The Asian Digital

Transformation
Index 2018
Building environments for
technology-led change

Written by
Executive Summary
In the quest to develop advanced technologies, Asian governments usually leave no stone unturned in
terms of policy and direction. Such has been the case in the past with 4G mobile technology and fibre
broadband, and more recently with smart manufacturing technologies. Fostering digital transformation,
however, requires more than deploying new technologies. Asian leaders aspire to create environments in
which businesses and other organisations can leverage a range of assets to achieve far-reaching change
through digitisation. Comparing their progress is the objective of the Asian Digital Transformation Index.

This second, 2018 edition of the Index finds economies such as India and Japan, as well as the overall
leader Singapore, making some progress in aspects of digital infrastructure and human capital. Others,
such as South Korea, Malaysia and mainland China, register marked improvements in terms of industry
connectivity. Singapore retains its top spot in the Index in 2018, with Japan and Hong Kong overtaking
South Korea to take second and third place, and Taiwan at number 5.

Other major findings of the Index analysis include the following:

• Asia is making up some ground on the West. Had the US, UK and Australia been included in the
Index, Singapore would still be the overall leader. The region’s other high-income economies, and in
some cases mainland China, compare favourably with the three western countries in several areas.
One is their commitment to long-term digital strategies, the implementation of which lags progress
in infrastructure indicators such as 4G mobile coverage, fibre deployment and average broadband
speeds, and the other is in their plans for advancing 5G and artificial intelligence (AI). Western
advantages remain significant in other areas, however, particularly in the human capital and industry
connectivity categories.

• Fibre, 5G and AI are Asian strengths. Four new indicators have been added to the Index in 2018, of
which these three address key technology enablers of digital transformation. Apart from the compact
cities of Singapore and Hong Kong, mainland China and Japan excel in fibre take-up. 5G plans are
well-advanced in South Korea and Singapore, while South Korea, mainland China and Japan are
forging ahead with AI research and development.

• Talent is a key differentiator. Digital expertise, particularly in fields such as AI and advanced analytics,
is in short supply in most parts of the world. When considering the availability of telecommunications
professionals—the fourth new indicator this year—Singapore emerges as the strongest Asian
economy, while India and mainland China have made strides in terms of other human capital
indicators.

Asian Digital Transformation Index – Overall Rank and Score

Average 43.0 Change in rank
1 Singapore 78.0 --
2 Japan 63.5 +1
3 Hong Kong 62.3 +1
4 South Korea 61.0 -2
5 Taiwan 55.7 --
6 Malaysia 36.9 --
7 Mainland China 36.4 --
8 India 31.0 +1
9 Thailand 23.0 -1
10 Philippines 12.8 --
11 Indonesia 12.2 --

© The Economist Intelligence Unit Limited 2018 2

1. Digital Infrastructure
The availability of reliable, fast and affordable digital connectivity
Digital Infrastructure
is not the sole determinant of a positive environment for digital
transformation, but it is the most important one (and is accorded Average 42.7 Change in rank
the highest weighting of the three Index categories). Singapore
remains Asia’s frontrunner in this category, thanks partly to its 1 Singapore 82.5 --
continuing clarity of digital vision and consistent implementation
of ICT development plans. This reflects in areas such as the fibre 2 Hong Kong 63.6 +1
network rollout to reach businesses and homes, the goals of 3 Japan 58.9 +2
which were set out in one of the nation’s past “ICT master plans”.
Unsurprisingly, Singapore has the highest fibre-to-the-home 4 South Korea 54.3 -2
(FTTH) and fibre-to-the-building (FTTB) take-up rates of the Index
economies. 1 5 Taiwan 47.6 -1
6 Malaysia 40.4 --
India and Japan show the most improvement in digital
infrastructure, moving up four positions and two positions in rank 7 India 36.1 +4
since 2016 respectively. For India this is partly a reflection of rising
investment in ICT infrastructure: according to the International 8 Mainland China 35.7 -1
Telecommunications Union, telecoms investment rose from 0.4%
of GDP in 2015 to 1% in 2017—the highest figure of the Index 9 Thailand 26.4 -1
economies. 2 Some of this spending has gone towards increasing 10 Indonesia 14.3 -1
coverage of 4G mobile networks, which now reaches 86% of the
population, compared with less than 20% three years ago. 3 11 Philippines 9.7 -1

Japan’s improvement in the category derives partly from the more

effective implementation of government policy in recent years,
Figure 1: Superfast connectivity
including ICT policy. It is also the result of the accelerated adoption
of mobile broadband services among the population. With 133
FTTH/FTTB subscribers as percentage of homes and buildings
mobile broadband subscriptions per 100 people in 2017, Japan is
passed
second in the region only to Singapore. 4

