Role of digital economy in shaping growth for emerging markets post COVID

Authors: Vedika Bhagat, Tajuddin Bin Muhammad Zahid

Region Head: Hteik Tin Min Paing

Editor: Praharsh Mehrotra

Illustration by Michelle Faith Lee

Introduction

The economic blow that came in the form of the novel coronavirus has swept away world economies leading to never seen before crises. The outbreak has triggered extreme turbulence in financial markets around the world. One way to achieve stability in the post COVID-era would be by embracing digitalization. People from any part of the world can render their services seamlessly, and the workforce is becoming more mobile. Be it healthcare, manufacturing, or logistics, companies are embracing themselves with digital devices. All employees have instant access to any information they need, from anywhere in the world, at any time of the day. Virtual collaborations from people around the globe has become customary. A new and different kind of economic growth is thus shaping the present and the future of global economic activities. To keep up with the competition posed by other developed countries, it is mandatory for south-east Asian countries like Vietnam or Thailand to accept the role of digital economy in shaping growth for emerging markets. The pandemic has forced businesses to recognise the urgency with which they need to upgrade parts of their workflows.

What does digitalised economy mean?

Digitalisation, to put it simply, refers to the use of technologies or software to automate complicated business processes. Digitalisation, at its most dynamic, could mean the development of an interconnected smart manufacturing environment through the wired, smart networks of sensors and automated machines. This includes the Internet of Things (IoT) connected technology that enables smart cities, smart agriculture, and smart connected industries for the future.

Why is it important?

The trend of digitalisation is irreversible, a paradigm shift has occurred, now all that can be done is realize the potential digitalization can offer to industries.

Digitisation will promote job growth, increase transparency and service quality, and enhance countries' economic and social integration (World Bank,2018). The digitisation of the Feinmetall factory in Singapore resulted in a recorded 10 % rise in productivity in one year after automation of their production line, this led to an increase in the salaries of existing employees by 4-8% (Energy Watch,2020).

A crucial factor in allowing Southeast Asian enterprises to expand has

been access to a broader variety of clients through the internet. In 2018, the region's e-commerce industry was worth US$ 150 billion and is projected to triple to US$ 390 billion in 2025, helped in part by the fact that 90% of Southeast Asians link to the internet through smartphones. This constant internet connection is likely to enable consumers and businesses to be constantly linked. This continuous internet connectivity possibly enables clients and organizations to be continuously linked. Grab introduced a new service on their app in Indonesia to enable market vendors to offer products to consumers. Grab uses different variables, such as position and price, and helps consumers to locate vendors and vice versa. This resulted in a rise in revenue, also amid the coronavirus pandemic, for vendors who signed up (ASEAN Post,2019).

In addition to this it also leads to: generating more jobs, enhancing the availability of welfare and thereby openness and accountability, fostering the economic and social integration of refugees, enhancing their capacity to return home and integrate into their countries and regions' economic and social structure, and eventually boosting participation in lagging areas and among disadvantaged populations (World Bank,2018).

Problems

Governments need to combat the idea that, in some cases

created, employment would decrease for digitisation to take place.

These can be completed using sponsored or free upskilling courses such as in Singapore by future skills or through MDEC in Malaysia. This will lead to stronger adoption of digitisation by the public. In their digitalization activities, companies, especially small and medium sized enterprises ( SMEs), need financial and policy support because they lack funds to buy skills and resources to improve them. E-commerce is the key for growing these businesses (Leong,2020).

How can it be done?

On the supranational level, on 12 November 2018 ASEAN member nations acknowledged the importance of e-commerce and signed the ASEAN Agreement on Electronic-Commerce10. During that economic council meeting, ASEAN leaders discussed ways to boost e-commerce cooperation in a way that helps their citizens, boosts the regional economy and strengthens their cybersecurity. In addition to this, Vietnam has plans to restructure its infrastructure with a goal to make use of e-government facilities, smart traffic grids and smart utilities to optimize sustainable life links these communities. This encompasses everything from strategic waste management to optimizing traffic flow by intelligent tracking and real time alerts through less congested roads to channel traffic (Energy Watch,2019).

Furthermore, Malaysia is investing in high quality internet connectivity and a cumulative loan of 300 million ringgit (US$ 68 million) has been prepared for small and medium sized companies aiming to digitize or simplify their industries. In addition to equipment and machinery, the funds will be used to help buy hardware, software, and other IT solutions and services (ASEAN Briefing,2020).

Conclusion

The use of technology to improve urban life will become an increasingly pressing goal as urban populations in the regions continue to rise. Digitalisation has a vital role to play to help shape the global and sluggish economies Post-COVID. The dependence of not only ASEAN countries but also other countries on E-commerce further supports this claim.

References

1.Energy Watch: Smart Cities and Urban Growth in Southeast Asia. (2019, October 15). Retrieved December 14, 2020, from https://www.energywatch.com.my/blog/2019/10/15/smart-cities-and-urban-growth-in-southeast-asia/

2.Energy Watch: The Future Digitalisation of Southeast Asia's Economy. (2020, August 07). Retrieved December 14, 2020, from https://www.energywatch.com.my/blog/2020/08/07/digitalisation-of-southeast-asias-future-economy/.

3.Malaysia Issues Stimulus Package to Combat COVID-19 Impact. (2020, April 03). Retrieved December 14, 2020, from https://www.aseanbriefing.com/news/malaysia-issues-stimulus-package-combat-covid-19-impact/

4.On Davos 2019: Is Digitalization in Southeast Asia Really Inclusive? (2020, May 27). Retrieved December 14, 2020, from https://janio.asia/articles/on-davos-2019-is-digitalization-in-southeast-asia-really-inclusive/

5.The ASEAN Post: E-commerce spending expected to triple in ASEAN. (2019, October 22). Retrieved December 14, 2020, from https://theaseanpost.com/article/e-commerce-spending-expected-triple-asean

6.World Bank: Digital Transformation for Inclusive Growth and Jobs. (2018). Retrieved from http://documents1.worldbank.org/curated/en/246561561495359944/pdf/Mashreq-2-0-Digital-Transformation-for-Inclusive-Growth-and-Jobs.pdf