Digital adaption to decide Asia’s future winners
Region is set to drive a ‘Fourth Industrial Revolution’ that leverages communication tech into innovation and growth but many will struggle to keep up with change
Millennials are encountering a yawning technological divide as they begin to transform the way businesses are run in Asia. And ‘connectivity’ studies indicate that the gap could be getting wider.
By 2020, Asian workforces will include more than two billion millennials – the generation born between the early 1980s and the early 2000s – who have never known a time without digital workfaces, online transactions and multi-tasking smartphones.
A survey released in September by Microsoft suggests they also have bigger expectations: 68% of respondents felt that more could be done to bridge the digital skills gap among workers.
“And with more than half of the world’s millennials residing in Asia, the workplace will need to transform to adapt to the technology habits of these digital natives,” said Byron Rader, Asia general manager for Microsoft’s Applications & Services Group.
Asia will help to drive the so-called ‘Fourth Industrial Revolution’, which will put a premium on innovation and fuse a range of communication technologies, but countries in southern and central Asia will struggle to capitalize despite recent impressive gains.
Disparities are even appearing within the wealthier East Asian and Southeast Asian regions, with countries like Thailand, South Korea and Japan in danger of being left behind because their digital momentum has stalled or government policies are inadequate.
South Asia has the lowest technological readiness of any region worldwide, according to the 2017-18 Global Competitiveness Index published by the World Economic Forum, ranking behind Sub-Saharan Africa. It was actually ahead of East Asia in 2011-2012, but had fallen into a deep trough by 2014.
Central Asia (included with Eurasia for assessment purposes) is just ahead of Latin America, but trails the Middle East/North Africa. On the upside, Central Asia has improved the most in technological readiness since 2007, the research shows.
Wealth creates opportunity, but the buzzword for digital laggards is inclusiveness: Asia’s least developed regions are missing out because they are struggling to participate at a technological level.
As of 2016, only 13.2% of people use the internet in Bangladesh, 17.2% in Nepal, 17.8% in Pakistan, 29.3% in Sri Lanka and 34.8% in India, compared with 91.1% in Japan and 85.7% in South Korea, according to Internet Live Stats, a part of the Real Time Statistic Project.
Former Soviet republics in Central Asia are mostly in a better position: about 51% of people in Uzbekistan have internet access, 55.8% in Kazakhstan, 61.1% in Azerbaijan and 49.9% in Armenia.
But they lose out due to high costs and poor connectivity outside of their own region, which limits the potential for digital commerce. A basic cell phone plan costs at least 10% of household income for more than 80% of people in Kyrgyzstan, Armenia and Georgia.
Even when there is access, most countries outside East Asia lack the financial inclusiveness they will need to integrate trade portals and develop effective digital payment systems. Only about 13% of Philippine consumers use internet banking and 20% in India; in contrast, 94% bank online in Singapore and 93% in Hong Kong.
The main barrier is low access to bank accounts and credit cards, but there are also regulatory gaps that undermine efforts to set up credit rating systems and reduce risks of payments fraud. In some Asian countries 70% of consumer sales are still conducted in cash.
When these disadvantages are transferred to the workplace, the ability of businesses in some regions to absorb new technologies and exploit emerging digital opportunities is seriously impeded.
In the 2017 Global Innovation Index, which tracks how countries are applying their digital capability, South Asian nations averaged a lowly 97.2 ranking from 127 countries, compared with 79.3 for Central Asia, 59.2 for Southeast Asia and 23 for East Asia.
There is an upswing, however, in South Asia, with India (60), Sri Lanka (90), Nepal (109) Pakistan (113) and Bangladesh (114) improving on their 2016 rankings. Bhutan’s capacity is too low to be rated.
Central Asia’s Kyrgyzstan (95), Armenia (59) and Azerbaijan (82) also did better, but Georgia (68), Kazakhstan (78) and Tajikistan (94) all dropped. Turkmenistan and Uzbekistan were not rated.
Singapore (7), Malaysia (37) and Cambodia (101) fell from their 2016 index positions; Vietnam (47), Thailand (51), the Philippines (73) and Indonesia (87) did better. Laos and Myanmar were not rated.
In East Asia, Hong Kong (16) declined from 2016. Japan (14), China (22) and Mongolia (52) scaled higher, and South Korea (11) stayed on the same rank. Brunei (71) was not included in the 2016 index, and Taiwan and North Korea were not given ratings in 2017.
Having access to technology is only half the story, though; how you use it is just as important, and some very surprising nations are doing well at converting innovation for economic benefit.
China is ranked third in global innovation efficiency rankings, with Vietnam 10th , South Korea 14th, Cambodia 15th, Armenia 17th , Thailand 24th and Mongolia 27th. Hong Kong struggled into 73rd place in the index, with Singapore a distant 63rd, Japan 49th and Malaysia 46th. Brunei (124th) and Kazakhstan (116th) did worst in Asia.
There thus may be an opportunity for less developed nations to close technological gaps by simply doing better with less. India and Vietnam have been “innovation achievers” – economies performing at least 10% above their peers for their level of growth – for seven years, Armenia for six years and Tajikistan for three.
On the flipside, some countries that have been doing well are now in danger of being left behind, according to the annual Digital Evolution Index compiled by Tufts University and MasterCard.
Singapore and Hong Kong are still rated “stand out” countries, and China, Malaysia, Indonesia, Bangladesh, the Philippines, India and Vietnam are “break out” nations showing strong momentum.
But Japan and South Korea, Asia’s innovation trendsetters for several decades, are now considered “stall out” countries that are losing their traction. Thailand brings up the rear as the only “watch out” nation, constrained by low digital advancement and static growth.