In Asia, no economic or business sector is as vibrant or commands more attention of policymakers as the digital sphere. This trend is well documented in a landmark study by United Nations Conference on Trade and Development (UNCTAD)’s first annual Digital Economy Report. The timely study was released earlier this month as countries across Asia grapple with a complex digital future. Digital technologies help cut costs, enable delivery of services without leakages, reduce opportunities for graft, promote ease of doing business, leverage an increasingly non-tactile world, grow economies, have the potential to create millions of new jobs and, it appears, even help fight fake news.
On the flip side, there are concerns of the cost of the emerging digital economy in terms of loss of traditional employment sectors, eroding the right to privacy, abetting authoritarian statecontrol of citizens’ lives, causing a spike in cybercrimes and, according to some, promoting a deracinated, atomised existence for human beings. On balance, as Andrew Sheng, Malaysian-born economist, writes for Asia News Network: “No economy today can afford to be complacent… We need a root-and-branch review of how to compete in a complex digital world.” The UNCTAD Report is clear that the emerging global digital economy is closely associated with key frontier technologies – Blockchain, Data Analytics, Artificial Intelligence, 3D Printing, Internet of Things, Automation/ Robotics and Cloud Computing – that impact all UN Sustainable Development Goals. Global Internet Protocol (IP) traffic, a proxy for data flow, has grown at a mindboggling rate in our lifetimes; from 100 GB of traffic per day in 1992 to 46,600 GB per second in 2017.
And it’s projected to hit to 150,700 GB of traffic per second by 2022. Yet, the world is only in the early stages of the datadriven economy. The geography of the digital economy is highly concentrated in two countries, China and the USA, which also have 90 per cent of the market capitalization value of the world’s 70 largest digital platforms. Half of the world remains offline and in LDCs (Least Developed Countries) only one in five people has internet access. Sheng says he is optimistic about digital economies in Southeast Asia. “Indonesia, Vietnam and Philippines have the scale, with populations over 100 million each.
ASEAN’s real strength is its young population already being digitally savvy and moving into middle/higher income ranges… “It is precisely because the ASEAN countries have youth, diversity of culture and access to world-class knowledge, as well as strategic geographical location, that they will become the cutting-edge digital future,” he writes. In Vietnam News, Vo Tri Thanh and Do Le Ngõc Bich point to the ride-hailing firm Grab investing $500 million in Vietnam over the next five years, just a month after it announced a $2 billion investment in Indonesia. “Grab’s investment decisions are manifestations of the potential development of the digital economies of the two ASEAN countries which have ‘similar characteristics’,” say the authors.
But Grab isn’t just stopping there. It is accelerating its expanding business that now includes food delivery, digital payments and digital content by investing $150m in AI to build a regional super app, according to The Straits Times. ASEAN member countries have already signed agreements to drive the regional grouping toward the Fourth Industrial Revolution (Industry 4.0), add Vo Tri Thanh and Do Le Ng?c Bich. Malaysia, which established the world’s first Digital Free Trade Zone in 2017, approved implementation of the RM21.6 billion National Fiberisation and Connectivity Plan last week. The five-year plan, which the government views as part of the nation’s preparedness for the Fourth Industrial Revolution, is a crucial infrastructure project starting this year that will provide nationwide, highquality and affordable digital connectivity across the urban-rural divide.
Indonesia is set to become the region’s largest digital economy over the next few years while Vietnam is working on a national digital transformation project which aims to position it as a leading digital economy of ASEAN by 2030. Singapore, meanwhile, has implemented its Smart City initiative and Thailand has plans to develop digital capacities in all economic sectors. Southeast Asia’s digital economy is projected to hit $200 billion by 2025 while the e-commerce sector alone is forecast to reach $88 billion. According to a 2018 report by Bain & Company, the proportion of the digital economy in ASEAN’s GDP is 7 per cent, compared to 16 per cent of GDP in China. For the EU-5 it’s 27 per cent of GDP and for the US it’s a whopping 35 per cent of GDP.
