Investments and Connectivity: Digital Capacity Matters

The Belt and Road Initiative (BRI) and upcoming regional connectivity plans like the Asia-Africa Growth Corridor (AAGC) should stimulate foreign direct investment (FDI) inflows in countries getting connected and developing new industrial and other capacities. These investments, among other factors, would be driven by local and national capacities to do business across cyberspace. Discussions on connectivity often overlook this vital element as they focus on land and sea links.

But given the enormous impact of artificial intelligence (AI) on organization and operations of industries and businesses, cyber links are crucial for regional connectivity programs. It is hardly surprising the BRI also articulates the vision of a “Digital Silk Road.” The Asia-Pacific Region reflects diverse national capacities for responding to cyber connectivity. The core element of the latter is domestic information and communication technology (ICT) capacities. Broadband internet subscriptions are a good indicator in this regard. Among members of the Asia Pacific Economic Cooperation forum, Korea leads in broadband internet subscriptions, followed by Canada, the United States, New Zealand, Japan, Australia, Singapore and China. While these economies have high broadband subscriptions, capacities in Indonesia, Philippines, Peru, Brunei, and Vietnam are much lower. Investments flowing into BRI and other regional infrastructure projects would be influenced by national ICT capacities and economies with such capacities are best poised to attract private investors. Chinese regional investments in the BRI have, until now, focused more on economies like Myanmar, Cambodia, Indonesia, and Malaysia that are not among ICT “leaders.” Perhaps, these have been influenced more by political and geostrategic factors and less by domestic ICT strengths that can complement private sector investments. Indeed, Chinese private FDI might show distinct preferences for projects in countries with good domestic cyber infrastructure. Might this be a matter of concern regarding Chinese state-owned enterprise investments precipitated by political considerations?