Economic growth and development in Asia: What is the role of digital? Voice of Asia, May 2017

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The use of digital technologies can make businesses more efficient, innovative, nimble, and agile. Asian economies are investing in digital infrastructure to support policy agendas and facilitate the achievement of opportunities for businesses, consumers, and government.

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Asian economies are digitally engaged, and this can be leveraged to support the economic growth and development trajectories of emerging economies.

Digital technologies, done right, can be a powerful enabler for Asian economies and economic growth. Investment in digital infrastructure contributes to productivity in the same way as other forms of infrastructure, and by boosting productivity and opening up new channels of commerce, economic growth can be enhanced beyond what would otherwise be the case. As such, digital tools can support policy agendas and facilitate the achievement of opportunities for businesses, consumers, and government.

How?

For business, digital can help encourage trade in the region by helping businesses, particularly small businesses, access global markets.

For consumers, digital can provide opportunities in terms of connectivity, mobility, and social networks.

For government, digital can drive the development of public infrastructure, particularly around smart cities, which can help them overcome infrastructure development hurdles.

It is acknowledged that there are many other applications of digital technology in the business, consumer, and government spheres. These include the benefits of digital for multinational corporations, analysis of big data, and wide-ranging policy agendas, including privacy and cyber-crime. These are all important issues, but are not the focus of this paper.

Business engagement—supporting SMEs and facilitating trade

Economic takeaways

  • Digital technology has a role to play in helping business, particularly small business, in the Asian region.
  • Benefits include connecting buyers and sellers, increasing competition and choice, and facilitating trust between parties.

The use of Internet and digital technologies makes businesses more efficient, innovative, nimble, and agile. While all organisations, from very small businesses through to multinational corporations, can benefit from digital technologies, this section focuses on small to medium-sized enterprises (SMEs), which make up the vast majority of businesses and are a dynamic part of economies in Asia.

SMEs are more likely to innovate than larger firms, as they tend to have a greater appetite for risk and, hence, are better placed to pioneer and use new technologies.

Technology lowers barriers to entry, offers new business models, and supports SMEs in responding to consumer-driven change. By enabling SMEs, digital technologies can support the region’s economic growth and development.

Trade agendas

While the global economy is moving towards more protectionist policies (coming out of Brexit and US policies), the push for trade liberalisation in Asia continues.

As noted in the Voice of Asia Edition One paper Trade to trump protectionists and boost global growth, the rising Asian economic giants have been shifting their trade policies towards greater openness and global engagement. Their rise will underpin further trade gains through Asia and the world in the decades ahead. Digital has a role in supporting trade in the region.

For 2017, perhaps the most important trade agenda will be the Regional Comprehensive Economic Partnership (RCEP) that is being negotiated for a stronger partnership between ASEAN and the six states with which ASEAN has existing free trade agreements (FTAs): India, China, Australia, South Korea, Japan, and New Zealand.

A central element of the RCEP is the creation of a safe and efficient transaction environment, avoiding cumbersome regulatory barriers that will affect SMEs playing a part in the digital economy. Online payments via platforms like AliPay, Apple Pay, and PayPal ensure that trade can occur across borders.

In addition, an important feature of the trade agreements being negotiated in Asia, including RCEP, is the emphasis on SMEs, which was not usually the case in the previous generation of trade agreements. This signals a clear shift in focus towards supporting SMEs as part of economic growth in the region.

Digital facilitates the breakdown of distance as a barrier and can support these trade agendas in the region. On the other hand, it is important that digital considerations are part of the negotiations to ensure that emerging digital economies do not suffer.

Breaking down barriers

Digital technologies bring together more options for business, increasing competition and choice. This has benefits for consumers and sellers in the form of a broader, more competitive marketplace.

However, basing economic development in the growth of SMEs is not without its challenges. To be effective in the marketplace, a business has to be able to attract consumers by providing its products in a manner that is convenient, attractive from a cost perspective, and instils customer confidence in the quality of the product and ease of transaction.

