Having a strong education base particularly in the field of science, engineering, technology and math, will encourage faster digital adoption.
If one recalls a time when one would watch certain movies and observe the depiction of a world so modernised and advanced, one would certainly raise the personal question as to whether such feats would be even possible to realise. In this current day and age, what was initially seen as visualisation is now the centre piece for technology, as nations are building up to the concept of digitalisation and racing to be at the forefront of the 4th Industrial Revolution (IR 4.0).
The utilisation of Artificial Intelligence,robotics and machine learning in various sectors have proved to be essential in maximising productivity and have assisted organisations in acquiring these technologies to realise their economic potential at astounding rates.
Such is the case for the European Union,which is seen as a potential digital hub due to its large market size, which may increase baseline projections of GDP up to 10%. This means that digitalisation will be earning the bloc an additional €2.5 trillion of GDP in 2025, according to McKinsey estimates.
Maserati, world renowned sports and luxury car manufacturers from Italy, in 2015 took to venturing into the usage of IR 4.0 advanced solutions in the production of their vehicles. This not only saved 30% of their production time and tripled their production capacity, but also expanded their design variety, as seen with the Ghibli model which comes in 70,000 combinations.
It is within the successful adoption of these evolving technologies that we will see significantly enhanced performances and gains of competitive advantage. Apart from the commonly acknowledged notions of labour substitution that stems from the utilisation of AI, one can also see that it will have the potential to enhance productivity;raise throughput; improve predictions,outcomes, accuracy, and optimisation; and enable the discovery of novel solutions and possibilities. These potential opportunities when realised on a larger scale, can definitely translate into empowering growth of productivity for entire economies nationwide and on a macro-regional scale.
How will the EU balance declining birth rates and rising aging population, combat the loss of labour supply, and still maintain optimal productivity?
It must be taken into consideration that the near future will observe a rising aging population, decline of birth rates,and dwindling interest towards marital commitment. All of which will act as factors that will lead to slow, if not reducing rate of growth for the European labour supply. Inevitably, productivity growth will need to increase to sustain economic growth, especially in Europe.It is important to look at what measures can be considered essential for Europe to take in the wake of the emerging but surely-to-be vibrant digitalisation market. For the most part, the measures can be observed through aspects such as the embracing and advocating for digitalising industrial development, driving investment towards the direction of technology and digital advancements, as well as consideration towards the question of human capital.
EU’s Course of Action
It is imperative that we see Europe assert the role of trendsetter and taste maker inspear heading the world into the techno era. This can be evident when we start to see European governments set ambitious digitalisation targets for their own public sectors, leading by example while raising efficiency, and improving citizen interaction and delivery of citizen services – as Estonia has done.
It is also instrumental that the EU accelerates efforts to complete a ‘digital single market’, as common legal and regulatory frameworks can enable digital companies to scale within and beyond individual countries, and realise the potential of the single market. In a socially-concentrated context, European governments could strongly support the enabling, creation, and growth of large-scale digital platforms and digital innovators. Apart from acknowledging that digital platforms have proved instrumental in boosting cross-border commerce as well as helping small and mid-level organisations gain global outreach, they also have assisted in the facilitation of job matching.
The EU should also look through the angle of the investor in a sense, to understand what investors are looking for within the digitalisation of industrialisation. Within this effort, European governments can strongly advocate for increased investments in digital infrastructure and digital skills and to deepen and expand its digital ecosystem. AI technologies can also be a targeted market for EU investors. This is considering the landscape of the continent itself which has many AI and next gen startups, with vibrant ecosystems in the making in cities including Amsterdam, Barcelona, and Stockholm. The companies around these territories can look at an investors’ sentiment premised around of incentives and access to capital.
Free flow of cross-border data is impeded by the presence of hackers threatening cybersecurity.
Another premise the EU can look at is the development of human capital towards the direction of digitalisation. Strategic moves revolving around this sentiment include moves to spur entrepreneurship, business dynamism, and job creation. The argument for this is that new products, new activities, and new business models will be especially important in Europe, as the continent’s relatively high wage levels will likely speed up automation adoption. There also needs to be a strong and effective educational base as this will allow both faster digitisation and preparation of workers for the transition. Nations realise this when they start to improve science, technology, engineering, and math (STEM) skills and put anew emphasis on creativity as well as critical and systems thinking.
Greater mobility and better matching of talent with opportunity is needed across Europe to increase fluidity. This is where digitalisation comes into play, in a sense that digital platforms can support that and open up myriad opportunities for individuals to earn income outside of traditional employment contracts. Are thinking of worker support could serve instrumental for the outflow of ideas such as conditional transfers, adapted social safety nets, different forms of taxation, or even universal basic income may need to be considered and tested,as Finland and the Netherlands are currently doing.
The Digital Single Market Initiative
The continuous integration of EU member states and the border less nature of digitalisation states push for the embodiment of the Digital Single Market initiative adopted by the bloc in 2015. The initiative revolves around the pillars, namely: much more liberal access for organisations and consumers to the digitalisation of goods and services; the creation of platforms that enable fair competition for digital networks to actualise their economic potential; and the maximisation of overall growth potential of the digital market.
