Digitalisation is transforming economies in Emerging Asia and driving economic growth through increased productivity and new opportunities. Key effects include optimizing production through technologies like IoT, big data, and Industry 4.0; transforming services through increased internet use; creating new industries and changing international trade patterns; and developing human capital through skills development. Challenges include ensuring an adequate supply of digital skills and implementing supportive policies and infrastructure to maximize benefits. Research finds digital technologies contribute to growth through capital deepening and productivity gains, with impacts increasing over time.

1. Digitalisation
as a growth engine
in Emerging Asia

2. Introduction
• Technology is changing the world at a rapid pace, and new ways of
thinking, communicating, interacting and producing are taking shape.
• Over recent decades, digitalisation has transformed the world economy
into a more integrated, complex and dynamic system.
• By 2015, the digital economy already accounted for 22.5% of the global
economy
• Countries around the world now look to this expanding part of the
economy as a path towards economic development
• Indeed, the appeal of this path has been especially intense due to the rapid
pace of technological progress, notably in the field of information and
communication technology (ICT)

3. Why Asia?
• In terms of developing countries, their lack of infrastructure opens up more
opportunities for innovations that would not succeed in the Western world
• For the ASEAN region, the digital transformation can be part of the
response to the slowdown in productivity growth that has occurred across
much of the region, helping to ensure higher incomes and stronger
competitiveness in global markets.
• In Southeast Asia, it can help in changing the development paradigm
towards growth driven less on the demand side by exports and more on
the supply side by productivity increases.
• Moreover, it can help in addressing policy challenges such as the meeting
of future energy, food and water needs, or improving the delivery of health
and education services.

4. Digital economy
• As a concept, the digital economy includes:
• the convergence of fixed, mobile and broadcast networks;
• the increasing connectivity of devices and objects;
• and the changes in social interactions and personal relationships that
these developments bring about

5. New technologies
• In addition to the increased use of the Internet and other ICT tools,
new technologies continue to affect digitalisation around the world.
• Key and emerging digital technologies include the Internet of things
(IoT), big data analytics, artificial intelligence (AI), blockchain, cloud
computing, photonics and light technologies, robotics, modelling
simulation and gaming, and quantum computing
• The first four of these technologies, for example, can be expected to
have transformative effects on manufacturing and services if the
risks and challenges they present can be addressed

6. New technologies
the Internet of
things (IoT)
big data analytics artificial
intelligence
(AI)
Blockchain
+ Fintech

9. New Technologies - Fintech
• The financial crisis, which decreased people’s trust in banks, has prompted
financial innovations.
• FinTech emerged to provide new financial services at lower costs through mobile
platforms and apps.
• There are a couple of reasons why FinTech has grown tremendously in the last
couple of years.
• First, the millennials are very familiar with the Internet and they are used to
finding simple and fast solutions to their problems through the use of technology.
• Second, the widespread use of the Internet, social media and smartphones has
driven the idea to conduct transactions online.
• Third, Big Data has enabled the usage and utilization of data in large volumes,
with the variety and velocity that supports the implementation of FinTech.

10. New Technologies - Fintech
• A large segment of the population in emerging markets does not have easy
access to banking, transportation, and electricity.
• Thus, mobile money can be the solution.
• However, these people are usually unaware of such developments because
of lack of information regarding the available technology.
• Through the combination of digital money management; smartphone
technology and strategies to educate the population, it will be possible to
revolutionize the delivery of financial products to the unbanked population
• In addition, it may not only create business opportunities but also help
millions of people improve their quality of life in the developing countries

11. Digitalisation effects – R&D
• Digitalisation can optimise the production process to a large extent.
This saves time and cuts costs, leading to higher productivity.
• Moreover, adopting technologies pushes ahead R&D in various fields,
including ICT infrastructure and applications.
• Over the longer term, technological change in general and the
emergence of the digital economy in particular is a major factor
driving economic growth in Emerging Asia.

13. Digitalisation effects - Internet use
• Over recent decades, digitalisation has transformed the world
economy into a more integrated, complex and dynamic system.
• Emerging Asian economies have been active participants in this new
wave of change.
• The region is being transformed by the rapid adoption of
technologies.
• Internet use, a prerequisite for participation in most aspects of the
digital economy, has risen steadily across the region in recent years,
although there are still significant differences between countries.

