Digital Transformation to Pull Enterprises out of Economic Conundrum ?
The global economy has now entered its sixth year of stagnation and the growth outlook for 2017 is not looking any better. As the region navigates its way through weak global economic growth, Bart van Ark, Chief Economist of The Conference Board provided a forecast for the year ahead based on its Global Economic Outlook 2017 report, entitled “Trends, Shocks, and Change: Forces Behind Slow Global Growth and the Future Growth Potential for Asia Economies”.
The briefing session was co-hosted by the Asian Institute of Finance (AIF) and The Conference Board in Kuala Lumpur. Asian Institute of Finance (AIF) is a think tank jointly established by Bank Negara Malaysia and the Securities Commission Malaysia, to enhance human capital development and talent management across the financial services industry in Asia. The Conference Board is a global, independent business membership and research association working in the public interest, that was founded in 1916.
Bart van Ark presented the following forecasts and observations:
- The developing Asian economies (including Indonesia, Malaysia, Pakistan, Philippines, Thailand and Vietnam) will grow at 4.9 percent from 2017–2021, before easing to 4.4 percent from 2022–2026
- Although the growth in the ASEAN region picked up moderately in 2016, Malaysia’s economy continued to suffer from rapid currency depreciation and weakening business confidence
- Malaysia’s debt level had risen substantially in the last five years, which could lead to market volatility when the credit cycle tightens, growth slows and interest rates rise
- Productivity growth will likely accelerate in Malaysia over the next decade, partially due to catch-up growth and improved efficiency in investment as Malaysia integrates further into the global supply chain
Going Digital to Lift the Doom and Gloom?
According to The Conference Board’s estimates, the qualitative growth factors in emerging Asia, including increased labour force skills, investment in ICT capital and total factor productivity growth are expected to grow at 1 percent between 2017 and 2021 and by 0.9 percent in the following five years.
Despite that projection, the reality today is that the opportunities for capturing growth from innovation, especially digital transformation, vary greatly across economies. And almost nowhere have the growth and productivity effects of the New Digital Economy (mobile, broadband and cloud) been fully realized as yet.
Opportunities and challenges depend on companies’ abilities to access digital services, create digital skills, strengthen collaboration within the organisation, partner with incumbents and disruptors and turn disruptive threats into growth opportunities through agility and resilience.
On the one hand, it may not be easy for companies in emerging markets to leverage digital transformation which requires access to a wide range of knowledge-based assets (including design capabilities, business process changes and new skillsets for the labour force).
On the other hand, since many businesses in emerging economies are relatively young, they do not have capital tied up in legacy technologies which must be abandoned. Hence they may be able to leapfrog past older technologies, giving them an advantage in the transition to the New Digital Economy. One example of leapfrogging is the rapid adoption of e-commerce by China’s large and growing consumer market, facilitated by cashless payments.
In Southeast Asia, the young population and further integration of economies will continue to drive demand for e-commerce systems. Expanding e-commerce requires enhanced logistics and delivery systems, online security, legal and regulatory protections – all of which will boost investment and economic growth.
The Conference Board believes that in due time, these economies will ultimately reap the benefit of investments in ICT capital and ICT services – qualitative and wise factors in reversing the gloomy economic tide.