Investors are likely to open companies in countries with high internet connectivity a new survey has shown.
Investors are also interested in countries with high smart mobile phone usage and is the most important digital readiness factor they consider when deciding whether to invest in an emerging market according to findings by logistics firm Agility.
Speed and reliability of internet connectivity as well as financial and banking ecosystem to support e-commerce sales are the second and third most important digital readiness factors.
Technology adoption is being perceived by respondents as being more important than technology infrastructure. Indeed, even the best technology infrastructure provides little value if the population cannot take advantage of it. According to the World Economic Forum for each additional 10 percentage points of internet penetration, a country can add 1.2 percentage points to per capita GDP.
And adding 10 percentage points of the population to broadband can boost per capita GDP by almost 1.4%. Digitalisation has become one of the most significant growth engines for many emerging economies.
For instance, digital readiness and connectivity played a crucial role in overcoming the difficulties of conventional trade during the pandemic and facilitating recovery in Southeast Asia. Nikkei Assia reported that since the pandemic began, 60m Southeast Asians have become digital consumers.
There are now 350m digital consumers across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. This significant uptake of technology contributed to increased e-commerce sales during the pandemic.
For example, the Philippines and Malaysia have become the top two countries in e commerce retail growth, increasing by 25% and 23% per year respectively, according to eMarketer. But despite the obvious opportunities, there are major challenges in connecting emerging economies to the internet and realising the digital potential.
Greater investment in digital infrastructure is the most obvious one and is necessary in order to improve the speed and reliability of internet connectivity, the second most important digital readiness factor according to survey respondents.
Emerging economies need to continue to invest in digital infrastructure to increase connectivity and ensure everyone, including women, can fully access the digital economy. Closing digital skills gaps is another challenge for emerging economies- as the world becomes better connected, the need for skills to navigate it digitally has never been more urgent.