The need for speed: what is driving Asia’s accelerating economies

Andy North Andy North
Managing Director, Growth Strategies – Asia
27 April 2021
6 min read

In November 2020, motorsport fans watched Romain Grosjean's car spear into a barrier at the Bahrain F1 Grand Prix, where it split in two and burst into flames. Forty years ago, Grosjean would probably have died at the scene. But the French-Swiss driver survived, testament to advanced engineering, digital innovation, energy efficiency, smart materials and a culture of learning and improvement. The cars of today are far more efficient with much better fuel consumption and their ability to use their stored kinetic energy to enhance power. The garages, which used to be a typical mechanic workshop with oil, grease and grime, now resemble hospital operating theatres. To call it 'progress', would be an understatement.

Given the rate of advancement of technologies today, one might think that most industries globally would be able to accelerate progress faster than F1 has; unfortunately, this isn't the case. Many industries, such as engineering and construction, are only slowly adapting to new innovations and still have a long way to go.

All systems and economies have an innate disposition towards growth and progress. Without progress there is decline and, if unchecked, failure or breakdown will be inevitable. The faster an organisation can absorb change, the faster it will make progress, the more probable it will be to beat its competition.

When predicting which region will likely win the economic recovery race, experts and research are pointing to growing economies – especially to Asia. 

According to McKinsey's research, by 2040, Asia is on track to “generate 50 per cent of world GDP and could account for nearly 40 per cent of global consumption.” While the region may be behind many developed economies at the moment, its rate of growth and change relative to others, suggests it is an inevitability that many of the new technologies, the new ideas and products that will come onto the world will be Asian in origin. 

How was Asia able to transform from being the poorest continent into a 'global economic powerhouse'? It's their ability to absorb change. Any system or economy has a limited rate at which it can absorb change, growth or progress. Organisations are no different. They can only absorb change at a limited rate, so what can organisations learn from this and the rise of Asia?

What happens when an unstoppable force meets an unmovable object?

There is little doubt there are fundamental ingredients in Asia that are locked in and, probably, unstoppable. As the mix of demographics, population growth and leapfrogging technology combine, Asian economies will hold a competitive advantage, taking a place on the world stage that no business will be able to ignore.

And beyond the shift of the global economic centre of gravity from west to east, there is another salient lesson from the rise of Asia that business leaders should learn: What is the rate at which your organisation is absorbing (or resisting) change?

The accelerating pace of consumer adoption of digital technology in Asia enables the region to leapfrog from old to new technologies, and become an environment where innovations thrive. With many of the world's largest tech companies in the region such as Alibaba, Tencent, Baidu, Gojek and Softbank, citizens have become more than open and enthusiastic to welcome these new developments that can transform the economy.

When weakness becomes strength

How we take the leap to make progress is not only about what we have, but also about what we don't have. The absence of legacy systems lowers the barriers allowing businesses and economies to be much more agile, and open to disruption and change. 

For example, one of the strengths of Southeast Asian cities' mobility planning started off as a weakness: their relatively low internet penetration. This created the highest mobile connectivity rate in the world, which means many digital-enabled mobility solutions can be developed around an existing cohort of digital mobility 'natives'. 

Under the ASEAN Smart Cities Network, some of the mobility ideas pioneered by Singapore are being taken up by the other members, at a rate that suggests that by 2030 some ASEAN cities will have world-best mobility systems.

What about economies and companies that have many legacy systems preventing them from easily taking the leap? Is starting from a clean slate the answer? Perhaps, the first question organisations have to face and answer is: what old practices should we let go of and how willing are we to absorb change? 

Changing climate conditions 

Each ASEAN country has its own way of responding to climate issues, and for many of these cities – e.g. Jakarta, Bangkok, Ho Chi Minh City, Kuala Lumpur – the threat of rising sea levels and inundation are daily contingencies. Coal and oil are subject to ambitious ASEAN agendas for phasing out and the push for renewables will reach 23 per cent by 2025, from 17 per cent in 2015.

Vietnam is leading the way by implementing solar, hydro and wind technologies. Furthermore, the Southeast Asian response – while slower off the mark than other regions – represents a US$1 trillion economic opportunity by 2030, according to Bain & Company.

From an engineering perspective, one of the impressive aspects of the ASEAN ascendancy is the removal of 'at all costs' from its economic growth. There are amazing projects already in use in Southeast Asia in which the 'Circular Economy' is reusing treated waste water through the sanitation/water systems, and using waste-to-energy initiatives to turn the garbage produced by the region into electrical power. Some of these projects will also fix ground water issues created by waste dumps and landfills.

Young guns in the future workforce

Asian countries have a very young population, an advantage compared to the rest of the world, with 60 per cent of the ASEAN population under the age of 35. The next generation in the region is showing themselves to be fresh and agile, and quickly adapting to innovations such as immersive 3D technologies, which the ASEAN Smart City Network refers to as 'leapfrogging conventional solutions'.

Education is also playing its part with entrepreneurship and innovation incubators emerging in the region's universities, like NTUitive at Singapore's Nanyang Technological University.

Over recent decades, most ASEAN nations have implemented large capital projects in public infrastructure although, in many cases, they have not adequately invested in the maintenance and operations of these developments. Today's generation of planners, managers and engineers see and understand the potential of incorporating digital technologies for smart management of their assets. 

Considering this trajectory, it's no surprise that the number of STEM graduates in Asia is remarkably higher compared to other regions. China, India and Japan alone produce 7.5 million graduates per year, compared with the 0.5 million of the USA. While the real impact of Asia's future workforce has still to be felt in the region, it is looking very promising.

In Vietnam, young designers and engineers have been educated on 3D platforms, AI and machine learning protocols, giving them a 'leapfrog' generational advance over conventional engineers and a technical advantage in the design, construction and maintenance space. The abilities, confidence and openness of these young people will be economically transformative by 2030.

The road ahead

In the face of Asian economies that are gaining momentum, the answer as to who will win the economic race in the next century remains still a little opaque, albeit clearer. 

Just as today's Formula 1 garage doesn't look anything like the grimy old workshops of traditional motorsport, don't be surprised if you don't recognise Vietnam, Indonesia or Thailand in the coming decades. You'll be looking at the F1 workshop of the world economy.

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Andy North
Written by
Andy North


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