How Generative AI Is Changing the Global South’s IT Services Sector

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The emergence of large language models (LLMs) is expected to significantly impact the IT services sector in the Global South, with potential productivity gains and economic growth, but also risks of exacerbating the digital divide [1][2][5] - The Global South's IT sector, while growing, is likely to face disruptions due to LLM adoption, particularly in occupations with high automation potential [5][40] - Policymakers in the Global South are urged to support workforce development, promote AI adoption, and facilitate digital free trade to mitigate risks and harness opportunities presented by LLMs [6][44][49] Summary by Sections Section 1: Introduction to LLMs and Economic Impact - The report discusses the growing urgency to understand the economic impact of LLMs, particularly in the Global South, where the adoption of such technologies could lead to both productivity benefits and increased economic disparities [1][2] Section 2: Current State of IT Services in the Global South - IT services are increasingly important in the Global South, with many countries exporting digital services to the Global North, including telecommunications and content generation [2][5] - The report highlights that the IT sector's share of employment in countries like China, India, and Brazil is less than 1%, while the share of GDP from IT services is 7.5% in India and nearly 10% in Nigeria [18][20] Section 3: Impact of LLMs on Employment and Exports - The report finds that LLMs may disrupt the growth of the IT sector in the Global South, as many IT occupations are at high risk of automation [5][40] - Countries like India and China are significant players in global IT service exports, with $120 billion and $51 billion respectively, but face challenges from LLM adoption that could lead to reshoring of jobs [38][39] Section 4: Policy Recommendations - Policymakers are encouraged to implement workforce development policies to equip workers with necessary digital skills for the AI economy [6][44] - There is a call for widespread adoption of AI technologies to enhance productivity and competitiveness in various sectors, including agriculture and healthcare [46][48] - The report emphasizes the importance of facilitating digital free trade to ensure access to advanced digital services and mitigate the risks of protectionism [49]