As far as efforts and strategising is concerned, there have been numerous proposals in the spirit of realising the Digital Single Market initiative through various forms of action.
One of those forms is the sentiment of investing in digital infrastructures. In September 2016, the EU Commission crafted the European Electronic Communications Code to modernise the current legislative framework for communication in 2009. Seeing as how it takes into consideration the emergence of AI technology and elements of digitalisation, it offers a more attractive regulatory environment that will foster investments in top-quality infrastructure and technologies across the EU. In the same year, a goal was set that by the end of 2017, whereby the European Commission will also update the European guidelines that help national telecoms regulators decide when to intervene in markets.
Then, there is guaranteeing the free flow of personal data which can be realised through a clear, comprehensive and predictable framework for data storage and data processing services. This will contribute to a more competitive and integrated EU market.
Another form of action vital within this push is strengthening the EU’s Creative Sector. In September 2016, two proposals were fronted to the EU Commission which was reforming copyright rules which will guarantee fair remuneration for journalists, publishers and authors and reinforce their position to negotiate for their creative content, while boosting consumers’ choice to content online and across borders.
Another was an update of European audiovisual media services rules will create a fairer environment for all, promote European films,protect children and better tackle hate speech online. Correlating to that, the same time last year there was a call for the enhancement of European Cyber Security through the formation of a European Cyber-Security Agency to assist Member States in dealing with cyber-attacks, as well as a new European certification scheme that will ensure that digital products and services are safe to use.
Boosting E-Commerce in the EU is one form of action that the EU Commission have taken rather dynamic steps in. Earlier in December 2015, it was called for that there should be a modernisation of EU contract rules that would encourage consumers to shop online, as well as businesses to expand without the fear of costing.The following year saw a proposal for regulations on geo-blocking that was proposed to ensure that consumers no longer face unjustified barriers such as being re-routed back to a country-specific website, or asked to pay with a debit or credit card from a certain country. It also saw a revising on parcel delivery for cross-border destinations.
The complication this move wanted to address was a situation where sending send a parcel from the Netherlands to Spain would cost currently €13, while to do the same thing in reverse would cost €32.74. Apart from that, in 2016, there was an assertive push that EU Member-states should soon agree on our Value Added Tax (VAT) fore-commerce proposals to allow consumers and companies to buy and sell goods and services easily online. Once agreed by all Member States, the new set-up for VAT rates on e-publications would allow Member States to align the rates one-publications to those on printed publications ensuring a level-playing field for both products.
Challenges in Embodying the Fourth Industrial Revolution
Despite an assertive push by governments within the EU that behooves them to up their witsin coping with the technological times, the challenges that act as a stumbling block towards achieving this vision of a digitalised Europe must be recognised and strategically resolved to ensure smoothness in this transition.
For instance,many barriers still impede the free flow of cross-border data within the European economy; only 15% of EU consumers buy online from another EU country,whereas nearly 50% do so domestically, according to the EU Commission. This may stem from the fear of data theft and manipulation, as well as the fear of having individual cyber security compromised. Threats such as these, topped by the existence of the dark web, a coveted layer of the internet where users of this platform are anonymous and set themselves as untraceable make for rather petrifying possibilities.
It must be considered that a digital single market could double the ratio of cross border to national digital trade of goods and services. Digital cross-border flows beyond e-commerce could also increase as companies take advantage of the single market scale. While this is seen as a favourable paradigm, it also translates into higher standards of competency that businesses would need to keep up with to ensure their market survival. It would be a burden on EU member countries to see establishments closing their doors due to the inability to align their own with the wave of digitalisation, which may appear as costly in its earlier stages of bloom.
While we’ve centred the EU as the base of discussion, we cannot downplay the prospects of competitors diving into IR 4.0 and the possibility of nations such as the U.Sand China surpassing the regional bloc in terms of investment, policy craft,and digital infrastructure development. With Europe aiming to be the digital hub of the world, it would need to be maximising efforts and strategically immobilising the commitment of member states in stepping on the gas to win the rat race.
All in all, we see so much possibility in growth trajectory moving in a positive direction when countries take up the call to digitalise the construct of their life quality, economies and infrastructure. A nutshell contextualisation would say EU members would need to aim for inclusive growth to ensure that everyone profits from the digital dividend; digitalisation cannot remain restricted to a handful of regions or nation-states.
The EU’s effective coordination of national policies allow for effective knowledge and best practice sharing, emphasise need for specialised support in integrating SMEs into IR 4.0 global value chains. More importantly,to strengthen industry-driven approaches (or bottom-up participation) instead of applying a top-down governance approach, giving a greater say to involved stakeholders.
Roberto Benetello has over 20 years of experience in international relations and business facilitation, general management, marketing and business development in various sectors. He currently serves as the CEO of EU-Malaysia Chamber of Commerce and Industry (EUMCCI).