Digital technologies address each of these elements. It means that businesses, even small ones, are able to engage with customers, both within and across borders.

Trust is a key element. And for SMEs, it can be hard to develop direct relationships.

But, again, the architecture surrounding digital helps solve these challenges.

For example, digital platforms such as Alibaba, Taobao, and eBay allow SMEs to compete where otherwise they would face disadvantages of scale.

Also, e-payment systems can allow people to transact online, knowing their money is safe and being transferred via a third party. This can allow people to transact without cash or a physical meeting.

For many goods traded at distance or for services such as accommodation or transport in the sharing economy, rating systems support the trade by codifying trust. Reviews allow people to know that the seller/buyer will be genuine. Dispute-resolution processes also mean people have a backup if things go wrong. This can make buyers feel safer online and allow for trade across countries.

In this way, digital tools can assist trade even if there is limited regulation. The tools include platforms and client relationship management software.

Benefits of digital in connecting buyers and sellers can mean goods and services can be sold more broadly within a producer’s own, often large, domestic market. A boost in intra-country trade can involve import substitution and potentially reduce costs.

The economy-wide benefits of digitally engaged small businesses

The nature of the potential benefits that can be derived from successfully getting SMEs to embrace digital technologies has been explored in two extensive reports prepared by Deloitte for Google in India and Indonesia.1

Digital engagement benefits for Indian SMEs

In Indonesia, fewer than 1 in 10 small businesses considered themselves as having advanced online capabilities, while 73 percent are offline or have only very basic online capabilities. The potential benefits of digital technology for Indonesian SMEs include:

  1. Up to 80 percent higher growth in revenue
  2. One-and-a-half times the present likelihood of increasing employment
  3. Seventeen times the current potential for innovation
  4. Greater international competitiveness2

Indeed, the study found that boosting SMEs’ digital engagement could increase Indonesia’s annual economic growth by 2 percent, the jump it needs to become a middle-income country by 2025.

In India’s case, the digital agenda recently received significant support, as the government decided to demonetise large-denomination currency in an effort to promote “less cash�? (see the sidebar “Demonetisaton—a push towards further digitisation?�?). Initial anecdotal evidence points towards greater adoption of digital modes of payment by consumers and businesses even after remonetisation is almost complete in the Indian economy.

Demonetisation—a push towards further digitisation?

The Indian government has arguably pulled off one of the most significant reform measures in the recent past by demonetising high-value currency notes. This caused a sudden shortage in currency in circulation, as approximately 86 percent of the currency had to be exchanged. While the move had some negative impact, there were some long-term positives too. A push toward digitisation in the payment stream was one such phenomenon. The decision, in late 2016, to recall banknotes from circulation has essentially been a shot in the arm for fintech and other banking services in the country.

The shortage of currency made it necessary for all segments of society to use electronic money. The result was a massive increase in digital payment mechanisms even after the economy was completely remonetised. In fact, the economy has witnessed a 59 percent increase in transactions through digital channels in March compared to the first month after demonetization was announced. It is important to note that while some of this increase would be an initial reaction, long-term structural factors show that India is ready for a digital revolution and this event will lead to permanent shifts in digital. By 2021, the Indian Internet user base is forecast to reach 555.3 million—44 percent of the population.

Over the longer term, payment gateways, cards, mobile wallets, online retail, payment banks, and e-marketplace industries are likely to see net gains.3

Consumer engagement

Economic takeaways

  • Digital is driving connectivity in Asian countries, particularly via mobile Internet.
  • This ranges from mobiles connecting consumers, to the rise of social media and opportunities presented by digital banking, particularly in countries where there are large unbanked and rural populations.

Individuals around the globe are embracing and driving change, at least where the technology is available and affordable. Digital has the potential to open up a range of opportunities for consumers, from connectivity and mobility to access to social media and digital banking, and this can support economic growth and development.

Digital is driving connectivity in Asian countries, from mobiles connecting consumers in rural areas to improving liveability and convenience in urban areas, particularly as urbanisation throughout Asia results in congestion and environmental challenges.

