Opportunities and challenges in Asia's digital economy
(Baonghean.vn) - Asia's digital economy is booming, offering huge potential for growth and prosperity. However, to make the most of this potential, Asian countries need to have a clear strategic direction to address the accompanying challenges.
The digital revolution is sweeping across Asia, reshaping economies, societies and the daily lives of millions, heralding a new era of technological transformation. Moreover, the digital economy is driving change and improvement in many regions, particularly in countries with consistent investment in digital advancement, such as Singapore, China, Japan and India.
A country’s digital economy is made up of a number of industries, including e-commerce, fintech, digital media and software development. These industries have become essential to Asia’s economic growth, creating new opportunities for workers, businesses and innovators.
Growth opportunities of Asia's digital economy
According to the Asian Development Bank (ADB), the digital economy comprises digital products and industries that contribute to a country's Gross Domestic Product (GDP) and includes a wide range of economic activities.
A study by the Singapore University of Social Sciences (SUSS) suggests that the information and communications technology (ICT) sector requires a combination of hardware, software, IT consulting and telecommunications services to ensure the success of the digital economy. In addition, the digital transformation process needs to pay attention to both social and technological aspects.
One of the key goals of expanding the digital economy in Asia is to bridge the digital divide and ensure that all segments of society can benefit from the digital revolution. This involves increasing the availability of affordable and accessible internet connectivity, encouraging digital skills development, and investing in digital infrastructure in remote and underserved areas.
According to the annual e-Conomy SEA 2023 report released by Google, Temasek and Bain & Company, digital businesses have shifted their focus to monetization to achieve their goals. In 2023, the Southeast Asian digital economy reached $100 billion in revenue, growing at a compound annual growth rate (CAGR) of 27% since 2021 and is expected to reach $300 billion by 2025.
The widespread adoption of digital financial services (DFS) has contributed significantly to the growth of the digital economy, accounting for more than half of all transactions. Moreover, this shift not only reflects the ever-changing preferences of consumers, but also represents a significant opportunity for businesses to generate profits in the growing fintech sector.
Online businesses and e-commerce platforms are also contributing to the region’s digital economy. E-commerce platforms are focusing on attracting valuable loyal customers and expanding revenue streams, with an estimated gross merchandise value (GMV) of US$186 billion by 2025.
Meanwhile, the growing online lending industry, fueled by underserved households and small businesses, is becoming a significant source of revenue for the financial services sector. The tourism and transportation industries in Southeast Asia are also contributing to this growth, with Thailand’s online travel expected to increase by 85% in 2023 compared to the previous year.
How do countries in the region promote digital economic development?
The digital economy is playing an increasingly important role in driving economic growth and development in the Asian region. Countries in the region are implementing many innovative initiatives to promote digital economic development.
For example, in India, the government has launched the “Digital India” initiative to accelerate digital integration and reduce inequality between urban and rural areas.
Digital India is an initiative launched by the Government of India in 2015 with the aim of promoting the growth of the digital economy and ensuring that all Indians have access to digital services. The initiative includes a series of programmes and projects aimed at improving internet connectivity, promoting the use of digital services, developing digital skills and innovation in the technology sector.
This initiative has brought significant progress, helping millions of people gain access to the internet and digital services for the first time, improving the lives of millions of Indians and contributing to the growth of the Indian economy.
In China, the “Made in China 2025” initiative is an industrial strategy proposed by the Chinese government in 2015 with the goal of improving China’s manufacturing capacity and turning the country into a high-tech powerhouse by 2025. The initiative focuses on 10 key industries, including: robotics, precision machinery, electronics, advanced materials, electric vehicles, medical pharmaceuticals, aerospace, naval, next-generation information technology, and intelligent machinery systems.
The “Made in China 2025” initiative is seen as a major turning point in China’s economic development strategy. The initiative aims to improve China’s manufacturing capacity, reduce China’s dependence on imports, encourage innovation, and enhance China’s international standing.
This Chinese government initiative has had a significant impact on the Chinese economy, helping to spur investment in key industries, spur innovation, and help China become the world's largest producer of high-tech products.
Meanwhile, the Singapore Government has launched the “Smart Nation” initiative, a strategy proposed by the Singapore Government in 2014 to turn Singapore into a smart nation, where technology is used to improve the quality of life of its people and improve the efficiency of government operations.
The initiative includes various projects, focusing on three main areas: smart economy, smart government and smart society.
The Smart Nation initiative has made significant progress since its launch. Singapore is now recognised as one of the smartest nations in the world. The initiative has helped improve the quality of life of Singaporeans, spur innovation and enhance the country’s economic competitiveness.
Digital challenges in Asia
Despite significant progress in digitalization across countries in the region, the digital divide remains a threat to the digital growth potential in Asia.
Access to advanced technologies is unevenly distributed across and within countries, creating significant obstacles for small and medium-sized enterprises (SMEs) in their efforts to adopt these technologies. This gap is exacerbated by a shortage of skilled digital workers and inadequate regulatory frameworks.
The existence of digital inequality not only hinders economic progress but also limits the development of individual capabilities, as evidenced by low Internet access rates in countries such as Indonesia. In Bangladesh, the deployment of affordable Internet is hampered by slow connection speeds, which inhibits the full development of digital opportunities.
Additionally, there are ongoing concerns about data privacy and cybersecurity as the number of cybersecurity threats increases in tandem with technological advancements. Data leaks and cyberattacks underscore the urgent need for robust cybersecurity measures and cooperation among Asian countries.
To fully leverage the possibilities of the digital age, Asian countries need to establish a strategic plan for collaborative efforts, such as an integrated data policy framework, along with investments in digital infrastructure and human resources to underpin sustainable digital economic development.
