Enormous boost to Indonesia and Japan GDPs through digital skill building

13 May 2020 Consultancy.asia

Strategy consultancy AlphaBeta has concluded a $300-plus billion boost to Indonesia’s GDP by the end of the decade by enhancing its digital skills base, with the equivalent figure in Japan calculated at $1.5 trillion.

APAC-based strategy consulting firm AlphaBeta – which earlier this year joined Accenture Strategy – has been examining the value of digital skills to the future Indonesian and Japanese economies, concluding respective impacts of $312 billion and $1.5 trillion to each economy by 2030 by way of improving their digital skills-bases. As a projection, this would translate to around 15% and 30% of Indonesia and Japan’s forecasted GDPs.

Indonesia

Taking UNESCO’s definition of digital skills as “a range of abilities that allow individuals to use digital devices, communications applications and networks to access and manage information”, the firm notes that such skills are important for workers across all sectors of the Indonesian economy, including workers in traditional sectors such as manufacturing and construction as operators in each seek to adopt new technologies and improve productivity.

According to the AlphaBeta’s research (which was supported by Google), digital skills in Indonesia presently contribute $64 billion to annual GDP, or around 6%, with close to three quarters of that figure derived from non-tech sectors such as manufacturing SMEs likely contributing a significant portion. Indonesia is Southeast Asia’s largest and fastest growing digital economy, but AlphaBeta believes there is far greater potential still.

Enormous boost to Indonesia and Japan GDPs through digital skill building

To arrive at its figures, the firm examined estimated GDP contributions from workers in the technology sector (e.g AI developers working for digital companies or start-ups), digital workers in non-technology sectors such as BIM engineers in the construction industry, and non-digital workers in non-tech sectors who nevertheless require digital skills to perform their jobs – factory workers for example who require some level of IT proficiency to operate machinery.

The researchers point also digital trade as another overall example (which is described as a significant component of the digital economy), noting that its economic value could grow by greater than 18-fold before the decade is out. For this to occur however, improving the digital skill-base will be essential, with the aim of the research seeking to identify ways in which government, the private sector, and civil society cooperate to capture the opportunity.

“This makes it essential for policymakers to understand the size of the economic contribution of digitally skilled workers in Indonesia – and the necessary steps to realise it,” states AlphaBeta in a preliminary report. “However, while there is a range of literature on the productivity benefits of digital technologies in Indonesia, no studies to date have attempted to quantify the contribution of digitally skilled workers in both tech and non-tech sectors to its economy.”

Japan

While the long-term potential of the digital economy in Indonesia is indeed significant, the equivalent opportunity through a strengthened digital skills-base in Japan is a whopping ~$1.5 trillion impact to GDP, according the AlphaBeta analysis. This, the firm says, is particularly important considering the nation’s current economic headwinds, most notably as a factor of an ageing population delimiting workforce growth and straining social security systems.

“Without drastically boosting productivity, growth in Japan could average just 1.3% through 2025,” write the AlphaBeta analysts (predating the outbreak, the figures don’t take into account the as yet known economic impact of the global coronavirus pandemic). As it stands, digital skills in Japan account for $785 billion of national GDP, and at the current pace of digital skills training the GDP benefits by 2030 would only reach $1 trillion – a $479 billion lost opportunity.