Asia’s growth prospects are looking up. According to the IMF, the region is forecast to grow 4.5% this year, 0.3 percentage points more than the projection six months earlier. But this forecast is still below the 5% economic growth reported in 2023.
But look more closely at the region’s growth, and you’ll find that it lacks the underlying productivity gains that economists deem as the foundation for long-term improvements in living standards, skill levels, and employment.
The World Bank’s East Asia and Pacific April 2024 Economic Update noted that productivity growth among leading firms in the region lags that of leading global companies. The report blames impediments to competition, uneven skills among workers, and weak management for lagging productivity.
AI, step forward.
Commentators tout AI as a way to improve productivity and efficiency and foster the creation of new skills and jobs. Based on the level and speed of productivity growth during the rise of IT in the 1990s, EY estimates that GenAI has the potential to lift productivity growth by between 50% to 100% in the coming decade.
However, generative AI will likely fall short of the doubling or tripling of productivity growth resulting from the Industrial Revolution or the adoption of electricity. For reference, the IT sector accounted for half of labor productivity growth in the U.S. non-farm sector between 1974 and 2004. EY projects similar gains from GenAI, based on a conservative outlook.
Asia’s digital natives to supercharge AI adoption
Fortunately for Asia, the region is primed to capture the productivity opportunities from generative AI. Asians are digital natives, with the region’s large, growing—and young—populations leapfrogging other regions to embrace digital services. According to the International Data Corporation (IDC), around $700 million has been invested in GenAI in the region so far, with 44% of Asia’s digital native businesses (DNBs) exploring its potential use. That’s great news for future productivity.
GenAI’s ability to automate and augment repetitive tasks like coding and content creation will have the greatest effect on business functions like product design, R&D, customer engagement, sales, and marketing, predicts the IDC.
And while it can sometimes take a decade for the productivity effects of a new technology—like, say, the PC—to emerge, the benefits of generative AI will quickly become obvious. A population of digital natives will embrace and adopt AI more quickly than previous generations, meaning they might enjoy a boost to productivity and economic activity in as little as three years.
Not only are Asians digitally savvy, but so are the businesses that serve them. The rapid growth of small and medium-sized enterprises, combined with how consumers are embracing new e-commerce, social media, and mobile technologies has created a digitally rich and mature business landscape. Coupled with fast-advancing digital infrastructure and fewer legacy challenges than their Western counterparts, Asian markets and specifically their businesses are ideally equipped to extract GenAI’s potential earlier than other regions.
Still, many questions remain before business leaders can maximize the gains from AI. The most pressing of them: Where, and how, to best leverage AI for their businesses?
Leaders need to view AI as more than just a new application or technology tool, but instead as a true game-changer—one that requires new infrastructure, processes, and culture to tap fully.
How will data processing and delivery become truly real time and seamless to allow AI to deliver its full value? How will AI skills be properly and fairly distributed so upskilling is an opportunity for all and not just the few? How will jobs truly be impacted as AI and automation inevitably changes and reshapes tasks and roles, but also give birth to new ones?
But businesses in Asia shouldn’t wait for clear answers. Instead, they need to grasp this opportunity while they can. Asia is an ideal first mover in the race to tap this game-changing technology, and businesses will be the spearhead.
There are two immediate opportunities. The first is internal, where AI adoption can help employees and organizations get ahead of their competition regarding efficiency and productivity. The second is external, using GenAI to give customers new experiences and offerings.
Right now, there’s no playbook for success for a new technology like GenAI. It’ll be up to business leaders—and, potentially, business leaders in Asia—to write it, breaking new ground and leading the adoption of this transformative technology.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