The deployment of fibre to support high-speed connectivity for Philippines 4%

homes and businesses is one of two new indicators in the digital
infrastructure category (along with 5G plans). FTTH and FTTB are Thailand 6%
integral elements of next-generation networks, needed to support United Kingdom 9%
the burgeoning volumes of data being transmitted by Internet of
Things (IoT) and other connected devices, the increasingly powerful Indonesia 17%
analytics tools (including AI applications) that crunch such data, as
India 33%
well as organisations’ mission-critical connections with their cloud-
based applications. South Ko rea 38%

United States 40%

Fibre take-up is unsurprisingly high in Singapore and Hong Kong,
which have a highly built-up environment on a relatively small land Malaysia 42%
mass. But it is also high in mainland China (77% take-up among
Taiwan 47%
homes or buildings passed) and Japan (67%). Fibre deployment will
continue to be prioritised in both countries, as well as elsewhere Japan 67%
in the region, as it underpins their plans to build out 5G mobile
Australia 68%
networks over the next five years (see “Full steam ahead for 5G”).
Hong Kong 74%
Mainland China 77%

Singapo re 97%

Source: Idate/FTTH Council

1
https://www.itu.int/en/ITU-D/Regional-Presence/AsiaPacific/Documents/Events/2018/ssceg2018/Presentation%20and%20Bio/Session%204%20Steve%20Foster.pdf
2
https://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx
3
https://opensignal.com/reports/2018/02/state-of-lte
4
https://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx

© The Economist Intelligence Unit Limited 2018 3

 Full steam ahead for 5G
It is difficult to overstate
the importance of 5G
mobile to organisations’ and
consumers’ future digital
capabilities. It promises
broadband connections that
are multiple times faster than
speeds existing today and
with much lower latency. 5 If
the potential of AI, the IoT,
smart cities, Industry 4.0
(digital manufacturing) and
autonomous vehicles—among
many different transformative
developments—is to be
realised, 5G networks must
be widely deployed and
commercial services available
by early in the next decade.
This is why governments and
industry groups are busy
setting out 5G roadmaps
that include spectrum and
infrastructure deployment
plans.
Asian countries are at the forefront 5G infrastructure involves
of 5G development globally. The more than cell sites, base
South Korean government, for stations and towers.
example, has completed a 5G Upgrading transmission
spectrum auction, and Korean networks with ultra-high-
operators are to begin deploying speed fibre is an integral part
network infrastructure by the end of deployment plans. Their
of 2018, with commercial services 5G plans help explain why
expected to be launched in 2020. mainland China, Japan and
6
Network rollout is also set to Singapore, among others, are
begin in late 2018 in Singapore, aggressively pushing fibre
with a similar timetable to South network development (see
Korea’s for commercial launch. 7 Figure 1). India, which has
Government and network operator plans to roll out 5G networks
plans are also well-advanced by 2022, similarly aims to
in Japan and mainland China. expand the reach of its fibre
An analyst firm recently ranked backbone network—by more
Japanese and South Korean than one-third—as part of its
telcos ahead of their global peers 5G strategy. 9
in having the most advanced 5G
strategies, with Chinese and US
operators also ranking among the
world leaders. 8

Where digital infrastructure in Asia is advanced and widely available, it is also broadly
affordable to homes and businesses. For example, in the three category leaders of
Singapore, Hong Kong and Japan, the monthly cost of a fixed broadband connection is
around 0.5% of gross national income per capita. The figure is even lower (0.3%) in Taiwan.
10
Judged by this indicator, broadband is more affordable in Asia’s developed digital markets
than in the US or Australia. Of the Asian and western economies in our analysis, only the UK
has cheaper broadband.

5
https://www.sciencedaily.com/releases/2018/07/180705110036.htm
6
https://www.zdnet.com/article/south-korea-completes-5g-spectrum-auction/
7
https://www.cnet.com/news/singapore-first-5g-pilot-network-to-launch-by-q4/
8
https://www.telecomasia.net/content/japans-docomo-most-promising-5g-operator-says-juniper
9
https://www.business-standard.com/article/technology/india-to-roll-out-5g-by-2022-increase-fiber-backbone-to-2-5-mn-kilometers-118080700356_1.html
10
https://www.itu.int/en/ITU-D/Statistics/Pages/publications/wtid.aspx

