Embracing Digital Globalization

The power of globalization combined with robotics opens new avenues leading to prosperity for developing economies .

It is crucial for countries to prepare for digital globalization. (Image illustration: thehansindia)

In the 1950s, development theory emphasized the importance of industrialization for economic development. China is a prime example of a development model with industry as its spearhead.

The economic development model after 1990 initiated a wave of offshoring and industrialization. At that time, it was believed that the prosperity of developing countries was a result of participating in global value chains. To achieve this, countries needed to improve their investment environment, laws, infrastructure, and trade policies.

A new path?

Today, as argued by global economist and international trade expert Professor Richard Baldwin of the International Institute for Management Development (IMD) (Switzerland), the combination of globalization and digitalization (digital globalization) is the "gateway" to a new path to prosperity for developing countries: globalization based on services.

In fact, while China's economic success is based on manufacturing, India's growth is driven by the service sector. This is considered a very atypical growth model for a developing country.

It's not hard to understand why governments around the world still look to China's development model as a template. This model has existed and truly flourished throughout the late 20th and early 21st centuries in the world's second-largest economy – transforming a large number of farmers into workers, raising wages, and improving livelihoods. Hundreds of millions of people have escaped poverty, a strong middle class has emerged, and China has achieved superpower status.

China's path, while long a model for other developing countries, is not easily emulated. This is because China possesses too many advantages that other economies lack.

Here, international competition is the major issue and the "key" for developing economies to participate in the global race. Therefore, in terms of potential, developing countries currently find it very difficult to "self-nominate" for the manufacturing sector, as manufacturers in East Asia, Central Europe, and Mexico have already surpassed them by a wide margin.

The "fruit on the low branch" here refers to "offshoring," which has already been harvested. Meanwhile, the current trend of "reshoring" (reproducing domestically) is becoming dominant and is characterized by the simplification of global supply chains, both within and between countries.

Among these, some characteristics that will reshape and operate the current global supply chain include "flexibility, adaptability, application of digital technology , promotion of transparent e-commerce; and increasing regional production networks within the global network"...

Therefore, digital technology opens up another path of development. It "reduces" the distance of the remote workforce, while continuously improving online collaboration platforms and boosting international trade and services, thanks to the extraordinary growth of telecommunications.

This is being demonstrated by the growth of eBay and Alibaba in international commodity trade.

Meanwhile, cheap labor remains a crucial factor in international competition. Service providers across the ocean have the ability to monitor, interact with, assign tasks, manage remotely, and securely pay their workforce at a very low cost of living—just $5 an hour, yet a standard of living for the middle class in many countries around the world.

This creates significant shifts within and even among businesses as they seek to reduce costs by purchasing services overseas/outsourcing/or moving internal business processes overseas.

Currently, India is not the only economy benefiting from this trend. However, India's success story stands out, thanks to its global service delivery scale in the IT and accounting sectors, with superior foundational advantages such as robust technology infrastructure, high-level higher education, strong English skills, and very few institutional barriers.

The importance of policy

Observers note that what is interesting about India's rapid rise as a leading services exporter is that it did not originate from a focused development policy of the government.

Even India's success in developing its service technology sector began by chance. It's also said that the Indian model is difficult to replicate because its initial development was somewhat spontaneous, and therefore takes a long time.

Since the 2000s, India has emerged as a prime location for developed economies to outsource IT services and knowledge-based jobs, gradually becoming home to call centers and many other labor-intensive technology-related activities and processes.

In fact, initially, not stemming from government policy, the service sector "led" India's economic development by "groping" its way through the very limitations on international trade, such as lack of access to capital, weak transportation infrastructure, and the vast distance from global manufacturing centers in the US, Germany, Japan, and China.

However, the Philippines has recently emerged as a service export hub. Not only has it learned from India's experience, but it has also quickly and successfully capitalized on the wave of digital globalization in the service sector, driven by a deliberate government strategy.

Manila built this strategy on a customer service culture, offering tax incentives and establishing special economic zones to encourage the growth of service-exporting businesses.

The Philippines offers enormous potential for data center operators and developers, based on four key pillars: supporting businesses in adopting cloud computing faster; establishing favorable policies for digital transformation; building renewable energy infrastructure; and developing robust telecommunications infrastructure.

As a result, thanks to policies accelerating digital globalization, the Philippines' internet economy grew to $17 billion in 2021 and is projected to reach $40 billion by 2025.

Overall, to pave the way and address concerns, experts believe that global cooperation is needed so that the world economy does not overlook the enormous potential benefits of the digital flow.

Source: https://baoquocte.vn/don-toan-cau-hoa-ky-thuat-so-251460.html