15. Digitalisation effects - Industry 4.0
• Manufacturing is changing as digitalisation allows for new production
methods, unconventional relationships with suppliers and clients, and the
responsiveness to match supply with demand in real time
• “Industry 4.0”, “the fourth industrial revolution” or the “fourth wave” of
technological advancement refers to an industrial ecosystem in which all
processes and functions of manufacturing and distribution are interactively
connected through digital networks.
• Increased ICT use has also transformed services sectors by making many
services storable, transportable over the Internet and telephone
connections, and tradeable though digital and other means.
• In Emerging Asia, existing services industries have expanded and new
industries have emerged as a result of digitalisation.

16. Digitalisation effects - international trade
• The digital transformation is already having a profound impact on
international trade: changing how countries trade, altering how
products are made and delivered, and also what they trade, including
greater bundling of goods and services.
• In the ASEAN region, trade in services has grown rapidly in recent
years, partially enabled by digital technologies

18. Digitalisation effects - “sharing” economy
• Digitalisation is also changing the way work is organised.
• The “platform”, “sharing” or “collaborative” economy, though still
small in scale, is allowing businesses to access a larger pool of
potential workers and suppliers, with workers increasingly engaged as
independent contract workers.
• This has benefits for some workers, providing them with greater
flexibility, and allowing people to earn additional income and access
work

19. Digitalisation effects - socio-economic
development
• Following the rapid spread of digital networks across the world, a
large body of evidence is now emerging that shows that digitalisation
does not only contribute to productivity and efficiency, but also to
broader socio-economic development.
• It can give rise to a more inclusive society and better governance
arrangements; enhance access to key services such as health,
education and banking; improve the quality and coverage of public
services and political participation; expand the way that individuals
collaborate and create content; and enable them to benefit from a
greater diversity and choice in products and from lower prices.

20. Digitalisation challenges - skills
• Greater use of digital technologies requires new skills.
• First, the production of digital products and services requires
specialist skills in ICTs to programme software, develop applications
and manage networks.
• Second, workers across an increasing range of occupations need
generic and/or advanced ICT skills to use such technologies
effectively.

21. Digitalisation challenges - policy
• It is crucial that governments enable firms to invest in knowledge-
based capital (e.g. data, organisational change, process innovation) to
help them realise the full potential of the digital transformation.
• Policy makers in the region can help manufacturing and services firms
to seize the opportunities presented by digitalisation through reforms
to trade and investment policies,
• the development of supportive infrastructure, addressing labour
market challenges and other reforms targeting the main constraints
facing their economies

22. Research
• Far from being a recent phenomenon, ICT remains one of the phenomena
of the economic reality which has undergone a tremendous growth since
the beginning of the 1980s.
• One of the first major contributions of theoretical literature dealing with
the relationship between the new technology and economic growth is that
of Cette, Mairesse and Kocoglu (2000, 2003) and Jorgensen (2001).
• These authors have analysed the positive and significant role of ICT in the
economic growth using two channels: Firstly, the substitution effects
related to the accumulation of the ICT capital (capital deepening).
• Secondly, the TFP (Total Factor Productivity) gains which are mainly the
result of the technological progress were achieved in the producing
industries of ICT.

23. Research
• According to Drik Pilat of the OECD (2008), the econometric analysis of economic
growth and productivity generally distinguishes three types of impacts of the ICT.
• Firstly, investment in ICT increases the capital stock available to the workers and
thus contributes to the improvement of the labor productivity.
• Secondly, the rapid technological progress in the production of ICT goods and
services can contribute to the progress of the capital and labor efficiency, or the
multifactor productivity (MFP) in the producing sector of the ICT.
• Thirdly, a wider use of ICT in the economy can help companies be generally more
efficient and therefore increase the multifactor productivity (MFP).
• The ICT is also likely to enhance the network effects, external effects, such as the
reduction of the transaction costs and the acceleration of innovation, which can
also improve the MFP.

24. Research
• Kharti Lee (2003), on their part, studied the ICT influence on the
growth of the Asian countries.
• To achieve this, they used a production function type Cobb Douglas
with the non-ICT capital, the ICT capital (including hardware, software
and communication) and the workforce as an independent variable
during the periods 1990-1994 and 1995 to 1999.
• They suggest that the contribution of the ICT to the economic growth
is the result of the effect of the capital of the ICT sector in the 1990s
and particularly the effect of capital intensity in the ICT sector in
1995-2000 play an important role in improving the labor productivity.

26. Research
• The main conclusion is that the impact of ICT on labor productivity in Asia
is currently mainly through capital deepening.
• The effects of such revolutions have generally occurred in three (often
overlapping) main stages.
• First, technological change raises productivity growth in the innovating
sector;
• second, falling prices encourage capital deepening;
• and, finally, there can be significant reorganization of production around
the capital goods that embody the new technology.
• Thus we may expect the bulk of the benefits from ICT in Asia (and the
world) to accrue in the future.