© The Economist Intelligence Unit Limited 2018 4

2. Human Capital
In our 2017 study of city-level digital transformation environments, Figure 2: Digital expertise
Asian survey respondents were vocal about the challenges they face
in finding the right people to drive transformation forward. Of the 10 Telecommunications professionals as a share of the workforce
cities facing the most acute talent shortages relevant to digitisation,
seven were in Asia, including cities in Japan, India, mainland China
and Thailand, as well as Singapore. 11 For several years, companies Singapo re 8%
in the region have complained of a scarcity of people skilled in
Hong Kong 5%
working with big data and analytics. As the use of AI, the IoT and
other advanced technologies becomes widespread, the difficulties India 4%
of meeting local demand for digital talent are only likely to grow South Ko rea 4%
more acute.
Taiwan 4%
Singapore is in the strongest position to address these challenges Malaysia 3%
among the Index economies. The city-state has risen three places
Thailand 2%
to occupy the top position in this category in 2018. This is due partly
to the addition of a new human capital indicator which measures Japan 1%
the presence of qualified telecommunications professionals within Mainland China 1%
the workforce. Singapore outpaces the other Asian economies on
this measure, although Hong Kong, India, South Korea, Taiwan and Philippines 1%
Malaysia also boast sizeable pools of technology professionals Indonesia 0%
relative to their overall workforce.

Source: UNESCO UIS database

Human Capital Singapore’s human capital advantage runs broader and deeper,
however. The quality of its maths and science education, for
Average 47.0 Change in rank example, is considered second to none in the world, according
to the World Economic Forum (WEF). 12 Education, of course,
1 Singapore 80.8 +3 is the foundation of a nation’s talent pool, and Singapore has
taken several initiatives in recent years to ensure its schools and
2 South Korea 75.9 -1 universities produce graduates with digital skills that its businesses
and other employers need. These include the updating of secondary
3 Hong Kong 74.1 -- and vocational school curricula to emphasise both hard and soft
“21st century skills”, and the introduction of lifelong learning
4 Taiwan 70.2 +1 programmes for employees at different stages of their careers.

5 Japan 67.9 -3 South Korea is another strong performer in developing human

capital for digital transformation. At 94%, its tertiary enrolment
6 Malaysia 44.4 -- rate is the highest in the region, and its universities and technical
schools are now prioritising the training of specialists in Industry
7 Mainland China 33.6 -- 4.0, AI and other areas identified as target growth areas by
the government. South Korea is considered by The Economist
8 India 22.4 +2 Intelligence Unit to be the most prepared of 25 countries in the
world to meet the future challenges of automation, partly thanks to
9 Philippines 20.4 --
the country’s education policies. 13
10 Thailand 20.1 -2
India also deserves mention when it comes to human capital, not
only for the large pool of software experts who have underpinned
11 Indonesia 6.9 --
the growth of its IT outsourcing industry. The quality of its maths
and science education has also improved in recent years, according
to the WEF. The growing digital savviness of the population overall
is manifested in extensive and relatively sophisticated citizen use
of e-government services, as judged in the United Nations’ latest
e-government survey. 14

11
The survey covered 45 cities in North America, EMEA and Asia-Pacific. http://connectedfuture.economist.com/
12
https://weforum.ent.box.com/s/dari4dktg4jt2g9xo2o5pksjpatvawdb
13
http://www.automationreadiness.eiu.com/
14
http://www.unpan.org/Library/MajorPublications/UNEGovernmentSurvey/PublicEGovernanceSurveyintheNews/tabid/651/mctl/ArticleView/ModuleId/1555/articleId/58634/Default.aspx

