Home Technology & Digitalisation How can Asian economies reap the AI economic dividend?

How can Asian economies reap the AI economic dividend?

James Lambert
The US and China lead the global AI race, but AI provides plenty of opportunities for smaller, agile Asian economies
Director of Economic Consulting, Asia at Oxford Economics
The concept of AI with the city of Bangkok in the background

In the race to become the leader in artificial intelligence (AI), China and the US are way ahead of the global competition. What does that mean for everyone else? Will these two giants of the global technology industry soak up the AI economic dividend all for themselves?

The answer is no: there is a huge opportunity for smaller, agile economies in Asia—to borrow from the 17th century scientist Isaac Newton—to stand on the shoulders of those giants in order to reap the benefits of AI application in their own industries.

Of course, it’s right to recognise the supremacy of the US and China. The AI research infrastructure they have established has translated into an unassailable advantage over other, smaller competing nations in Europe, North America and Asia. This is due to a number of factors: the depth of their capital markets; the richness of their skills bases; the dominant position of their cash-rich technology firms; and the data generation capacity of their vast populations.

Applications matter

The economic dividends from AI are not reserved for the researchers. The majority of economic value promised by the AI revolution will be captured through innovation and application of AI technologies in industry. Enterprises and policymakers the world over should recognise that the AI dividend is theirs for the taking.

AI is a fundamentally open science. It is fierce, open competition in academia that drives global research forward. The relatively open borders to data flows and digital services mean the latest technological breakthroughs in one part of the world are quite quickly made available, and adaptable, to businesses everywhere else.

When it comes to AI application in industry, ambitious economies can learn lessons from China’s achievements. China has managed to establish a culture of technology adoption and data sharing in consumer interactions and business practices that give it a distinct edge.

Chinese technology firms are major sources of funding for tech entrepreneurship in the wider Asia continent – which itself leads to valuable knowledge spillovers around the region.

There are three factors behind this. The first is the openness within Chinese businesses to technological trial and error. Chinese enterprises have demonstrated a fundamentally positive and flexible attitude to digital solutions in the past two decades, which serve to accelerate AI integration and innovation. International executive surveys, such as the WEF Future of Jobs report, consistently rank China first in the world—or close to it—for their attitude to AI adoption.

Second, technology uptake is helped by a robust and ambitious policy framework. China’s most recent five-year plan crystalised the national goal of “deep integration” of the internet, big data and AI into various industries. More recently, the Chinese government has begun to tighten regulation on AI development and internet companies, but the repercussions of China’s broadly positive policy footing can be seen in the rate of investment taking place. The publicly funded, $2.1 billion AI-focused technology research park on the outskirts of Beijing is one example. More broadly, China accounts for almost 40% of new industrial robot installations globally, more than three times higher than second placed Japan.

Third, China has established a world-class skills base, not only to develop AI solutions but to integrate them into industry too. The rapid expansion of China’s pool of computer science and engineering graduates in recent years has been a core pillar of economic planning. China ranks third in the world for “AI skills penetration”, according to Stanford University’s AI Index report. That means AI skills are 1.4 times more likely to be required in Chinese occupations than the global average.

These three conditions create a virtuous cycle in China. A rapidly growing industry of Chinese firms is bringing AI products to market and competing to pursue AI solutions that are customised to Chinese scenarios. These solutions are embraced by receptive businesses, willing to quickly test, adopt and integrate AI products into their activities. In doing so, they generate vast amounts of data in return. This allows developers to constantly and nimbly improve their AI products, and leads to innovative spillover applications in different industries.

There is a huge opportunity for smaller, agile economies in Asia to stand on the shoulders of China and the US in order to reap the benefits of AI application in their own industries.

Additionally, the growing domestic market justifies high levels of investment in the tech industry. The openness to AI across the wider economy is indirectly fuelling Chinese innovation in high-tech computer chip manufacturing and software development.

Lessons for Asian economies

Other Asian nations can benefit from China’s recent experience in AI, in pursuing their own virtuous cycle of AI integration. That means cultivating an open attitude towards AI adoption and integration within industry, emphasising technology skills development and retention, as well as being open to foreign investment and technology trade. Chinese technology firms are major sources of funding for tech entrepreneurship in the wider Asia continent – which itself leads to valuable knowledge spillovers around the region.

The AI economic dividend is not a prize being fought over by two international heavyweights. It’s a universal economic opportunity that all Asian nations can pursue and will shape the competitive landscape across the region over the next decade.

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Director of Economic Consulting, Asia at Oxford Economics

James is Oxford Economics’ Director of Economic Impact Consulting for Asia. Before moving to Singapore in 2019, he headed a team in London focused on the economic impact of technology and the digital economy. James previously worked in the UK Government Economic Service, in the Foreign and Commonwealth Office and Cabinet Office, and prior to that at the International Labour Organization.

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