AT Kearney research shows ASEAN has the potential to enter the top five digital economies in the world by 2025, however, and implemen- tation of a radical digital agenda could add $1 trillion to the region’s GDP over the next 10 years. The real challenge in formulating digital strategies for countries in the region is, of course, that of inclusiveness. There are uneven skills sets and different strengths /weaknesses across the region which ASEAN as a bloc will have to address over and above its members’ national agendas. For example, the UNCTAD report states that while South Korea and Singapore top the charts in companies receiving orders online, Thailand fares poorly in business digitalization. But some of the most innovative ways of making the digital economy work for citizens are also being attempted in Thailand.
According to The Nation, the country’s digital economy minister is empowering senior citizens by creating and giving them access to an online network to look after their health concerns as well aid the government in countering fake news. The ministry has sought a Baht 21-billion budget for fiscal 2020 and plans among other steps to set up 10,000 free WiFi hot spots in rural areas as part of the government’s Thailand 4.0 drive. The establishment of an ‘anti-fake news’ centre is also on the cards. In South Korea, which has a strong legacy of digital innovation, start-ups are already brainstorming on how they can solve tech savvy Seoul’s urban problems using AI/IoT.
The McKinsey Global Institute report on China’s digital economy has recorded that the country is already more digitized than many appreciate, with one of the most active digital-investment and start-up ecosystems in the world. And it has the potential to set the world’s digital frontier in coming decades. The hard facts tell their own story: China is in the top three in the world for venture-capital investment in key types of digital technology, including virtual reality, autonomous vehicles, 3-D printing, robotics, drones and artificial intelligence (AI). China is the world’s largest e-commerce market, accounting for more than 40 per cent of the value of worldwide e-commerce transactions, up from less than 1 per cent about a decade ago. China has become a major global force in mobile payments with 11 times the transaction value of the US.
One in three of the world’s 262 unicorns (start-ups valued at over $1 billion) is Chinese, commanding 43 per cent of the global value of these companies. But more crucially, the report states, the factors propelling the expansion of Digital China suggest that the upside potential is still strong. First, the sheer scale of China’s Internet user-base encourages continuous experimentation and enables digital players to achieve economies of scale quickly. Secondly, China’s three Internet giants – Baidu, Alibaba, and Tencent – are building a rich digital ecosystem that is now spreading beyond them. Thirdly, the government gave digital players space to experiment before enacting official regulation and is now becoming an active supporter. Digital India, the signature campaign of the government in the other big economy in Asia, has a lot of catching up to do despite advantages such as high-quality, digital-ready and trained manpower and a gung-ho government.
A poor, if improving, digital ecosystem and an underwhelming record in project implementation are among the main issues holding it back. Yet, global players looking at economies of scale have started intensifying their engagement with India as two examples from August illustrate: Google and the Indian government signed a statement of intent to roll out ‘Build for Digital India’, a programme that will give engineering students a platform to develop market-ready, technology-based solutions that address key social problems.
Google Pay, which has 55 million monthly active users in the country, announced it is working to tap the over 12 million ubiquitous, neighbourhood or ‘kirana’ stores in India. Nearly 90% of the retail market in India is unorganised which, if it goes digital in the coming years, will open massive avenues for the digital payment firms. In terms of domestic players, Reliance, owned by Asia’s richest man Mukesh Ambani, created a splash in the growing digital streaming and video-on-demand market in the country earlier in September as it rolled out its fibre-to-the-home (FTTH) service across 1,600 cities in India, reported The Statesman.
The service will provide users an integrated experience of broadband, ondemand entertainment, voice-video calling and unlimited data. It’s telling, however, that a recent survey of directors, CEOs and senior executives in corporate India, said a report in The Economic Times, found that digital transformation (DT) risk was their #1concern in 2019. There are old challenges and new for Asian nations to overcome as they finetune their digital strategies.
(Special to ANN)