As the devastating effects of the coronavirus disease (COVID-19) pandemic continue to disrupt the global economy, the important role that digital technology will play during recovery grows by the day.
With lockdowns and other mobility restrictions limiting face-to-face interactions, digital technology and new apps accelerated a shift to online for many of our daily activities. According to a Google-Temasek eConomy SEA 2020 report, one-third of all digital consumers in Southeast Asia moved to online platforms due to COVID-19, with education, grocery shopping, and lending attracting most of these new digital consumers.
The adoption and use of digital technologies are bringing huge benefits to society. For markets, ordering is bundled with payment services, logistics and delivery, as well as ratings with analytics, generating continuous innovations.
For businesses, access to information and algorithms has created new opportunities for micro, small, and medium-sized enterprises (MSMEs) and individuals. They can now bypass intermediaries, reduce trade and market barriers, leverage under-utilized assets, and gain economies of scale—not least by expanding into global markets.
As for consumers, search engines, smartphones, and apps have brought more convenience and efficiency, expanding product choices, creating on-demand services, and allowing for greater customization.
Asia sits right at the center of this digital revolution. In 2019, the region generated $1.8 trillion in business-to-consumer (B2C) digital platform revenues, or about half the global total of $3.8 trillion. The People’s Republic of China generates the largest amount at $1.2 trillion—or about a third of the total. Asia’s digital revenue growth (16.1 percent in 2019) exceeds that of the United States (9.5 percent) and the euro area (8.4 percent). The region also accounts for the largest share of global digital consumers—of the 3.2 billion global e-commerce users, 60 percent come from Asia. And there remains greater room for growth in per capita spending and digital penetration, as Asia still trails the more advanced economies in these indicators.
A recent Asian Development Bank (ADB) report estimates that accelerating digital transformation could substantially boost global output, employment, and trade. The report says that a 20 percent increase in the size of the global digital sector would increase global output by an average of $4.3 trillion a year from 2021 to 2025. About 40 percent of this growth would benefit Asia and the Pacific, where the economic dividend would reach more than $1.7 trillion a year during the period. About 65 million new jobs would be created annually across the region. Regional trade would also increase by $1 trillion yearly through 2025.
As the region shifts from crisis management to economic recovery, digital technology can help open economies safely and ensure the recovery is inclusive and sustainable. For this to happen, connectivity needs to improve in many parts of Asia and the Pacific. While technology applications continue to spread, many are still left behind. Policy support and reforms are needed to increase access to digital infrastructure; promote fair competition and cut red tape; enhance labor security and social protection; and strengthen data security and cybersecurity measures.
As these reforms move forward, here are some ways digital technology is already helping support the region’s recovery.
Digital technology can enhance the delivery of essential public services. One example is giving the wider public better and safer health services and access to education. Digital platforms can now deliver health services to remote communities. Drones deliver medical supplies and medicines. Artificial intelligence (AI) is used to recognize patterns in images or scans, increasing our ability to customize and speed up responses to health emergencies. The pandemic also changed how and where we learn, and learn new or more relevant skills. Now, students of all ages are increasingly using smart devices to study and expand their knowledge.
Digital technology can also facilitate the better design, targeting, and delivery of social assistance programs. In the Philippines, for example, Bayan Bayanihan, an emergency food program, used poverty maps made by innovative data analysis to identify vulnerable populations. More than a billion people can tap digital platforms across Asia and the Pacific, which give these technologies the power to help end poverty and promote social inclusion and equity.
On a wider scale, digital technology can help open and reconnect markets safely. However, this can only happen if underlying issues such as access to technology and digital connectivity have been addressed. Digital technology supports national ID or social media systems to reliably identify, record, and deliver vaccines. Globally, governments increasingly use digital devices and apps to track infections, provide contact-tracing, and strengthen health and disease surveillance. As economies reopen, technology and real time data can be used to track progress and “learn” to better manage the risks of reinfection and potential localized flare-ups.
Improved logistics and delivery based on paperless and digital systems can ease trade flows, ensuring that critical supplies get where they are needed. Blockchain technology can help exploit the benefits of strong supply chains by streamlining border administration. And critically, developing systems and regulations that upgrade financial services and broaden digital payment options can deliver safe and secure payment and financial transactions that support market liquidity and reduce financial risk.
Digital technology can be an impetus for developing and strengthening new drivers of inclusive economic growth. As policies allow for the greater adoption and use of digital technology, MSMEs can boost productive scale, efficiency, and expand markets. Supplemented by technical support, toolkits, and free advisory services, they can now join a range of new online business practices.
Human capital investment and developing digital skills is a lifelong process. Hence, the quality and relevance of digital education and training needs to be boosted. In the workplace, AI can support career coaching, contributing to better job matching. Increasing access to smart devices and online training platforms will help re-educate, re-skill, and prepare workers for the future.
James P. Villafuerte is a senior economist at the Economic Research and Regional Cooperation Department, Asian Development Bank.
Thomas E. Abell is the chief of Digital Technology for Development at the Sustainable Development and Climate Change Department, Asian Development Bank.