Asian consumers are either already embracing digital or showing that they will when access improves and costs ease, as evidenced by the strong adoption of mobile.

Mobile and Internet

Mobile penetration rates are rising rapidly in the region, driving widespread Internet adoption and transforming consumer behaviour.

Mobile phone subscriptions in Asia (millions) and per 100 people

In Indonesia, for example, consumers have embraced mobile Internet in a country where difficult terrain has inhibited investment in fixed-line communication. There are over 1.3 mobiles per capita in Indonesia, and the trend has been away from 2G phones towards phones that can access the Internet. A survey by Nielsen in 2011 found that Indonesians who do use the Internet were more likely to access it on their mobile phones than in any of the other major countries in Southeast Asia. There has been strong take-up of social media; in May 2016, Indonesia was ranked 4th in the world in terms of number of Facebook users (78 million), behind India, the United States, and Brazil.4

Internet penetration in India has also grown rapidly over the last few years, with around 432 million users in December 2016, and a potential 750 million additional potential users. Also, 77 percent of urban and 92 percent of rural users consider mobile the primary device for accessing the Internet.5

But price and access remain a hurdle—users are ready but the Internet remains expensive.

Price of mobile broadband services by region, percentage of GNI per capita

In Indonesia, the cost of Internet (measured as 10 mbps, unlimited data, cable/ADSL in 2016) is US$26, the 81st most expensive in the world. It is US$42 in the Philippines, US$37 in Malaysia and US$30 in Singapore.6 When GDP per capita is taken into consideration, the relative costs of Internet access for Asian countries remain relatively high.

For mobile broadband services, the cost of 500 mb of prepaid mobile data as a share of income is the highest in the world, other than in Africa, as shown in Figure 1.3.

Social media

There is high participation in social networks, with India leading the way with the highest number of Facebook users in the world (195 million in May 2016). Indonesia ranks 4th, with 78 million users.7 Facebook has been banned in China, though there are alternative social networks including the Renren network and WeChat.

Leading countries based on number of Facebook users as of May 2016 (millions)

When considering all forms of social media, over 1 billion individuals across Asia were active users of social media in 2016, with 806 million in China alone and a further 130 million in India and 76 million in Indonesia.8 In China, Weibo, the country’s most popular blogging platform, reported that monthly active users grew 33 percent year over year to 313 million in December 2016, and that 90 percent of these were mobile users.9

In Japan, LINE is the most popular mobile messaging app, allowing users to send messages, share picture, movies, and music. LINE has 50 million active monthly users, representing 40 percent of the country’s population.10 As shown in figure 1.5, Japan has the fourth-highest number of Twitter users in the world, and is the only market in which Twitter is more popular than Facebook. Its appeal to the Japanese includes the ability to post anonymously and the greater detail possible in 140 characters relative to English. Japan also holds the world record for the most number of tweets per second (143,199) during a television broadcast of a local movie classic.11

Number of active Twitter users in leading markets as of May 2016 (in millions)

E-commerce is also expanding in China, now the world’s largest e-commerce market. Online shopping is emerging as a strong competitor to shopping in physical stores, with its success underpinned by sophisticated payment systems and efficient logistics networks. Some of the major online marketplaces allow users to create accounts with value on the platform itself, so that payments are not delayed while waiting for bank clearance, allowing goods to be delivered faster.

The Taobao Marketplace (launched in 2003) is the Alibaba Group’s consumer-to-consumer e-commerce platform. The Alibaba Group also operates the Tmall website (launched in 2008), which is its business-to-consumer e-commerce platform. While Taobao Marketplace facilities the transaction of goods between private buyers and sellers, including small businesses, Tmall sellers are typically larger registered businesses. These two platforms had 443 million active buyers as of the end of 2016,12 which roughly represents 60 percent of all Internet users in China.13 Tmall.com and Taobao.com are currently the third- and fifth-most visited websites in China, respectively, and ninth and tenth globally.14

In the year ended 31 March 2016, the Alibaba Group reported annual revenue of around RMB 101.1 billion, with over 80 percent of this coming from its e-commerce operations in China.15 In 2016, the gross merchandise volume (GMV) of the Chinese e-commerce market was RMB 20.2 trillion, with 23.3 percent, or around RMB 4.7 trillion, comprising of online shopping.16 Alibaba’s annual GMV in the year to 31 March 2016 was around RMB 3.1 trillion.17 Over 60 percent of this activity was transacted on the Taobao Marketplace.

