“Countries in Asia and the Pacific have leveraged rapid technological progress and digitalization to recover and reconnect to the global economy during the pandemic”
Digital platforms and other technology-based tools are providing new growth opportunities for businesses of all sizes and across all industries in Asia and the Pacific—a trend which could contribute significantly to the region’s sustainable recovery from the coronavirus disease (COVID-19) pandemic, according to a new report by the Asian Development Bank (ADB).
A new ADB publication, the Asian Economic Integration Report 2021, looks at Asia and the Pacific’s progress in regional cooperation and integration, and examines the initial impact of the pandemic on trade, cross-border investment, financial integration, and the movement of people.
The latest edition features a special theme chapter on the role and potential of digital technologies in contributing to inclusive and sustainable development, how digital technology can spur post-pandemic recovery in the region, and ways to accelerate digital transformation while managing the risks effectively.
“Countries in Asia and the Pacific have leveraged rapid technological progress and digitalization to recover and reconnect to the global economy during the pandemic. Technology is helping to forge new global linkages, which offer enormous economic opportunities, but also present new risks and challenges,” said ADB Chief Economist Yasuyuki Sawada. “It is imperative to implement policies and regulations that manage the disruptions and maximize the gains from the burgeoning digital economy, and to lock in these gains through enhanced regional cooperation.”
Business-to-consumer revenues of digital platforms reached $3.8 trillion in 2019 globally, with Asia and the Pacific accounting for about 48% of the total or $1.8 trillion, equivalent to 6% of the region’s gross domestic product. These figures are expected to have significantly increased in 2020 as more business transactions – such as ride hailing, food delivery, and e-commerce – migrate to the digital space amid restrictions imposed to curb the spread of COVID-19.
Accelerated digital transformation can potentially boost global output, trade and commerce, and employment. According to the report, a 20% increase in the size of the global digital sector can increase global output by an average of $4.3 trillion yearly from 2021 to 2025. Similarly, Asia and the Pacific would reap an economic dividend of more than $1.7 trillion yearly or more than $8.6 trillion over the 5 years to 2025. There will be about 65 million new jobs created yearly in Asia and the Pacific until 2025 from increased use of digital technologies, with regional trade also expected to increase by $1 trillion yearly over the next 5 years.
Governments in the region can leverage and reap the benefits of the emerging digital economy through policies and reforms to improve digital infrastructure and connectivity, as well as access to them. These steps include promoting fair competition and improving ease-of-doing business processes, as well as enhancing labor security and social protection measures to align with digital jobs. The report also emphasized the need to focus on data privacy and security, taxation, partnership between public and private institutions, and regional cooperation.
The report notes that the region’s trade performance, while hit hard during the first half of 2020, is expected to recover faster than anticipated. Asia’s merchandise trade volume growth hit the bottom at -10.1% year-on-year in May, and has recovered gradually, turning into positive territory since September 2020. Investment flows globally and to the region are estimated to have fallen further in 2020, following a 7.7% slide in foreign direct investment to Asia in 2019 at $510.5 billion. Nevertheless, recent firm-level activity in mergers and acquisitions in the region shows signs of recovery, as countries start to reopen and ease some pandemic-related restrictions.