© The Economist Intelligence Unit Limited 2018 5

 How Asia and the west stack up
Is Asia closing the gap The western countries, however, industry connectivity. For
with western countries retain advantages in several example, firm-level technology
in its support for digital other areas. In the human adoption, according to the
transformation, a gap which capital category, for example, WEF, is higher in the US than
was identified in the 2016 Australia outpaces all other Index in any other western or Asian
study? There are some economies in terms of tertiary economy included in this
indications of this. In an enrolment levels. And its pool of Index. 17 E-commerce levels
enlarged Index table that telecoms professionals is a larger in the US and UK, and to a
also included the US, UK share of the overall workforce than lesser extent Australia, far
and Australia, Singapore in the countries examined, save for outpace those registered in
would have advanced to first Singapore. In digital infrastructure, the Asian economies. The
position this year, overtaking Australia, the US and UK largely one area in which a western
the US; Japan, meanwhile, match Asia’s leaders in planning country lags noticeably
would have gained entry into for 5G. Australia’s regulator, for behind the Index leaders is
the top five, moving ahead of example, has developed a five-year in government support for AI
the UK. plan for 5G spectrum allocation, development, where Australia
with its first auction scheduled lacks a coordinated national
The region’s five high-income for November 2018. 15 The first US AI strategy with significant
economies (Singapore, Japan, spectrum auctions are also set for financial commitments
Hong Kong, South Korea and late 2018. 16 (see “The race is on for AI
Taiwan) compare favourably leadership”).
with their western peers in The Western advantages are
several areas covered by the most evident when it comes to
Index. One is overall digital
strategy development and
Enlarged Index: Overall Rank and Score
implementation, in which
Asian governments are Average 48.3 Change in rank
ambitious and committed to 1 Singapore 78.0 +1
achieving long-term goals. 2 United States 75.0 -1
That commitment has helped
3 Australia 65.5 --
some of them outpace the
three western countries in 4 Japan 63.5 +2
key infrastructure indicators 5 United Kingdom 62.9 -1
such as 4G mobile coverage, 6 Hong Kong 62.3 +1
fibre deployment and 7 South Korea 61.0 -2
average broadband speeds.
8 Taiwan 55.7 --
As discussed earlier (“Full
steam ahead for 5G”), this 9 Malaysia 36.9 --
commitment is also the source 10 Mainland China 36.4 --
of the early attention given 11 India 31.0 +1
by Asian economies such as 12 Thailand 23.0 -1
South Korea, Japan, and also
mainland China, to planning 13 Philippines 12.8 --
for 5G and supporting AI 14 Indonesia 12.2
research and development.

15
https://www.zdnet.com/article/australian-5g-spectrum-auction-set-for-late-november/
16
https://www.lightreading.com/first-5g-specific-us-spectrum-auctions-coming-november/d/d-id/744609
17
http://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf

© The Economist Intelligence Unit Limited 2018 6

3. Industry Connectivity
The industry connectivity category contains indicators that seek
Industry Connectivity
to gauge organisations’ ability to absorb and benefit from digital
technology available in the market. The addition of two new Average 39.9 Change in rank
indicators has led to significant upward movement of economies
in this category. One of the new indicators assesses national plans 1 Japan 73.1 --
for AI development (see “The race is on for AI leadership”). The other,
“technology use”, compares firm-level technology absorption in 2 South Korea 66.2 +2
economies, based on WEF survey data. 3 Taiwan 65.5 --
Following these changes, South Korea has moved up two places 4 Singapore 61.9 -2
to take second position behind Japan (the category leader in
2016), and Malaysia has advanced three places to eighth position. 5 Hong Kong 46.5 --
Mainland China has also advanced one rung on the industry
6 Mainland China 41.3 +1
connectivity ladder, to sixth. South Korea and mainland China have
mainly benefitted from their regional lead (together with Japan) in 7 India 24.4 -1
AI strategy development. Malaysia’s improvement is due largely to
its favourable score in firm-level technology use, where it trails only 8 Malaysia 18.6 +3
Singapore and Japan.
9 Thailand 16.0 -1
The survey we conducted as part of our 2016 research revealed the 10 Indonesia 14.1 --
technologies that Asian businesses planned to focus on to advance
their digital transformation efforts. Foremost among these were 11 Philippines 11.3 -2
big data and analytics, 18 while mobile apps and services, mobile
devices, and cloud computing—naturally along with cyber security
tools—were also high on their priority list. Large numbers also
Figure 3: Open for business
pointed to AI, robotics and the IoT. To generate the desired benefits,
these technologies need to be used in combinations. It is the ability
Asia scores from the Global Open Data Index (2016)
of firms to use these in an integrated manner, which will determine
the scale of their contribution to digital transformation.
Malaysia 10%
Much of the data that organisations crunch and analyse today to
build or improve products comes from open sources made available Mainland China 18%
by local, regional and national governments. (Think, for example, Indonesia 25%
of the legions of mobile apps that integrate city-level data on Philippines 30%
traffic patterns, weather and public transport.) Taiwan remains
Thailand 34%
ahead of the rest of Asia (as well as Australia, the UK and the US)
in the accessibility of data afforded to citizens and organisations India 47%
by the government, as measured by the Global Open Data Index. South Ko rea 50%
19
While lower on the list, Japan and Hong Kong have both made
Hong Kong 51%
considerable strides in recent years in expanding the volume
and variety of data their governments make publicly available. Singapo re 60%
Governments in the lower reaches of the Index will similarly need to Japan 61%
make big strides in open data, as demand for it from their citizens Taiwan 90%
and businesses is certain to grow.

