Author: Yasumasa Yamamoto, Kyoto University
Digital transformation is crucial to tackling a number of major global challenges. Yet Japan has unique disadvantages that place it behind global digital leaders such as the United States, Singapore and China and hamper its economic partnerships in the region.
Japanese government entities and regulators are too deeply entrenched in the fixed structure of the digital industry – which lacks digital literacy, customer accountability and strong ties to traditional technology outsourcing providers – making it difficult to promote of digitalization in the private and public sectors. This fixed mindset, particularly strong in Tokyo, requires efforts to promote digitalization and ultimately digital transformation in rural areas, where regulatory and mindset issues are less rigid. But cities outside Tokyo lack digital experts to address local challenges through digital transformation.
Japan has other structural issues that hamper digital transformation. Digital talent, especially software engineers capable of handling artificial intelligence, is in short supply. This is due to the relatively low emphasis on software education at Japan’s top universities.
Another problem is that most software engineers work for systems engineering companies and their salaries are very low. This is partly because Japanese companies view digital investment as a cost and not as an investment that generates additional revenue. Most companies lack knowledge in managing digital technologies and try to order low-cost systems to achieve short-sighted goals. Talented software engineers who aim for high pay take positions at large technology companies, such as Google, and do not join Japanese companies.
To overcome these obstacles, engineers and executives must conceptualize digital investment as a tool to increase profits. A deeper partnership between ASEAN and Japanese companies would help accelerate the flow of digital talent.
The Japanese digital agency worked on the Digital First Frontier Team concept, which aims to promote digital transformation. But it was only created in 2021 and Japan still needs to attract more data scientists from ASEAN countries by offering competitive recruitment packages. Japan needs more talents from ASEAN countries with the knowledge and skills to achieve digital transformation, including engineers and developers, analysts and cybersecurity experts.
At the same time, Japan needs to share more knowledge with ASEAN companies on operations and quality manufacturing. Japan still maintains technological advantages in certain manufacturing industries. Given ongoing tensions between the United States and China, enhanced collaboration between ASEAN countries and Japan would be beneficial to secure supply chains and increase security.
The recent decision by the Taiwan Semiconductor Manufacturing Corporation to build a semiconductor factory in Kumamoto is a good example. It takes advantage of Japan’s geographic location and manufacturing strength, will reduce Japan’s dependence on other countries for chip supplies, and create local opportunities for skills development.
Japan needs to develop a strong mechanism that promotes the development, utilization and circulation of human resources between ASEAN and Japan. There are programs related to the multi-level exchange and development of students, youth, researchers and entrepreneurs in various fields, such as the academic cooperation of the ASEAN Center of Kyoto University. But obstacles to practical cooperation, such as onerous regulations and laws, must be removed.
The complementarity between Japan and ASEAN is important. It will be mutually beneficial to promote exchanges and circulation of human resources between Japan, which has a declining and aging population, and ASEAN, which is full of young workers and wants to use ASEAN’s power. To accommodate them, Japan must establish a competitive environment comparable to that of Singapore, which has not only effective physical but also social infrastructure.
Through this expected cross-border move, there are a number of concrete ways in which Japan and ASEAN could resolve their own respective national issues and consolidate their cooperation.
One problem is how slowly traditional sectors such as manufacturing respond to digitalization. In ASEAN countries, many people are benefiting from new services thanks to the rapid advancement of startups and digital implementation. In Vietnam, for example, attracting and developing supporting industries as a source of employment for the young population is an important issue. Skills development in these sectors and the transfer of human capital from primary industries are also pressing issues. Vietnam’s largest private conglomerate, Vingroup, achieved this skills development and human capital transfer by acquiring the operations of General Motors Vietnam and hiring outside experts.
The outdated perception of foreign workers as just cheap labor in Japan should also be discarded. Implementing more privileged visa programs, better living conditions and tax incentives – similar to the UK’s high-potential individual visa program – could prove effective. ASEAN’s digital workers know little about lucrative visa programs, partly due to a lack of competition and public relations. A comprehensive one-stop service or investment fund to support ASEAN startups is likely to attract more talents.
Talent sharing and skills development in cybersecurity are also essential for digital security in Japan and ASEAN members.
With relations between the United States and China become more tense Following the introduction of semiconductor export controls, it was revealed in July that a group of hackers had illegally accessed the emails of 25 government agencies, including the US State Department. The hackers also accessed the emails of the US ambassador to China and government officials responsible for regulating the semiconductor trade. Hundreds of thousands of government-related emails have been leaked. American authorities have not revealed the identity of the hacker group. Cyberattacks will increase and become more advanced with the use of generative AI and cybersecurity cooperation will only become more important.
By fostering more opportunities for data scientists to work in Japan and facilitating the exchange of young professionals between Japan and ASEAN countries, a multi-level connection will be established. This is essential to increase Japan’s digital competitiveness and digital security and expanding opportunities for digital economy players in ASEAN.
Yasumasa Yamamoto is an associate professor at Kyoto University and a senior researcher at the Tokyo Foundation for Policy Research.