These activity and market share numbers suggest that Alibaba’s e-commerce platforms are pervasive in China and have grown rapidly in just over a decade. These numbers also imply that online retailing has had extensive reach in the country. A media report indicates that the number of stores on the Taobao Marketplace with annual sales under $15,000 increased by 60 percent between 2011 and 2013.18 Over the same period, the number of stores with sales between $15,000 and $150,000 increased by 30 percent, and the number of stores with sales over $150,000 increased by 33 percent.19 Furthermore, there is activity outside urban areas as well. In 2014, more than 2 million Taobao Marketplace stores were registered to rural IP addresses in China.20 Digital technologies have lowered the barriers to market access, with examples of this leading to the transformation of remote farming communities.21

Online shopping in China

The success of Taobao Marketplace and Tmall is attributed to the ability of the Alibaba Group to customise its features to meet the needs of the local market. For example, the AliWangWang instant chat program allows for pre-sales consultation and after-sales service. The introduction of the Alipay escrow-based online payment platform in 2004 provided consumers the additional security of only paying for goods upon receipt and inspection. At the same time, the availability of Alipay meant that many Chinese consumers who did not have credit cards were able to purchase goods online. In 2014, Alipay surpassed Paypal to become the world’s largest online payments platform (Bobsguide).

In addition to the development of this digital infrastructure, investment in logistics support services has also been critical. The online shopping experience is ultimately dependent on the goods delivery experience. The Cainiao Network, a partly owned affiliate of Alibaba Group, runs a logistics platform and central data-communications network that helps coordinate deliveries with more than 3,000 independent logistics companies located across China and abroad (Alibaba Group). As of 2015, Cainiao was able to offer next-day delivery of goods ordered from Alibaba’s online marketplaces to 34 cities, and had aimed to expand this to 50 cities by the end of 2015 (Alizila). Again, service coverage goes beyond the cities. For example, Cainiao served more than 1,200 villages across a number of provinces at that time, and around 20 percent of the parcels delivered to rural areas were delivered on the same day or the next day (Alizila).

Other factors driving the success of online shopping in China include regular discounts and sales “events,�? such as Singles’ Day, and extensive marketing via social media.22

Online shopping in China

As these trends converge and combine, the nature of retail, distribution, marketing, and consumer engagement is changing. With over half of the world’s population, 58 percent of its mobile subscriptions, and 53 percent of its Internet users, Asia will play an increasing role in the use of digital platforms to engage customers.23

Digital banking

Consumers also stand to benefit from gains in digital banking. In developed Asian markets, Internet banking is now near universal and smartphone banking has grown more than threefold since 2011. In emerging Asian markets, about a quarter of consumers are using computers and smartphones for their banking.

This is important for the traditional banking system, as more than 80 percent of consumers in developed Asian markets are willing to shift some of their holdings to a bank that offers a compelling digital proposition. In emerging Asia, more than 50 percent of consumers indicate such willingness.24

Digital banking penetration, 2014]

Digital banking includes smartphone and Internet banking. Smartphone banking is making particular inroads in developing Asia, with penetration increasing over fivefold in the three years from 2011 to 2014, going from 5 percent of the population using smartphone banking in 2011 to 26 percent in 2014.25

Mobile banking can also improve financial inclusion in the region. For example, in Papua New Guinea, mobile network operators have been exempted under the Banks and Financial Institutions Act 2000 to conduct mobile phone money transfers.26 In some countries, electronic top-ups allow individuals to send or receive airtime, which can act as transfers similar to mobile money. Further, mobile banking promotes financial inclusion by providing access even in regions where the number of physical branches is limited.