Source: Global Open Data Index

18
http://connectedfuture.economist.com/connecting-capabilities/article/connecting-capabilities-infographic/
19
https://index.okfn.org/place/

© The Economist Intelligence Unit Limited 2018 7

 The race is on for AI leadership
For business leaders, the formulated AI strategies that projects have attracted
AI future cannot come soon are backed by public funding for government funds of more
enough. For good reason: R&D. All are also using public- than US$2bn. 22
technologies based on AI private partnerships to advance AI
and machine learning are research. Western countries are moving
viewed as pivotal enablers ahead with their own AI plans.
of organisations’ digital Due to their head start in Much of the science behind AI
transformation. Prominent developing strategy and the scale was developed and perfected
among AI’s expected benefits of investment they are putting in US laboratories over the
are much higher levels of into it, Japan, South Korea and past few decades, and the
automation of business mainland China are Index leaders government has earmarked
processes than have yet in this indicator. The South US$2bn in new and existing AI
been achieved, and much Korean government, for example, projects for defence purposes
greater insight into customer published its long-term “master alone. 23 The UK is looking
behaviour and preferences. plan” for AI development in 2016, to keep pace with Asia and
Further advances in AI are and has subsequently pledged the US, and to that end, the
integral to the success of US$2bn to fund AI research. 20 government has recently
Industry 4.0, smart car, Japan’s government released a earmarked over US$1.28bn
smart home and other cross- detailed AI plan in early 2017, in central funding to support
industry initiatives that are with funding of about US$4bn an “industrial strategy” for AI.
dear to governments looking eventually committed. 21 The 24
As mentioned earlier, only
to bolster their economies’ Chinese government has not only Australia, among the three
global competitiveness. For formulated an AI strategy but western countries analysed
this reason, seven of the Asian also elevated AI to the status of in the study, has yet to
governments in the Index a “national strategic technology”. advance a specific plan for AI
(mainland China, South Korea, Public funding details for the plan development.
Japan, Singapore, Taiwan, are not clear, but over the past two
Hong Kong and India) have years, different state-sponsored

20
https://english.msit.go.kr/cms/english/pl/policies2/__icsFiles/afieldfile/2017/07/20/Master%20Plan%20for%20the%20intelligent%20information%20society.pdf; and https://medium.
com/syncedreview/south-korea-aims-high-on-ai-pumps-2-billion-into-r-d-de8e5c0c8ac5
21
http://www.nedo.go.jp/content/100865202.pdf; and https://asia.nikkei.com/Economy/Japan-to-expand-innovation-fund-to-4bn-in-AI-push
22
http://www.gov.cn/zhengce/content/2017-07/20/content_5211996.htm; https://www.scmp.com/tech/science-research/article/2145568/can-trumps-ai-summit-match-chinas-ambitious-
strategic-plan; and http://www.xinhuanet.com/english/2018-01/03/c_136869144.htm
23
https://www.darpa.mil/news-events/2018-09-07
24
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/702810/180425_BEIS_AI_Sector_Deal__4_.pdf

© The Economist Intelligence Unit Limited 2018 8

Conclusion
The 2018 Asian Digital Transformation Index offers clear signs of progress in the region in building
supportive environments for technology-led change. Asia’s high-income economies, for example,
are leveraging long-standing strengths in ICT policy vision and implementation to accelerate fibre
deployment, to cement plans for 5G rollout and to advance AI development. The Index also reveals several
examples of individual economies’ improvement across key indicators, such as the availability of open
data, university enrolment levels and investment in telecoms infrastructure.

Notwithstanding the areas in which they continue to lag behind their western rivals, it is fair to say that
organisations in most economies in the Index—including those in its lower tier such as mainland China,
India and Malaysia—have access to the tools they need to bring about far-reaching technology-led
change in their operations. Many of the technology tools, such as software and virtual hardware, are also
becoming more affordable to organisations thanks to the growth of cloud computing.

The success of digital transformation, however—as with any change initiative—relies on much more
than just access to technology and talented specialists. It hinges on changing employee mindsets and
organisational culture—progress in which is difficult to assess in a benchmarking index. How willing and
able are managers and staff to use emergent technologies to change their business processes and upend
long-established ways of working? How ready are senior management teams to make structural changes
in their organisations—for example, creating new teams that are better able to leverage newly acquired
technologies?

The growing prominence of Asian companies in global markets suggests that their senior managers are
as able as their western counterparts to bring about such change. The increasingly favourable digital
environments in which they operate ought to give them confidence, as well as the concrete tools, to make
transformation a success.

© The Economist Intelligence Unit Limited 2018 9

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