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The Global Impact of Digital Transformation in Asia

The Global Impact of Digital Transformation in Asia

Asia has experienced phenomenal growth over the past 50 years and now represents over one-third of global Gross Domestic Product (GDP), a trend the experts expect to continue. For example, BMI’s Cedric Chehab believes, “By 2030, Asia will account for the largest share of global GDP at around 40 percent.”  As a result, what happens in Asia will significantly impact the global economy, so it is in everyone’s interest to have a keen awareness of the business trends that are shaping the Asian market.

Digital transformation and Asian economies

Just like the rest of the world, Asia is undergoing a massive transformation as the digital tsunami disrupts all areas of life and business. Asia has in many regions taken the lead in the digitalization of its industries, even leapfrogging European economies as of 2018. One Microsoft study goes so far as to state that 60% of Asia Pacific’s GDP will derive from digital products or services by 2021. While the exact impact has yet to be determined, the contribution by digital transformation will undoubtedly be significant.

Asian governments see great potential in digital transformation, but also significant challenges. Many emerging Asian economies have enjoyed tremendous growth over the last half-century by employing cheap, low-skilled workers in simple manufacturing industries. This model of development quickly established these new emerging economies within historical global trade networks. However, this can only take a country so far, and without upskilling workers and embracing technological innovation, nascent economies risk falling into the middle-income trap. In other words, the technological disruption caused by digital transformation and the advent of Sewbots, automated garment manufacturing machines could leave millions of garment workers jobless, and governments urgently need to upskill national workforces to avoid such calamities.

Two of the largest economies in Asia, China and Japan, have actively engaged and promoted digital transformation policies over the past decade. Since the early 2000s, the Chinese government‘s support for e-commerce has helped China’s e-commerce sector skyrocket from less than 1% of the value of global transactions a decade ago to more than 40%. Currently, it is larger than the value of the transactions in the US, UK, Japan, France, and Germany combined. Already the global leader in e-commerce, China is now focusing on adopting digital technology across its other sectors, such as manufacturing. Japan has long led the world in the digitalization of industry, and is still one of the most advanced countries in the robotics industry. Ironically, Japan lags in digital transactions, but the government is trying to encourage the finance industry to catch up as part of its Society 5.0 initiative and has recently liberalized the laws pertaining to cashless payments. This has resulted in banks there investing in projects to develop platforms using everything from QR codes to blockchain technology and digital currencies.

Original image source: Cabinet Office

Elsewhere in Southeast Asia, other countries are moving quickly to prepare their economies for the impact of digital transformation. Singapore, a small island city-state that is highly dependent on trade and finance, has embraced the digital wave and its government launched projects such as the Smart Nation initiative to capitalize on the internet of things (IOT) and artificial intelligence (AI) for the betterment of its citizens. Thailand is primarily dependent on manufacturing and agriculture, but wants to move beyond being a source of cheap labor in Southeast Asia; the country has launched Thailand 4.0 to create a value-based economy that is driven by innovation, technology and creativity. The Philippines developed a strong base of skilled knowledge workers while capitalizing on internet technology to become a hub of business process outsourcing (BPOs) in the early 2000s. However, to avoid being stuck as a middle-income economy dependent on outsourced work from other economies, the Philippine government has started to create a framework for nation-wide digital transformation.

Asia’s digital transformation effect on the rest of the world

As digital transformation leads to further, unparalleled growth, the economic impact and rise of the middle class in Asia will affect business in the Americas and Europe. A recent study by the Brookings Institute highlights the fact that the overwhelming majority, 88%, of the next one billion people to enter the global middle class will be in Asia, representing 65% of the global middle class. Just as the growth of the middle-class consumer in the US & Europe did much to influence business growth after World War II, the rising Asian middle-class consumer will undoubtedly be a huge factor in global business strategy over the next decade.


Ethan Dengate is a Partner Success Consultant for Skillsoft APAC.


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