Making sense of US$3 trillion – Estimating the value of Open Data for Small Economies

No matter what source you subscribe to, the numbers are staggering, when one considers the potential economic value of open data. The McKinsey Global Institute estimates approximately US$3 trillion value potential across 7 domains. The Warsar Institute for Economic Studies projects a contribution of €205 billion annually to the European Union. An Omidyar Network study suggests open data impact for the G20 countries could be US$2.6 trillion per annum or 1.1% of GDP.

Open Data Economics – Just Common Sense

These studies all provide face validity, from creditable sources. Even if one allows a generous error tolerance of 40%, these are still huge numbers to be derived from an economic resource that is, for the most part, already in the hands of most governments across the developed and developing world. The data owned by governments is one of the few resources that is characterized by abundance rather than scarcity. It is increasing every day through the normal day to day business of governments doing what they do, and has the peculiar characteristic, unlike natural raw materials, of not being diminished when consumed. Indeed, the value of data as an economic resource, increases with use and re-use. According to Nigel Shadbolt of the ODI “Making the best possible use of an existing and increasing resource is not just common sense, it is the closest we can get to generating economic winners without losers.”

So, if this seems like a social, political and economic no-brainer, why are the Governments of the Caribbean, small island developing states with limited economic resource endowments and persistent growth challenges, not enthusiastically embracing the open data agenda? As of the writing of this Blog (May 2015), only 2 Caribbean countries have signed up to the Open Government Partnership (Trinidad & Tobago, Dominican Republic) and there is, as yet, no official Open Government Data Portal in the Caribbean.

In Search of Credibility, Context and Relevance

The primary issue is one of credibility and context-relevance. How does a Caribbean government make sense of the scale of numbers associated with the typical global open data estimates? Jamaica, one of the larger countries in the English speaking Caribbean, has an economy less than 1/200th the size of the McKinsey estimates. Furthermore some of the rationale (“levers”) underpinning the economic estimates in domains such as Transport, Consumer Products, Oil & Gas, Health Care and Consumer Financing appear irrelevant, given the state of civil infrastructure and public service delivery in many of these countries. For instance, Tourism as a target sector is rarely mentioned in the global open data discourse, although it represents for most Caribbean countries the most important contributor to their economy, in some cases in excess of 50% GDP. Given that effective access to information provides the primary basis for awareness, choice, and improved service delivery between the prospective tourist and local operators, tourism presents genuinely interesting and relevant opportunities for Open Data application.

Scaling the Economic Potential of Open Data

In an effort to contribute increased awareness, understanding, and relevance of the potential value impact of Open Data initiatives in the countries of the Caribbean, we conducted a study of the open data economic potential for 3 sectors of the Jamaican economy – Agriculture, Tourism and Education. Details of the study can be found here. Qualitatively, we adopt the approach used by the McKinsey report in specifying a set of “levers” as a means of identifying ways in which Open Government Data (OGD) can enable potential value. This allows for separating the qualitative “how” from the quantitative “how much”, and provides a convenient bottom-up mechanism for explicating, evaluating and estimating the potential value impact of OGD in individual sectors. An example of a “lever” in the sectors examined is as follows:

Currently only 30% of the total food purchases in the Tourism sector in Jamaica come from domestic Agriculture, with the rest being imported. Effective use of Open Data about the demand & supply of agricultural produce can facilitate increased linkages and economic multiplier effects between Tourism and Agriculture.

For the quantitative estimates, clever economics students at the University of the West Indies used a combination of analytically derived scaling and discount factors to project the open data estimates from global studies to the size of the Jamaican economy. Overall, it was estimated (conservatively) that Open Data initiatives in these 3 sectors could add over J$15 billion in aggregate, annually to the domestic economy, approximately 1% contribution to GDP. For a country that has rarely seen better than 1.5 to 2% GDP growth in the last several decades, and negative growth in many instances, this is a significant impact.

In a region where small island developing economies struggle to cope with the lingering effects of the economic recession, tight fiscal space, limited economic policy discretion (due to the compliance strictures of IMF-dictated economic programmes), and fiercely competitive political democracies, Open Data contends with a range of other socio-economic policy demands for scarce resources and political attention. In such circumstances, the considerations for open data initiatives and its potential economic impact requires greater specificity, more targeted focus and contextual relevance. Our goal with this type of study is to help stimulate debate, inform the policy agenda and spur Caribbean Governments to embrace Open Data initiatives with greater urgency and commitment.

Reprinted from: 3rd International Open Data Conference Website