Financial inclusion through digital banking has been taken very seriously in India, where a large section of the population still relies on informal sources of financing. The government started to push for banking via digital modes in 2014 through the popular JAM (Jan Dhan, Aadhar, and mobile) program. The idea is simple: JAM aims to connect a citizen’s unique identity number (Aadhar number) with the bank account and mobile number. Other examples in India include the use of Unstructured Supplementary Service Data (USSD), which allows for mobile banking transactions using basic feature phones without the need for mobile Internet connectivity; Unified Payments Interface, which powers multiple bank accounts in a single mobile app; and micro ATMs, where business correspondents (BCs)—who might be local shop owners—act as “micro ATMs�? to conduct instant transactions.

Share of population (15+) with a bank account at a financial institution

Mobile payments are also booming; of the 900 million WeChat users in China, 800 million are using its mobile payment services. Further, AliPay’s Quick Response (QR) codes account for about half of the US$ 5.5 trillion mobile payments made each year in China.27 Mobile payments are increasingly being used in favour of cash for transactions ranging from grocery shopping to paying for taxis and rental leases.

There is significant potential for such technologies to have an impact on consumers and improve convenience, particularly as much of Asia’s populations remain unbanked (see figure 1.7).

Government engagement

Economic takeaways

  • In Asia, governments have been taking a greater lead on digital relative to the rest of the world, and this can help countries leap over development hurdles.
  • Digital technologies support economic growth and development, and government can play a role in making the most of these technologies to enable the economic advancement of the region.

Digital technologies can help countries leap over development hurdles, increase productivity, and boost economic growth—technological advances and falling prices mean that even countries without extensive telco infrastructure are able to take advantage of digital. Innovation is increasingly based on digital technologies and business models that effectively utilise ICT. As innovation is a key driver of economic and social gains, encouraging businesses and individuals to fully embrace digital technologies should be a priority for governments. Indeed, governments have a strong incentive to provide the private sector with policy incentives to encourage this investment.

In Asia, governments have been taking a greater lead on digital relative to the rest of the world.

  • Singapore is ranked first globally on the Networking Readiness Index (NRI), according to the World Economic Forum. This includes ranking No. 1 for government usage on the NRI.
  • The UN 2016 e-Government Survey ranked Singapore and the Republic of Korea among the top five world leaders on the Online Service Index (OSI). The Republic of Korea is in the process of implementing a new vision for its government operations, “Government 3.0,�? with a focus on sharing, openness, communication and collaboration. Citizens can see all services provided by the Korean government on one portal.28
  • The UN 2014 e-Government Survey ranked the Republic of Korea and Singapore among the world’s top three e-government leaders, followed by Japan at number six.29

As noted by the Deloitte indices above, Asian governments have a high level of digital engagement compared with other countries with similar GDP per capita. There are a number of roles and opportunities for government. It could act as a facilitator, for instance, by providing policy incentives to support digital infrastructure development, or directly invest in digital and increase the use of digital in its own operations—by providing government services online, for example. This chapter explores some of these aspects.

Role of government

Government can play a role in a number of areas to drive digital opportunities in Asia. It is acknowledged that there are many policy agendas associated with digital, ranging from privacy, cyber-crime, and censorship to robotics. However, in this chapter, we focus on the role for government as shown in Figure 1.8.

Role of government

The UN 2016 e-Government Survey ranked the Republic of Korea and Singapore among the world’s top four e-government leaders, followed by Japan at number 11. Asia’s regional average is above the global e-Government Development Index average.30

Coordinating and financing digital infrastructure provision

Governments play a crucial role in improving access to high-quality, reliable, and affordable Internet for all residents.

