Robust growth, high digital penetration
The role of AI governance will become even more significant as Asia’s digital economy continues to grow. While a tech slowdown has dogged the U.S.—with more than 91,000 workers laid off in 2022—Asia seems unfazed. According to a Google, Temasek, and Bain & Company report in October 2022, Southeast Asia’s leading digital economies likely amounted to S$ 200 billion (US$ 149 billion) in 2022, marking a 20% increase from 2021. Far from this being a short-term growth spurt, the region’s digital economy is forecast to reach S$ 300 billion (US$ 224 billion) by 2025.
Asia’s ability to defy a digital downturn that has plagued others lies in “big shifts both on the demand side and the supply side,” says Simon Chesterman, senior director of AI governance at AI Singapore. On the demand side, a combination of high internet usage, high penetration of digital devices, such as smartphones, and population-level comfort with technological innovation has seen many Asian individuals and businesses embrace the digital economy at speed, explains Chesterman.
As of February 2023, 93% of companies in Singapore had adopted some form of digital technology, marking an increase of 19 percentage points from 2018, according to IMDA. This explains a key point of differentiation with some western economies, says Chesterman. “When you’ve got fast-developing economies, people are more willing to embrace change because they can see the benefit,” he says. “Whereas the more comfortable you are, the more resistant you may be to change.”
This willingness to embrace digital technologies has only increased with the global pandemic. Three quarters (76%) of the population in Southeast Asia viewed technology as an enabler rather than an impediment during the peak of covid-19, according to an August 2022 report by VMware—surpassing the global average by four percentage points—and 77% say digitalization improves both their work and lifestyles.
Compounding strong demand in the region has been a steady supply of innovation from the region’s vast network of enterprises, underpinned by direct support from government. Increased public funding in Hong Kong, for example, resulted in the creation of 3,755 start-ups in 2021, a 12% boost over the previous year, marking a record high for the Special Administrative Region. The Singapore government has committed S$ 25 billion (US$ 18 billion) to research, innovation, and enterprise from 2021 to 2025, and growing the digital economy was identified as one of the key pillars of that initiative.
Building a digital ecosystem
Meanwhile, Singapore’s IMDA, which bills itself as the “architect” of the island’s digital future, has introduced a series of initiatives to entrench the city-state as a global and regional technology hub. It has made strategic investments in both hard and soft infrastructure to accelerate digital economic growth in the country. Singapore has achieved nationwide standalone 5G coverage (over 95%) three years ahead of schedule, and IMDA has rolled out digital utilities such as TradeTrust, which streamlines the exchange of electronic documents.
IMDA also plays a central role in creating a strong digital talent pipeline and a progressive regulatory framework to foster innovation. By enhancing the credibility and trustworthiness of digital products and services, it aims to spur growth in the digital economy. In June 2022, for instance, it launched a US$ 36.3 million Digital Trust Centre as part of the country’s R&D efforts focused on enhancing the legitimacy of digital systems.
A fine balance
Government intervention often takes a two-pronged approach, Chesterman explains: “Governments should regulate to avoid market failures, because it’s inefficient to expect individual consumers to negotiate this themselves. The second reason governments regulate, though, is, even if it’s not geared toward efficiency, we have certain values and principles that we hold to.”