commerce in other EU countries.

Digitalization of industry

A special place belongs to digitalization (digital penetration) of the European industry.

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Currently, the EU is on the threshold of a new industrial revolution, which is caused by a new generation of information technology such as the Internet of things, cloud computing, Big Data, data analysis, robotics, artificial intelligence, and 3D-printer. These technologies open new horizons for the industry, increase efficiency, improve processes and develop innovative products and services.

In addition, they allow the industry meet the basic expectations of today's consumers, such as personalization, increase safety and comfort as well as energy and resource efficiency.

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For example, the combination of advanced sensors, large data in industrial manufacturing processes can reduce the consumption of energy and natural resources. Thus, sensors installed on the equipment are to report abnormal behavior that promote energy efficiency and will save billions of euros.

Recent studies estimate that digitalization of goods and services can bring more than 110 billion euros of annual revenue in Europe in the next five years.

Only in Germany further digitalization of industry is expected to bring up to 8% of productivity growth in 10 years. This will lead to employment growth to 6%.

Related: Ukrainian Softcube received investment from Digital Future

About a third of the total growth of industrial production in Europe is going through digital technology. Several national and regional initiatives such as the Industrie 4.0 in Germany, Smart Industry in the Netherlands, and Industrie du Futur in France have been launched recently to obtain capabilities that provide digital innovation in industry.

Internet of things

According to the working paper of the European Commission on promoting Internet of Things in Europe, EU plans to actively develop this area, which is the next step towards the digital economy, where physical objects and people are linked together through a network of relationships and report on their condition or environment.

According to the latest study by the European Commission, the market value of the Internet of things in the EU is expected to exceed one trillion euros. Today, less than 1% of the objects are connected to the Internet, but by 2020 it is planned to create a nearly 6 billion connections of physical objects to the Internet.

Related: Ukrainian Softcube received investment from Digital Future

The economic benefits of the Internet of Things is expected to get through the resolution of social problems, as evidenced by many examples.

The simplest example is the smart house.

For example, in Barcelona, a system of intelligent lighting, sensors are installed on street lights to automatically control the brightness by analyzing levels of noise, air pollution and population density.

As a result - at least 30% energy savings per year.

What about Ukraine?

Currently, the world competition to attract private investment in digital innovation is tight. Between 2000 and 2014 years, investments in products related to information and computer technologies, the EU accounted for one-third of similar investments in the US.

That is why one of the biggest concerns in the EU is lagging behind in innovation. Accordingly, the European countries have to act ahead of the curve, for example, planning to create its own "Silicon Valley", as, for example, takes place in Austria.

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In Ukraine, country with one of the greatest potentials in information technology, due to IT professionals, this course is not in the strategy. In particular, the Strategy for Sustainable Development "Ukraine 2020" focuses on the tactical, not strategic tasks, bypassing the issue of building a digital economy in Ukraine.

Ukraine needs a digital strategy; there is a need to develop a roadmap to adapt national legislation to EU standards in digital sphere.

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In addition, the digital economy requires skilled professionals. Thus, according to the Communication from the Commission on digitalization of European industry, about 40% of workers in the EU have insufficient digital skills.

The need for multidisciplinary and digital skills is growing rapidly. The gap between demand and availability of skilled workers in Europe is growing.

If you look only at professionals in the field of ICT, during the last three years has been created over 1 million jobs. Moreover, it is expected that by 2020 the rapid growth in demand will lead to the emergence of more than 800 thousand vacancies...

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However, advances in automation and robotics significantly change the nature of work not only for repetitive tasks, but also for complex ones, for example in the legal field. This will require training of staff at all levels.

This requires appropriate education reform in Ukraine, or Ukraine in the future will be excluded from the global economic processes.

Estonia demonstrated a striking example of digital skills and education reform in this direction, which paid more attention to teaching digital literacy.

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