Digital Economy as a Factor of Sustainable Development of the

RNO-Alania

Bella Tokaeva

and Albina Tokaeva

North Ossetian State University named after Kosta Levanovich Khetagurov, North Ossetia-Alania, Russia

Keywords: Digital Economy, Digital Technologies, Digitalization of the Economy, Information and Communication

Technologies, Digital World, Regional Economy.

Abstract: The development of the regional economy requires a wide spread of information technologies. The article

deals with the main approaches to the concept of digitalization of the economy, the features of digitalization

in different industries are considered. A comparison of the degree of digitalization of the economy of the

RNO-Alania is presented. The advantages are reflected, as well as an analysis is carried out, as a result of

which the significance of the digitalization process and its role in the economy are revealed, since digital

technologies, being introduced into economic and technological processes, necessarily participate in the

formation of the added value of the final product (service), regardless of its purpose (type of activity and

sector of the economy). The study provides recommendations for removing existing obstacles and restrictions

for the creation and development of high-tech businesses in the Russian Federation, because information and

communication products produced in the ICT sector, in each type of activity, develop, implement and use

their own ICT solutions, «digital personnel» and «digital capital», which are not directly taken into account

and are not measured. In this regard, there is a need to improve approaches to assessing and measuring the

volume of the digital economy at different territorial levels, including in regional economies.

1 INTRODUCTION

The world economy is being transformed by the rapid

spread of new digital technologies, which has a strong

rationale for Russia's sustainable development until

2030. Digital technology and data are driving

innovation, increasing efficiency, and improving

many products and services. They promote trade and

investment and facilitate the transfer of technology.

They help increase productivity, which leads to

greater economic opportunities. It is essential to

realize this potential and ensure that it is widely

disseminated. Higher levels of digitalization of both

the economy and society create new tools to address

global challenges in socio-economic development;

contribute to more inclusive development of

countries. As of 2018, 9.5% of organizations in the

telecommunications and information technology

sector are engaged in innovative activities. The

organizations' own funds are spent to cover more than

half (50.6%) of the expenses on technological

https://orcid.org/0000-0003-4877-6986

https://orcid.org/0000-0003-3544-8692

innovations. In industrial production, costs covered

by company funds are estimated at 65.9%; in

telecommunications and information technology, at

95.5%. Telecommunications and IT organizations are

strengthening their position in innovation markets - in

2018, production based on new and improved

technologies exceeded the previous year's level by

12.4% and amounted to 138.6 billion rubles ($1.8

billion) (Litvinceva and Karelin, 2020)

Particular attention needs to be paid to the ways in

which regions can take advantage of the digital, data-

driven economy as producers, innovators and

exporters.

The course towards the digital economy,

announced at the highest level, is designed to bring

Russia among the leading economies of the mid-21st

century. The Strategy for Information Society

Development in the Russian Federation for 2017-

2030 approved in Russia gives the following

definition of the digital economy: "The digital

economy is an economic activity in which the key

Tokaeva, B. and Tokaeva, A.

Digital Economy as a Factor of Sustainable Development of the RNO- Alania.

DOI: 10.5220/0010666000003223

In Proceedings of the 1st International Scientiﬁc Forum on Sustainable Development of Socio-economic Systems (WFSDS 2021), pages 191-196

ISBN: 978-989-758-597-5

191

factor of production is data in digital form, the

processing of large volumes and the use of the results

of analysis, compared with traditional forms of

economic activity, allow to significantly improve the

efficiency of various types of production, technology,

equipment, storage, sale, delivery of goods and

services". (Smirnov, 2021).

Digital innovation is a fundamental driver of

digital transformation, leading to radical changes in

the way people interact, create, produce and consume.

Digital innovation not only generates new products

and services but also creates opportunities for new

business models and markets and promotes efficiency

in the public sector and beyond (Fedosova, 2020).

Digital technology and data are also driving

innovation across a wide range of sectors, including

education, health, finance, insurance, transport,

energy, agriculture, fisheries, manufacturing, and the

information and communications technology (ICT)

sector itself.

2 RESEARCH METHODOLOGY

Economies, governments, and societies around the

world are going digital. Although nearly half a

century in the making, the pace of change has

accelerated as digital technologies rapidly evolve and

combine in new and innovative ways, pushing digital

transformation in new and often unpredictable

directions (Kramin and Klimanova, 2019).

