Section 4 Creation of New Businesses Through Co-Creation of New Value with Emerging Countries Amid Accelerating Digitalization Worldwide
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Section 4 Creation of new businesses through co-creation of new value with emerging countries amid accelerating digitalization worldwide Amid the trend of slowing growth in developed countries, a population decline coupled with a low birthrate has proceeded in Japan in particular, resulting in a rapid decrease in the working-age population. This is casting a long shadow over economic growth. If Japan is to realize sustainable growth in the future, it is important for the country to develop and strengthen a mechanism that enables it to be actively involved with emerging and developing countries with growth potential and achieve growth together. As described in Chapter 2, which looked back at the history of globalization and the advance of technology, Japan has actively incorporated the second unbundling into its economy. Since the 1990s, Japanese companies, mainly those in manufacturing industries, have succeeded in achieving growth together with Asia by starting at an early time to actively invest in Asia and promote international division of work. Now, Japan is facing a historic turning point, where the global shift to digital economy is proceeding rapidly. The novel coronavirus disease (COVID-19) pandemic has occurred at a time when promising growth companies capable of using digital technology to resolve social challenges come to the forefront in countries where social infrastructure are underdeveloped. In this situation, there have been cases in which the public and private sectors worked together to accelerate leapfrogging digitalization. For example, the government of Asian emerging countries developed a contact tracing app together with a private-sector business operator, or a FinTech company received support from the government and central bank of an African country in order to mitigate the risk of infection due to hand-to-hand transfer of cash. Amid this trend, in Japan, too, there have been cases in which the public sector worked together with local companies to resolve social challenges in order to achieve sustainable growth. The initiative to promote the digitalization trend in Asia is known as Asia Digital Transformation. This section looks at Japan’s co-creation of new value with local companies in Asia in order to achieve sustainable growth and Japan’s long-term industrial strategy based on that initiative. 1. ASEAN and India as partners under the global industrial strategy in the era of digitalization At a time when economic growth slows down as a long-term trend and when global digital companies, such as GAFA and BAT,110 are absent in Japan, there are concerns over the country’s presence in the world. However, as Japan has relationships of trust with Asian countries that have been built up over many years, it is surrounded by an environment that allows it to continue to be actively involved with those countries. Furthermore, it is becoming increasingly important to focus attention on Asia, mainly Southeast Asia and India, from the viewpoints of exploring new markets, enhancing competitiveness, increasing Japan’s presence, and managing risks. First, this section shows the potential for strengthening cooperation with ASEAN and India by examining the economic size, growth potential, business environment, the penetration of digital economy, and workers with digital skills in Asian emerging countries. 110 Major players leading digitalization. GAFA (Google, Apple, Facebook, and Amazon) are U.S. companies, and BAT (Baidu, Alibaba, and Tencent) are Chinese companies. 354 (1) Economic size and growth potential (A) GDP A comparison of countries around the world in terms of the average annual growth rate of GDP value (purchasing power parity basis) in 2016 and 2050 shows that developed countries are expected to be replaced by emerging countries as the driving force of the global economy. Among noteworthy points are the prospect that India will surpass the United States111 and ASEAN’s growing presence. More specifically, Indonesia, which was ranked eighth in 2016, is expected to rise to the fourth place in 2050, and Malaysia, the Philippines and Viet Nam are also expected to rise significantly in the GDP rankings (Table II-3-4-1). (B) Population A comparison of countries around the world in terms of the average annual growth rate of population between 2019 and 2050 shows that the populations of developed countries and regions other than the United States will decline. While the margin of decline for Japan is the largest at 0.6% per year on average, the populations of Europe (a decline of 0.2%) and China (a decline of 0.1%) are also expected to decline. The aging of society coupled