This has had a positive economic impact. Rollout of broadband in China (1999–2007), with an increase in Internet domains and users per capita, had a positive impact on firms’ manufacturing exports in ICT-intensive sectors. It raised the number of firms that export, the firms’ share of exports in total sales, and the real value of firms’ exports. The higher share of Internet domains and users also increased firms’ real output and labour productivity.31

Research presented in the World Bank’s 2009 report, Information and Communication for Development, found a GDP boost of 1.38 percentage points for every 10 percentage-point increase in broadband penetration.32

Whole-of-government service delivery

The spread of digital has also facilitated the trend towards the provision of integrated public services online. This makes it easier for people to interact with the public administration to access information and essential services (whole-of-government service delivery).

India has started the Digital India initiative wherein a whole range of services are to be digitised to increase their reach and improve transparency in tendering. These initiatives have also taken place in the fiscal space, with India establishing the GST System Project. This initiative aims to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the centre and states. This is essentially the backbone upon which India’s biggest tax reform in recent years is built.

India has also established the Bhoomi ICT-based land registry and management system in Karnataka. This has involved the integration of the registration department with land-acquiring bodies and banks and other financial institutions, resulting in streamlined and simplified transactions and record administration.

The Japanese economy is unique in its own right as it has one of the most advanced Internet infrastructures in the world. The economy faces strong demographic pressure and one of the ways of tackling it is increasing productivity. Productivity can be increased by retooling the existing population, and digital innovations possibly provide the best way forward. The government, for its part, has a number of initiatives for enhancing its strengths in the ICT sector. Japan also has a number of e-government initiatives that are focused on transcending agency boundaries to enable instant use and sharing of information in ways that unify national and local government.

The smart Japan ICT strategy unveiled in 2014 had two major elements, the first being ICT growth strategy and the second, an initiative on the intensification of international competitiveness and global outreach in the field of ICT. The vision was to create innovation by connecting various things and services via ICT.

Singapore has REACH (reaching everyone for active citizenry @home), a government agency designed to engage citizens on policy issues. Since its inception in 1985, it has been modified to become a designated e-engagement platform to engage citizens via electronic means on key policy initiatives. This is helping it achieve the goals of increasing the participation of citizens in government processes.33

The increased connectivity between government institutions also has the potential to encourage different agencies to work more closely together, generating new insights that help improve existing decision-making processes. Singapore has the G-Cloud to securely share information between government agencies.

Open government data

Many governments across Asia are making their data available online in an effort to make public institutions more inclusive and accountable. This can also potentially lead to improved service delivery as data is understood in new ways.

A number of Chinese cities including Beijing, Shanghai, and Chongqing have created open government data websites to allow citizens to access government data freely. Datasets include topics such as tourism, education, transportation, land zoning, and medical treatment. These websites also encourage the development of apps based on the available data and provide a platform for these apps to be shared. Japan has promoted the Open Data Initiative, in which the government widely discloses public data and allows its secondary use.34

Data analytics also provides governments with the opportunity to focus on prevention rather than reaction. This is particularly evident in the area of disaster management:

The Republic of Korea has established the National Disaster Management Information System to provide detailed and timely data on impending disasters at each stage of disaster management (prevention, preparation, response, and recovery). Disaster status information can be disseminated between local governments in one minute, down from the 35 minutes that were required prior to the establishment of the system. 3,800 CCTVs are used in an open system for disaster management. Additionally, the public can receive SMS messages with updates on disaster information.35

Japan has established a Nowcast earthquake information system to warn of imminent disasters. Information on factors such as the timing of seismic wave arrivals and the estimated intensities of incoming seismic waves can also be obtained.36

Ensuring that digital technologies deliver long-term and broad based gains

Governments have a key role to play in ensuring that the social and economic benefits of digital technology are inclusive. The success and sustainability of the digital economy will depend on the ability of governments to develop agile frameworks that allow societies to anticipate and shape the impact of new technologies.37

According to the World Economic Forum, “Governments can play a supportive role in creating a level playing field by ensuring a business environment that allows firms to quickly react to new developments; this includes speedy procedures for opening a new business and bringing products to market, providing a supportive innovation ecosystem, ensuring that barriers to entry stay low by enforcing a competition regime that counteracts potential network lock-in, and promoting and facilitating ICT adoption by building out infrastructure and having a clear ICT strategy.�?38