At the same time, the continued deployment of

communications infrastructure, the proliferation of

digital technologies such as smartphones that enable

ubiquitous computing, and the generation of vast

amounts of data of all kinds are making data an

important, strategic asset.

Digital technologies and large-scale data flows

fundamentally change the way people live and work,

interact with each other, participate in the economy

and interact with the government.

Many are now comparing digital transformation

to earlier industrial transformations caused by

general-purpose technologies, such as steam or

electricity. Whether it's the Second Machine Age, the

Third Wave, Industry 4.0 or Society 5.0, significant

shifts are taking place. Digital transformation affects

all countries around the world, and the importance of

digital technology is highlighted in the United

Nations Sustainable Development Goals, where

access to information and communication

technologies and universal and affordable access to

the Internet is one of the key objectives in

transforming our world (Babkin, 2018).

According to surveys, 60-70 million people today

are willing to work without travelling to offices and

production facilities. According to the Social

Investment Fund, there are several categories of

people who can be referred to non-movable labor

resources - women with small children, disabled

people, pensioners, people who came out of prison,

people who moved, for example, from Moscow and

the Moscow region beyond the Moscow Ring Road

not far enough and now are not ready to spend in

traffic jams longer than their working day.

According to the Digital Society Index, Russia

ranked among the top 10 countries leading the digital

economy in 2018, and also ranked seventh in terms of

the degree of population engagement in the digital

economy More than 8 million people, or 12% of the

total number of working Russians, are connected to

intensive use of ICT. Most of them work in the

industries of "Information and communication

activities", "Financial and insurance activities" and

"Professional, scientific and technical activities"

(Indikatory, 2020).

In 2019, fixed broadband traffic was 45.8

exabytes, while mobile traffic was three times less. A

third of Russian subscribers (33.7%) had access to

high-speed Internet in 2019 - 100 Mbit/s to 1 Gbit/s,

almost half of subscribers (45.2%) had speeds of 10-

100 Mbit/s, and a fifth of all subscribers had Internet

speeds less than 10 Mbit/s.

The Russians are not inferior to the residents of

the USA (83% and 82% respectively), Poland (80%),

Italy (78%), but they are far behind the leaders -

Ireland and Scandinavian countries (97-99%).

Russians most often use the Internet to communicate

(the indicator is close to the average European), and

much less frequently to search for jobs and content

(Borovskaya and Masych, 2020).

Internet users named email spam as the main

threat to information security, with 22.3% of users

encountering it in 2019. During the same period, three

times fewer users (7.5%; for comparison, 17.1% in

2015) experienced virus attacks. There are eight times

fewer anti-spam filter users than those who have

installed antivirus tools. A clear understanding of the

mobile economy is a key component for sustainable

socio-economic development. The availability of

digital channels helps Russian companies to be

successful and competitive in the international

market.

Despite the potentially huge benefits, small and

medium-sized enterprises (SMEs) are lagging in

digital transformation. As diverse as they are, new

technologies offer a wide range of applications to

improve productivity and overcome the business size

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constraints they face. However, SMEs need to be

better prepared, and the stakes are very high. Small

and medium-sized enterprises are the largest

contributors to the industry in many countries and

regions; they create jobs (sometimes the majority of

jobs) and cement an inclusive and sustainable society.

The SME digital divide has increased inequalities

between people, places, and firms. There are fears

that the benefits of digital transformation may fall to

early adopters, further widening these inequalities.

Ensuring the digitalization of SMEs has become a top

policy priority in OECD countries and beyond. The

report examines recent trends in SME digital

adoption, including in the context of the COVID-19

crisis. It focuses on issues related to digital security,

online platforms, blockchain ecosystems, and

artificial intelligence. The report identifies

opportunities, risks of not going digital, and barriers

to adoption. It looks at specific policy measures being

taken worldwide to accelerate the transformation of

SMEs and raises several considerations for advancing

the SME digital policy agenda. While almost 80% of

SME firms have a website on average, only 30% buy

cloud computing. Wider diffusion is critical, given

that many advanced digital tools have been shown to

increase productivity, especially when combined with

additional investment in managerial and technical

skills (Buht and Hiks, 2018).

To help SMEs overcome barriers to the use of

advanced digital tools an enabling environment for

ICT adoption needs to be created They need to

address the specific challenges faced by SMEs

through more targeted policies. For example:

Support schemes to facilitate the adoption of tools

that are particularly beneficial and may be new to

SMEs, such as cloud computing, which requires

limited initial investment and offers flexible

scalability of activities.