with a low birthrate and a population decline affect both supply and demand sides of the economy. On the other hand, as the populations of India and Southeast Asia are expected to grow by 0.6% per year on average, economic expansion can be expected (Figure II-3-4-2). (C) Labor force A comparison of countries around the world in terms of the average annual growth rate of the working-age population, which forms the core of production activity, shows that the working-age populations of developed countries and regions other than the United States are expected to decline. The pace of decline in the working-age population is expected to be more rapid than the pace of decline in the overall population. While the pace of decline for Japan is the fastest at by 1.1%, the working-age populations of Europe (a decline of 0.6%) and China (a decline of 0.6%) are also expected to decline, meaning an increase in the population onus. On the other hand, the working-age population is projected to grow by 0.6% in India and by 0.4% in Southeast Asia, with the population of younger generations increasing, so India and Southeast Asia are expected to replace China as the world’s main production and consumer location (Figure II-3-4-3). 111 The value of GDP on a purchasing power parity basis was 18.6 trillion dollars in the United States and 8.7 trillion dollars in India in 2016 and is estimated to be 34.1 trillion dollars in the United States and 44.1 trillion dollars in 2050. 355 Table II-3-4-1 Top 30 countries in GDP value (purchasing power parity; estimates in 2016 and 2050) 2016 Ranking 2050 China 1 China U.S. 2 India India 3 U.S. Japan 4 Indonesia Germany 5 Brazil Russia 6 Russia Brazil 7 Mexico Indonesia 8 Japan U.K. 9 Germany France 10 U.K. Mexico 11 Turkey Italy 12 France ROK 13 Saudi Arabia Turkey 14 Nigeria Saudi Arabia 15 Egypt Spain 16 Pakistan Canada 17 Iran Iran 18 ROK Australia 19 Philippines Thailand 20 Viet Nam Egypt 21 Italy Nigeria 22 Canada Poland 23 Bangladesh Pakistan 24 Malaysia Argentina 25 Thailand Netherlands 26 Spain Malaysia 27 South Africa Philippines 28 Australia South Africa 29 Argentina Colombia 30 Poland : G7 : ASEAN countries and India Notes: GDP values are based on a purchasing power parity. Viet Nam ranked the 32nd place in 2016. Source: “The world in 2050” (Pricewaterhouse Coopers Co., Ltd.). 356 Figure II-3-4-2 Population and average annual growth rates in major countries and regions (2019-2050; estimates) (%) 1 Average annual growth rate of population Average 0.8 India Southeast Asia 0.6 0.6 0.6 U.S. 0.4 0.5 0.2 0 China Europe -0.1 -0.2 -0.2 -0.4 Japan -0.6 -0.6 -0.8 -1 Notes: The size of a bubble represents the scale of population. Bubbles in blue show positive average annual growth rates of population and those in gray show negative rates thereof. The data in the figure are estimated medium variants. The data on average annual growth rates are those from 2019 to 2050. Source: World Population Prospects 2019 (UN). Figure II-3-4-3 Working-age population and average annual growth rates in major countries and regions (2019-2050; estimates) (%) 1.5 Average annualgrowth rate of working 1 India Southeast Asia 0.6 0.4 0.5 U.S. 0.2 0 -0.5 Europe China - age population -0.6 -0.6 -1 Japan -1.1 -1.5 357 Notes: The size of a bubble represents the scale of working-age population. Bubbles in blue show positive average annual growth rates of such population and those in gray show negative rates thereof. The data in the figure are estimated medium variants. The data on average annual growth rates are those from 2019 to 2050. Source: World Population Prospects 2019 (UN). (D) Market Over the 20-year period from 1998 to 2018, household consumption expenditure increased only 2.4-fold in the United States, 1.9-fold in the EU112 and 1.3-fold in Japan, while the increases in ASEAN and India were much larger, 6.1-fold and 6.0-fold, respectively. Although the figures are smaller than the 11.2-fold increase in China, India’s and ASEAN’s markets are expected to continue growing in light of their population expansion and economic growth potentials (Figure II-3-4-4). Figure II-3-4-4 Household consumption expenditures in major countries and regions (changes over 20-year period) (Trillion dollars) Times (1998-2018) 16 12 11.2 14 10 12 8 10 8 6.1 6.0 6 6 4 4 2.4 2.2 2.2 1.9 2 2 1.3 0 0 ASEAN10 India Japan China U.S. EU28 Brazil Mexico 1998 2018 Times (right axis) Notes: The data in this figure show private-sector consumption expenditures in GDP (demand side). Source: UNdata. (2) Importance of improving the business environment (A) Global business environment According to the Doing Business 2020 report, published by the World Bank, of the 190 countries surveyed, Singapore came in second in the overall business environment rankings,113 while Malaysia and Thailand were ranked 12th and 21st.