Prosperous APAC: Digital economy enablers
In 2021, Asia Pacific (APAC) accounted for 37% of the global Gross Domestic Product (GDP), up from 26% ten years ago.1 Fast-growing Internet penetration, increasing purchasing power, and expanding trade links have fueled the growth, but new headwinds are emerging. In a world of economic uncertainty and long-term disruptions due to COVID-19, digital technologies are becoming all the more crucial to the region’s growth and prosperity.
Commissioned by the Digital Prosperity for Asia (DPA), AlphaBeta (part of Access Partnership) has conducted a study focusing on the APAC-11, 11 of APAC’s largest economies (Australia, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Thailand, and Vietnam). The report was developed to quantify the digital economy’s unrealized potential, explain the gaps behind it, and suggest policy approaches to fully capture the benefits of the digital economy.
APAC-11’s digital economy domestically and in exports has grown considerably and is estimated to be US$586 billion in 2021.2 While this is significant, the APAC-11 has successfully captured only 30% of its digital potential. There is room for much more growth as if captured fully, the economic benefits could amount to approximately US$2 trillion.
However, if the APAC-11 adopts the “digital prosperity” approach, they stand to capture over US$2.2 trillion in additional economic benefits in 2030, realizing the full benefits of US$3.1 trillion. Our research has shown that by adopting a new approach — dubbed here as “digital prosperity”, which seeks to merge the benefits of flexible regulations, widespread access to global technologies, and a strong focus on domestic capabilities and skills, countries will be able to fully capture the benefits of the digital economy.
The significant benefits of the digital economy can be harnessed if the APAC-11 focuses on four enablers – policy, competition, capability, and infrastructure. AlphaBeta’s Digital Connectivity Index, comprising 26 parameters relating to the four enablers of the digital economy, pinpoints the gaps in current enablers for each country that are hindering the realization of the full benefits of the digital economy.
- Policy enabler includes policies that enable cross-border data flows, safeguard data sovereignty by ensuring continued control over and access to data and reduce border frictions impeding digital trade and foreign investment.
- Competition enabler focuses on parameters that ensure that businesses optimize their gains from the digital economy with access to a wide range of local and imported digital technologies at an affordable cost.
- Capability enabler includes efforts to equip workers and businesses with the required capabilities to thrive in the digital economy.
- Infrastructure enabler includes initiatives to improve digital connectivity and cloud service adoption, as well as facilitate robust cybersecurity systems in the country.
By focusing efforts on the four enablers, the APAC-11 will be able to capture additional economic benefits in 2030.
1 S&P Global (2021), “The Ascent of APAC in the Global Economy”. Available at: https://ihsmarkit.com/research-analysis/the-ascent-of-apac-in-the-global-economy-june22.html#:~:text=The%20weight%20of%20APAC%20in,the%20size%20of%20China’s%20economy.
2 The digital economy benefits refer to domestic benefits (cost savings and time savings from improved productivity) and revenue from the exports of digital goods and services.