Measures to assist SMEs to overcome obstacles to

the effective use and protection of intellectual

property and other intangible assets.

Measures to avoid obstacles to expanding the

value of SMEs. For example, SMEs may prefer to

remain small to avoid the additional regulatory

burden that may arise at a certain threshold size

(Borovskaya and Masych, 2020).

These SME support measures can be taken into

account in a digital transformation strategy for

society.

Following the Strategy of Socio-Economic

Development of the North Caucasus Federal District

until 2025 (hereinafter - the Strategy), the main

directions, ways, and means of achieving strategic

goals of sustainable development and ensuring

national security of the Russian Federation in the

territories of the Kabardino-Balkar Republic,

Karachay-Cherkess Republic, Dagestan Republic,

Ingushetia Republic, North Ossetia - Alania

Republic, Chechen Republic and Stavropol Region

that are part of the North Caucasus Federal District

have been identified. The North Caucasus Federal

District lags significantly behind other federal

districts on many key socio-economic indicators,

such as per capita gross regional product, labor

productivity, and average wages.

The strategy's main objective is to ensure

conditions for the accelerated development of the real

economy in the constituent entities of the Russian

Federation that are part of the North Caucasian

Federal District, create new jobs, and improve living

standards. At the same time, the Strategy plans the

transition of these constituent entities of the Russian

Federation from a policy of stabilization to a policy

of accelerated growth, under which the key areas of

state support will be an investment in the

development of the economy to gradually ensure self-

sufficient existence of the constituent entities of the

Russian Federation that are part of the North

Caucasian Federal District, as well as promoting their

integration into the national and global economy.

Digitalization of the economy is also an issue of

social entrepreneurship development and support of

social entrepreneurship (Mirolyubova et al., 2020).

Each republic of the North Caucasus Federal

District is at a different stage of digital development.

Close monitoring and analysis of relevant trends and

effective impact assessment is required.

Measurement, monitoring, and evaluation are critical

to the design and management of digital policies and

enable policymakers and analysts to 1) assess the

contribution of digital transformation to social and

economic goals; 2) understand the barriers to digital

transformation, which is critical for developing

effective policies in the region; 3) evaluate the

effectiveness of various strategic approaches, which

allows for informed decisions about priorities,

policies, measures and instrumentation, and the

allocation of funds; 4) constantly improve the design

and administration of programs (see Table 1).

Digital Economy as a Factor of Sustainable Development of the RNO- Alania

193

Table 1: Digitalization index and digital intensity in organizations in the business sector of the SCFD: 2018.

Business

digitalizatio

n index

Share of organizations using digital technologies in the total number of

organizations, per cent

Broadband Internet Cloud

services

RFID

technology

ERP

systems

E-Sales

North Caucasus Federal

District

9.3 70.8 68.1 88.6 22.3 63.6

Republic of Dagestan 3.2 59.4 63.2 91.0 12.2 52.8

Republic of Ingushetia 1.5 53.9 66.8 84.9 25.3 77.2

Kabardino-Balkar

Republic

10.2 75.4 82.9 90.7 32.5 79.3

Karachay-Cherkess

Republic

10.5 67.5 72.6 846 22.8 75.3

North Ossetia-Alania 16.7 81.3 74.5 89.2 14.1 53.3

Chechen Republic 4.9 66.7 72.7 91.1 28.2 60.0

Stavropol Territory 17.4 87.2 68.1 87.9 27.8 75.3

Intangible assets (e.g. patents, organizational

capital and software) drive digital innovation.

In the Republic of North Ossetia-Alania, legal

support in this sphere is mostly focused on the

development of information society (edict of the

Head of North Ossetia-Alania "On Measures to

Develop an Information Society in RNO-Alania" No.

10, January 19, 2010); open government (edict of the

Head of North Ossetia-Alania "On Ensuring Access

to Information on the Activity of Bodies of Executive

Power and Local Self-Government in RNO-Alania

Available on the Internet", August 27, 2010, No.115);

open government mechanisms (resolutions of the

Government of RNO-Alania "On Ensuring Access to

the Information on the Activity of Bodies of

Executive Power and Local Self-Government in

RNO-Alania", No. 115, July 28, 2010); the

mechanisms of an open government in the activities

of the republican and local self-governing bodies of

RNO-Alania (the Resolutions of the Government of

RNO-Alania "On Providing Access to the

Information on the Activities of Bodies of the

Executive Branch of RNO-Alania" No. 309,

November 12, 2010) (Smirnov, 2021).

