Internal Expenditures on Digital Economy Development

The HSE Institute for Statistical Studies and Economics of Knowledge presents results of the pilot calculation of internal expenditures on digital economy development, based on data collected in the course of federal statistical observations and by the Bank of Russia. According to the HSE ISSEK estimates, in 2017 internal expenditures on digital economy development amounted to approximately 3.3 trillion roubles, or 3.6% of GDP.

Development, and ubiquitous proliferation of digital technologies in Russia is a government policy priority: 1,837,696 million roubles are allocated for implementing the national programme 'Digital Economy for the Russian Federation' in 2019–2024 (out of that 1,099,589 million roubles from the federal budget).

The key indicator of the national programme implementation is 'Internal expenditures on development of digital economy, from all sources, as share of national gross domestic product'. Methodology for its calculation is not yet approved.

National statistical observation practices are limited by existing statistical surveys in the information and communication technology domain, which only partially describe development of digital economy. Digital economy statistics is a cutting-edge area for international statistics too; statistical standards for measuring digitisation-related processes haven’t been developed yet.

To design approaches to calculating internal expenditures on digital economy development, HSE ISSEK experts made a pilot calculation of the indicator using available statistical data. The following definitions provided the methodological basis:

• Digital economy: activities to create, disseminate, and use digital technologies and related products and services;
• Digital technologies: technologies for collecting, storing, processing, searching, transferring, and presenting data in electronic format.
• Expenditures on digital economy development: actual expenditures (internal and external ones) of organisations and households on creating, disseminating, and using digital technologies and related products and services, in monetary form;
• Internal expenditures on digital economy development: total expenditures of organisations on in-house  creation, dissemination, and application of digital technologies and related products and services, and expenditures of households on use of digital technologies and related products and services;

According to HSE ISSEK estimates, in 2017 internal expenditures on digital economy development amounted to 3,324.1 billion roubles, or 3.6% of GDP. This is comparable with public expenditures on healthcare and education, twice as much as public expenditures on road building, and 3.5 times more that internal R&D expenditures.

More than a third (40.4%) of total internal expenditures on digital economy development were made by entrepreneurial organisations; the share of households is slightly smaller, at 36.4%. Advantages provided by implementation and use of digital technologies are particularly evident in these two sectors, and the benefits can be obtained very quickly.

Public sector organisations account for just a tenth (10.8%) of total expenditures on development of digital economy. Despite the sufficiently broad range of distant learning programmes, expenditures of the higher education sector on implementation and use of digital technologies remain relatively small, at 0.7% of total internal expenditures on digital economy development.

The biggest (at 35.0%) category of expenditures on digital economy development is telecommunication services, including internet access. In 2017 1,163.8 billion roubles were spent for these purposes. About a quarter of total expenditures goes for procurement of computers and telecommunication equipment (23.4%, or 777.7 billion roubles); a tenth is spent on software (9.5%, or 315.4 billion roubles), and about the same amount on purchasing ebooks, films, music, games, and other digital content (11.3%, or 375.1 billion roubles).

Against this background, organisations’ internal expenditures on digital technology-related R&D look rather modest, at 81.4 billion roubles (just 2.4%). The small share of R&D expenditures indicates that Russian companies mostly apply foreign information technologies. In the long term this strategy will lead to technological dependence, and loss of competitiveness in international markets.

The skill level is one of the factors affecting productivity of digital technologies’ application. Organisations’ expenditures on staff training related to development and use of ICT in 2017 amounted to 7.6 billion roubles, or 0.2% of total expenditures on digital economy development. Saving on staff training leads to reduced productivity of digital technology application, and thus reduces the rate of implementing advanced digital technologies in economic practices.

Sources: calculations were made using Rosstat and the Bank of Russia data on the basis of results obtained by the HSE ISSEK in the scope of the project 'Preparing methodological, information and analytical materials for digital economy indicators', in the framework of HSE thematic research plan.

By Gulnara Abdrakhmanova, Leonid Gokhberg, Galina Kovaleva, and Anton Suslov