One of the defining economic phenomena in Asia in the past two decades has been its rapid digitalisation, and the growing importance of its digital economy. However, progress across the region has been uneven, given various infrastructural gaps, says Blair Chalmers, Singapore-based managing director at Marsh McLennan Advantage. He also speaks about some key developments we can expect to see in the region’s digital economy this year, and drivers of change.
Unravel: What is the importance of digital infrastructure in developing Asia?
Blair Chalmers: For rapidly growing, labour-intensive economies in developing Asia, adopting digital solutions can make both capital and labour more productive, remove communication barriers and catalyse innovation. Such changes enable both businesses and governments to find new ways to provide reliable, data-driven services to the public, and achieve sustained economic growth. Crucially, when businesses and governments harness digital solutions that improve both the quality and the reach of their services, developing economies can close longstanding gaps in service-delivery in sectors like healthcare, education and energy. This enables them to raise aggregate standards of living and promote social resilience by ensuring that businesses and governments can provide better services to previously underserved populations. As such, investments in digital infrastructure offer a model for both sustained and inclusive economic growth that serves as a resilient foundation for individuals and businesses to thrive, and as a key driver of change in Asia’s growth story.
Unravel: Across the region, what are some key developments you expect to see in 2023?
Mr Chalmers: Let’s approach this question by looking at key assets in digital ecosystems.
Large investments in data centres have been announced in the region; Google is investing $730 million in a new data centre in Japan, Japan’s Nippon Telegraph and Telephone (NTT) is investing $500 million annually to double its data centre presence in India, Amazon is building 10 new local zone data centres in Asia-Pacific, and the Abu Dhabi Investment Authority recently committed $2 billion to establish a data centre investment programme with Singapore-based SC Capital Partners. The scale of these investments from private and institutional investors demonstrates that 2023 will witness rapid growth in the data centre market.
Alongside investments in data centres, major telecom providers in the Philippines, India, Indonesia, and other nations in the region have been expanding 5G service infrastructure in new areas since late 2022. Complementing this expansion, 2023 will also see developments in subsea cable infrastructure. A Philippine telecom provider is unveiling a $150 million subsea cable project in April, Japan’s NTT will also invest in landing stations for undersea cables in Mumbai and Chennai, and Infinera recently doubled its trans-Pacific subsea cable network capacity between Japan and the US.
As these developments become operational, consumers and businesses in the region will enjoy superior services and unlock new avenues for economic growth.
Unravel: In your view, what will be the drivers of change in the digital economy in Asia in 2023?
Mr Chalmers: I believe that the primary driver of change will be technological convergence, led by businesses who harness developments in nascent technologies like blockchain, AI and IoT using the advanced capabilities of low-latency 5G networks and superior data storage/transfer infrastructure. In developing economies, we’re seeing technological convergence in digital identification systems like Aadhar in India, and in digital payments systems in countries like Vietnam, Indonesia, the Philippines and Thailand. In more advanced economies, technological convergence is manifesting in innovations in smart manufacturing, central-bank digital currencies, healthtech startups, IoT in automotives, and climate technologies. Crucially, conversations about technological convergence in diverse fields like infrastructure, healthcare and climate demonstrate that businesses are looking to unlock the tremendous untapped value that lies in the intersections between nascent technologies. With the capacity-building efforts that we’re seeing in Asia’s digital infrastructure landscape, such innovations will become more attainable. However, to truly spearhead growth, stakeholders must address the barriers to technology adoption and ensure that the public is willing and able to adopt new solutions in their lives.
Unravel: Are you optimistic about digital infrastructure gaps closing any time soon? What is required to close the gaps?
Mr Chalmers: Let’s be clear about what we mean by ‘gaps’. I am optimistic about overcoming gaps in access to digital services in developing Asia. Mobile phone and internet penetration rates have been steadily growing among Asia’s developing economies and are converging toward the near-universal coverage rates among the region’s advanced economies. Multilateral agencies like the Asian Development Bank, as well as private enterprises have spearheaded initiatives in expanding broadband and digital financing that connect more people to the digital economy.
Although gaps in access may be closing, vast disparities in the quality of digital infrastructure remain. Moreover, as countries like Thailand, Vietnam and China have introduced data sovereignty regulations, bridging these gaps through more private investments becomes increasingly difficult. While developing Asia is still trying to expand access and affordability, digitally advanced economies like Singapore, Korea and Japan have mature digital ecosystems and measure their performance in terms of more advanced metrics aimed at improving sustainability and efficiency. As such, although gaps in absolute coverage will close soon, gaps in the quality of digital infrastructure across the region will likely persist.
Based in Singapore, Blair leads the Marsh McLennan Advantage agenda for innovations in infrastructure. He believes the topic of infrastructure financing and development is a dynamic dialogue driven by the interplay between climate change, the low carbon agenda, technological advancement and evolving societal demands. Blair is an Executive Consultation Group member of the Blue Dot Network, an OECD-led mechanism to certify infrastructure projects that meet robust international quality standards.