It is important to note that in RNO-Alania, a draft

law "On State Support for the Development of the

Digital Economy" has been developed and submitted

to the Parliament of the Republic. The draft law is

aimed at: - creating a legal environment that would

create favourable conditions for the development of

the digital economy; - increasing the competitiveness

and investment attractiveness of the Republic of

North Ossetia-Alania; - implementing economic

activities related to the use of digital technologies; -

creating a single state digital platform that would

overcome the disparate departmental systems and be

based on a single data set; - converting state services

into a digital format and digitalizing interagency

cooperation with the automatic growth of electronic

state and municipal services (Innovation, 2020). The

primary purpose of the draft law is to stimulate the

activities of digital economy entities. "State support

measures include subsidies, assistance in obtaining

loans, provision of tax incentives, organization of

human resources training, etc. The draft law proposes

to introduce the concepts of "digital economy actors"

and "digital innovation" to identify the recipients of

support measures" (Buht and Hiks, 2018).

North Ossetia is one of the leaders in the North

Federal District in terms of broadband penetration

(95%) and mobile signal coverage (93%). Simple use

of the Internet by individuals is widespread

throughout the country. However, less than 80% of

people still use the Internet every day, and more

complex online activities are less common. Typically,

the level of usage decreases along with the degree of

sophistication of the online activity. For example,

78% of Vladikavkaz residents use the Internet for e-

mail, but only 7% take online courses (Albutova,

2013).

RNO-Alania can be considered a leader in

implementing digital technologies in various areas of

the republic, and this pace will only increase in the

near future. For example, if we take the same sphere

of transport, there is an indicator - informing the

resident of the region about the movement of public

transport. This indicator is already available in many

administrative centers, where residents can use the

Yandex.transport app to see how a route is moving

and at what time it arrives at a particular stop. But this

opportunity is not available to people living in rural

areas in settlements 100-200 km away from this

center. At the same time, there are opportunities to

provide this service not by 2030, as was planned, but

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as early as 2021. In RNO-Alania, it is possible, but

with its own regional navigation information system.

Therefore, 2021 should be focused on the

development of target models.

With the help of Sber ecosystem companies,

together with the government of RNO-Alania, digital

services in healthcare and urban planning were tested

in November 2020. These are projects using artificial

intelligence, neural networks and speech recognition.

RNO-Alania participates in five federal digital

economy projects, with an information infrastructure

project completed in 2021. The main task is to

connect to high-speed Internet the main socially

significant objects, which is more than 200 (70% will

be connected by the end of 2021, including the

objects located in the mountainous part of the

republic). Completion of this project is underway in

2022. In addition, four more projects are underway,

such as training for the digital economy, for which

more than 2,000 people have been trained.

SberBank works with 8 thousand entrepreneurs,

and it issued about 8.7 billion loans for business

development in the republic in 2020.

Within the framework of concessional lending,

160 companies received state support worth 207

million rubles, and 350 deals worth 832 million rubles

were restructured. It should be noted that people in

business of RNO-Alania have now started to actively

convert their organizations to digital format, with

more than 74 percent of them working with Sberbank

Business Online. At present, the drivers of digital

growth in the region's economy are the service sector,

the residential real estate market, and the agro-

industrial complex.

It is noted that in 2020 each client visited a

Sberbank office 3 times, and the total number of

appeals was about 1.6 million people. Compared to

2019, the loan portfolio volume for working with

North Ossetia-Alania residents increased by 34

percent to 26.2 billion rubles, including mortgage

lending - by 62 percent, to 4.2 billion. Loan

disbursements amounted to about 13 billion.

The average consumer loan exceeded 210

thousand rubles, and 73 percent of them were

obtained through Sberbank Online. The average

mortgage loan exceeded 1.8 million, and 2,336

families in the republic improved their housing

conditions in 2020 (Kramin and Klimanova, 2019).

Sber supports all of the North Ossetian

government's initiatives to digitalise the region. Over

the last 3 years, 11 investment projects worth RUB 5

billion have been financed in RNO-Alania. The

largest deal of 2020 was the project of the fruit storage

for 50 thousand tons in Arkhonskaya village for 3,2

billion.

