The innovation imperative: How Asia can leverage exponential technologies to improve lives and promote growth

Robots will take over our jobs, disrupt our industries and erode our competitiveness.
 
Such were commonly expressed fears about advances in automation, artificial intelligence, and 3D printing – key representations of exponential technologies – during the inaugural Global Innovation Forum that took place in Singapore.
 
While robots continue to bear the brunt of public skepticism, participants at the Forum also expressed optimism about the emergence of innovations that could dramatically transform the quality of life for the poorest people in society, particularly in Asia, the region that was acknowledged by many participants as leading the pace of innovation around the globe.

Consider the impact of technology on public services. Remote diagnostics and surgical procedures led by artificial intelligence can bridge the vast urban-rural divide in the delivery of quality healthcare in large countries such as China and Mongolia. Crowdsourcing apps and similar disruptive technologies can be a window to the world for millions in Asia: they can broaden financial market access for entrepreneurs, boost access to education platforms, and modernize agricultural systems. The role of government in delivering public services could vastly improve, and potentially lead to greater pressure for governments to keep up with higher expectations.

Asia is also well positioned to capture the benefits of the trend of exponential technologies. Asia already has 1.4 billion internet users, which is nearly 50% of the world’s total number of netizens. According to a McKinsey report, China has twice as many internet users as the United States, with India and ASEAN close behind. Alibaba’s Alipay is now the world’s largest mobile payments service in the world. In 2017, China recorded 502 million online payment users and processed nearly three billion transactions, nearly triple that of Paypal and Square combined. Chinese social network WeChat added 300 million users in just two years, which is more than the US adult population.

The GDP impact can be significant. It is estimated that they could lead to 30% GDP growth in ASEAN, 20 to 30% GDP growth in India and up to 22% GDP growth in China by 2025, according to estimates by McKinsey Global Institute.

Yet, the aggregate impact of these technologies is getting increasingly hazy – with some alarm over downside risks and gains being unevenly distributed. And quite simply, jobs are likely to be lost along the way.

In addition, the impact of exponential technologies will not be uniform across the region or the world, given disparities in factors such as education and infrastructure. In 2017, Japan and South Korea have more than 90% internet penetration, while it reached only 20% in Cambodia and Lao PDR and much of the rural population are not connected at all. These disparities carry significant consequences for efforts to address inequality within and across countries in the region.

These are some of the reasons the Trade and Competitiveness Global Practice thought it was timely to hold the Global Innovation Forum. To address the myriad opportunities and challenges and prepare for many others to come, the T&C GP felt that it was crucial to initiate an informed discussion on the implications of exponential technologies on economic growth and on policies that promote innovation, infrastructure, and education. We are developing programs and conducting research on ways to help our clients leverage on the potential of exponential technologies to reduce poverty and promote inclusive growth.

Among our latest research, our report Trouble in the Making? The Future of Manufacturing-Led Development has important implications for regions such as Asia that are keen to maintain, or perhaps even seek to improve, their competitiveness in manufacturing by harnessing innovation.  The report examines how advanced technology and shifting globalization patterns are affecting opportunities for export-led manufacturing.  
 
It indicates that, for developing countries, strengthening three key conditions – competitiveness, capabilities and connectedness – will become increasingly important.

• First, to boost competitiveness, countries will need to reform their public institutions to be better equipped to consider new business models; embrace new technologies; and to devise new ways for manufactured goods to deliver services.
• Second, to build capabilities, governments will have to support workers to adopt new sets of skills, strengthen firms’ abilities to absorb new technologies, and provide new infrastructure.
• Finally, promoting connectedness through openness to trade services (over and above goods) will be critical. Trade in services often faces greater restrictions – even as services represent a growing source of value and where many opportunities lie, and the time to reform is now.

Governments and businesses in emerging markets like Asia can make the most out of this nascent industrial revolution, not only as adopters, but also as innovators and investors. To do so, leaders in the public and private sectors need to continue adapting to rapid changes, as well as learning from others from within and outside the region, including through platforms such as the Global Innovation Forum.

Jointly written with the Global Innovation Forum Organizing Team.