Singapore ranks first in the 2016 Global Information Technology report’s measure of social impact. Gains from ICT adoption are widely shared, with digital technologies being used to provide basic access to government services and ensuring that schools are connected.39

Smart cities

Smart cities are urban spaces that use innovative digital technologies to support their operations. Digital tools are built into the infrastructure of the city itself to make it more efficient, innovative, and vibrant. This is one area in which digital tools can help a government and city leap over development hurdles in terms of infrastructure, towards more efficient city operations.

Smart cities may include congestion- and crime-management systems: Singapore has a network of sensors, cameras, and GPS devices embedded in taxis to track traffic and predict future congestion to warn drivers to take alternative routes.

In India’s ninth most populous city, Pune, the state government introduced Safe City advanced electronic surveillance and the Physical Security Information Management (PSIM) project to combat crime, urban policing issues, and terror threats. This involved installing more than 1,200 cameras as well as a state-of-the-art command and control centre (C3). In almost all major states in the country, police departments have developed apps to support women’s safety.40

In Japan, smart city initiatives have a particular focus on ensuring the functions of electricity supply networks and emission reduction. As part of these initiatives, thousands of residences have been equipped with home energy-management systems; electric vehicles and renewable energy have been introduced across much of Yokohama. The size of the smart city-related market is expected to be 3.3 trillion yen by 2020.41

Another benefit of smart cities is that they support regional connectivity; for example, the government of Singapore has promoted data centres in an effort to attract private entities. In addition, Singapore’s Personal Data Protection Commission (PDPC) has actively engaged industry in the development of good practices in data management, including those related to the transfer of data. This has contributed to Singapore becoming a global leader in digital transfer, which has helped underpin the country’s success as a financial hub.

In the case of smart cities, it is essential that the government lead the charge, as the initiatives involve managing significant amounts of sensitive and personally identifiable citizen data. The data must be managed collaboratively and also secured against potential cyber-attacks. A country’s government is often best-placed to do so.

According to an Economist survey, 33 percent of respondents who claim that their city has better governance were familiar with the concept of a “smart�? city and what this constitutes, compared with 16 percent of those with weaker governance.42

Many governments in the region have resorted to planning for smart cities to further the goal of digitisation while also alleviating concerns such as overcrowding, environmental issues, and increased demand for infrastructure and energy. The Japanese government has supported these initiatives for some time by giving subsidies and also collaborating across the globe for the development of Japanese businesses. Singapore’s government established the Smart Nation Vision in 2014 as an initiative to create their smart city. Today, nearly 98 percent of public services are available online, among countless other initiatives (see infographic at the end of the “Role for government�? section). The Indian government also has its own smart city mission, wherein 100 cities have been selected for development, with the idea that cities should be able to plan their own growth.

What’s next?

Rapid advances in technologies and digital platforms are certainly changing the way we live and operate. The advent of the Internet and the prevalence of smartphones have caused us to rethink how we, as individuals, consume; digital technologies are lowering barriers to entry and presenting new models for businesses, especially small to medium-sized enterprises; and digital is driving the development of public infrastructure, which can help leapfrog traditional development hurdles, increase productivity, and support economic growth.

Technological advances on the horizon, such as robotics and artificial intelligence, are expected to change the way we live and work. Countries that are prepared and digitally engaged will be better placed to ride this next wave.

The government has a key role to play in helping economies and societies take a proactive position on digital, both through its own investment and by providing policy incentives to encourage private-sector investment. How this translates to a country’s economic growth, financial inclusion, and social cohesion depends on a number of other factors, including the country’s approach to innovation.

As countries become more digitally savvy and economies develop, the role of businesses and consumers come to the fore, while governments take more of a back seat.

Asian economies are leading the race in terms of digital engagement. However, each country is running its own race and there are clear opportunities for countries to accelerate their growth and development by learning from each other’s experiences.