Health care is another collective challenge in

which digital technology has great potential. For

example, health care providers can improve care and

potentially reduce costs by digitizing medical records,

using new surgical equipment, expanding

telemedicine and teleconsultation, and adopting

mobile health technology. Digital technologies are

also of particular importance for long-term care for

the elderly in RNO-Alania, as one of the leaders in

digital transformation in the North Caucasus Federal

District, it implements solutions for the healthcare

system. For example, the Republic has a voice-

activated robotic assistant, Zalina, based on artificial

intelligence technologies. It answers the questions of

the region's residents about the symptoms and course

of the disease, advises how to keep yourself and your

loved ones safe, calls at home, or makes an

appointment to see a doctor. However, data-driven

health services also raise new challenges related to

personal data protection and privacy, security, control

and ownership, transparency and accountability,

quality and security, many of which can be addressed

through effective health data management.

Following the Concept of Development of the

Digital Economy of the Republic of North Ossetia-

Alania, approved by Decree No. 474-r of the

Government of the Republic of North Ossetia-Alania

of December 27, 2017 "On Approving the Concept of

Development of the Digital Economy of the Republic

of North Ossetia-Alania", the challenges of

developing the digital economy are the following:

- the digital divide at the regional and municipal

levels;

-weak level of digitalization and application of

information and telecommunication technologies in

local governments (Fedosova, 2020).

Many traditional firms are increasingly moving

online and combining both digital and physical

components. While traditional firms are going digital,

some firms that started on the Internet are now

heading in a different direction. This goes beyond

traditional firms just having a website. On the one

hand, traditional retailers are using websites, mobile

apps, self-checkout, electronic kiosks and smart shelf

technology; on the other hand, online retailers are

beginning to create digital physical stores, removing

friction from traditional shopping processes and

offering the ability to "click and collect"

In turn, consumer behaviour is also changing. For

example, consumers can research a product online

before buying it in regular stores by reading reviews

and comparing prices online. Similarly, other firms

Digital Economy as a Factor of Sustainable Development of the RNO- Alania

195

mix online and offline elements to sell goods of

variable quality (e.g., fruits and vegetables) or goods

that require some fit that is otherwise difficult to

judge online (e.g., custom-made clothing).

Innovation in the digital age relies on a wide range of

public and private sector resources, including basic

research, research and development (R&D), skills,

and intangible assets, including data and

organizational capital.

However, the social implications of digital

transformation are ambiguous. For example, digital

technologies provide opportunities for increasing

access to information, interpersonal communications,

and a multitude of services (free and interconnected

Internet), advancing science and improving health

(e.g., telemedicine), and enriching education (e.g.,

massive open online courses). On the other hand, they

can create work-life imbalance problems, contribute

to the segregation of people into relatively isolated

like-minded groups, reduce privacy and lead to screen

addiction, depression, and cyberbullying, including

among children.

3 CONCLUSIONS

Digital transformation has great potential to bring

about positive change across the economy. For

example, digital technologies facilitate access to

markets and business start-ups and increase access to

goods and services - including education, health, and

financial services - for low-income groups (especially

those living in remote areas). Digital technology

helps SMEs become "responsive" to citizens and

consumers. Digital technologies make it easier for

people to participate in economic and social

activities.

Realizing opportunities and solving problems is

not automatic and may require several steps to make

digital transformation work for the growth and well-

being of the entire community. There are now many

opportunities for SMEs, republics' leadership, and all

stakeholders to shape a digital future that maximizes

the enormous digital transformation opportunities to

improve people's lives.

It should be noted that RNO-Alania, despite its

leading positions in digitalization and the intensity of

digital technology use in the organizations of the

business sector of the North Caucasus Federal

District, is far from being a leader in the digital

economy. The digital economy has enormous

potential to promote economic development by

activating established markets for goods, services,

and labor. Effective use of new digital technologies

will determine the competitiveness of republics and

individual companies that form the infrastructure and

legal environment for digitalization.

The development of this sphere requires

coordinated work of the state and private sector

companies in such areas as elimination of legal

barriers to the introduction of advanced technologies,

creation of infrastructure for the digital economy,

improvement of the education system.

Nevertheless, such benefits come with new

challenges, as digital transformation changes the

nature and structure of organizations, markets, and

communities and raises concerns about jobs and

skills, privacy and security, and notions of equity and

inclusion.

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