Geneva, Switzerland

Article of the week World November 16, 2024

Digital economy coupled with superior development

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Eurostat’s August 29th data indicates that by 2023, 59% of companies in the EU will transition to a predominantly digital state. Within the smes sector, 58 percent attained a minimum level of digital conversion last year, in contrast to 91 percent of major companies. “Basic level of digitalization” denotes employing no less than four out of the twelve chosen digitalization technologies, as indicated by the Digitalization Intensity Index (DII), including AI systems, social media, cloud services, customer service management, or e-commerce transactions accounting for at least 1% of the overall revenue. One objective of the “Digital Decade” is that by 2030, over 90% of European Union small and medium schools are expected to reach a minimum threshold of digitalization intensity. Last year’s EU smes fell short of the 2030 goals in the “Digitized era” by 32 points. A significant 4.4% of small, medium enterprises in the EU attained an elevated degree of digitalization intensity, while 19.6% reached a similar peak. The majority of smes exhibit a minimal (33.8 percent) or extremely minimal (42.3 percent) digital intensity. Finland, Malta, and the Netherlands boast the greatest percentages of enterprises escalating to extreme digital activity, each at 13.0%, 11.4%, and 11.0%). Concurrently, Romania, Bulgaria (70.6%), and Greece (56.2%) host the majority of companies with minimal digital engagement.

Principal motivators for the shift to digital technology in the EU

The EU’s digital evolution in 2022 is set to accelerate due to multiple elements, including swift technological advancements (like transformative artificial intelligence), climate shifts leading to economic and social upheavals, the escalating need for high-speed connectivity, and both internal and external risks stemming from democracy, among others, along with the diversified global landscape amidst tech contests. Technological advancement holds a vast potential influence. The European Union requires agility and swift transformation.

As geopolitical tensions intensify and the global competition in technology intensifies, digital technology emerges as the focal point in a new wave of rivalry. The rapid and extensive nature of digital technology development is vital for the European Union to preserve its top spot in upcoming worldwide contests. The onset of the Russia-Ukraine dispute in 2022 has reignited geopolitical significance, with divergent strategic goals and beliefs intensifying economic hazards. Rising living costs, escalating cyberattacks across the EU, and interruption of product and service supply chains have drastically altered the regular operations and lives of individuals through geopolitics. Advancements in digital tech systems could indirectly affect the EU’s economy and maintain its forefront position in the worldwide digital network, thereby markedly influencing the EU’s international competitiveness, economic development, and autonomy.

The European Union’s substantial reliance on overseas digital technology and goods necessitates major measures. The EU, being the global leader in regional integration, has begun to address critical dependencies, especially in crucial raw materials, semiconductors, software (including cloud and edge computing software), and cybersecurity tools and skills. Initially, reform and investment efforts will be made to realize the digital age. For instance, the EU Chip Act has declared the initiation of 100bn in both governmental and private investment schemes since its release in the previous February. Additionally, the focus is on acquiring high-efficiency computers, with the EU possessing two among the top five globally. Thirdly, the creation of specialized research and innovation (R&I) programs like Horizon Europe and the European Defense Fund is crucial for bolstering the EU’s position in R&D, thereby boosting its prolonged competitive edge, resilience, and decreasing reliance on current strategies.

The evolution of digital technology holds immense importance for Europe

Regarding societal progress and the well-being of individuals, the Digital era unveiled the European Union Digital Infrastructure Alliance (EDIC), a novel execution tool, enhancing adaptability for the EU, its member countries, and private entities in establishing and executing projects across multiple countries.The member States’ execution of numer ous major projects via the EDIC further substantiates this.Furthermore, the Commission has revised its array of State aid resources, especially by introducing changes to the General Collective Exemption Regulation (GBER). This amendment plays a crucial part in enhancing and hastening public backing for the EU’s digital evolution and substantially increasing investments in digital technologies and network connectivity.The implementation of digital innovation hubs and trial sites, along with the establishment of stationary broadband, 5G, and various mobile networks, in addition to backhaul network projects in rural and isolated regions, have fostered social progress and enhanced the quality of life for individuals.Currently, pertinent divisions in Europe continue to advance digital technologies to cater to the populace. The advancements in digital technology stemming from the digital strategy are set to significantly elevate and uplift the standard of everyday human life.Consequently, Europe is set to increase its investment in key technologies, extensively employing 5G (and potentially 6G) network technologies and advanced technologies in the future.

Furthermore, employing cutting-edge digital connectivity technology will aid in advancing the EU’s pursuit of a novel economic growth model in the digital age.As Europe evolves in to a low-carbon society, digitalization stands as a key component in the EU’s dual shift towards low carbon emissions.Through digitalization, the EU can investigate eco-friendly digital methods to enhance resource use efficiency, foster a circular economy, and attain carbon neutrality objectives.Undoubtedly, the advent of digital advancements is set to alter the evolution and progression trends of conventional technologies post the Industrial Revolution.The advent of digital technology has transformed conventional media communication methods and nurtured the growth of artificial intelligence along with other digital economic sectors, thereby altering and transforming individuals’ work and personal lives.Future advancements in digital connectivity technologies are set to forge a novel socio-economic growth framework for the EU.Consequently, the European Union’s digital approach trans cends mere tech R&D; it’s a developmental blueprint steered by R&D in digital technology, aimed at fostering a cohesive digital marketplace in Europe, bolstering the EU’s worldwide economic and technological prowess, and elevating civil society’s welfare to realize societal growth and prosperity as its ultimate objective.

Initiate digital actions

Edge computing nodes’ evolution signifies a transition to wards decentralized data storage and processing, diminishing net work data transfer requirements and enhancing cloud computing efficiency.The worldwide expenditure on edge computing has been consistently increasing, hitting €190 billion in 2023, a 13.1% rise from 2022, and is projected to near €289 billion by 2026. By the year 2025, the majority of businesses will see edge computing emerge as an adjunct to cloud computing.

Semiconductors: These devices form the core of all digital technologies, with their distribution networks being worldwide.Presently, the dense production of semiconductors worldwide in Asian nations has heightened the susceptibility of Europe’s semiconductor supply network.Bolstering the European Union’s stance on semiconductors and creating an adaptable semiconductor manufacturing process pose significant hurdles for the EU with extensive investment s. The European Union possesses fundamental benefits in research and development as well as in the production of machinery.Apart from sophisticated production, the European Union mus t tackle deficiencies in the design, packaging, and assembly of chips.The EU anticipates its semiconductor production to surpass $1 trillion by 2030 due to the swift increase in chip demand, effectively doubling in this decade.Within this framework, the objective of the EU Chip Act is to fortify the EU’s robustness, tackle its shortcomings, and develop strategies to manage upcoming disturbances in the supply chain.Concurrently, the European Union has established state assistance schemes to guarantee rapid allocation of funds for chip research and development.The enactment of the EU Chips Act is set to significantly enhance the European Union’s capacity to create and produce chips in key industries including automotive, industrial automation, the Internet of Things, aerospace, defense, data centers, telecommunications, and healthcare.

Digitalization in Enterprises: Amidst a fluctuating worldwide economy and growing unpredictability in industrial and supply networks, digital transformation plays a crucial role in advancing reforms in business models, boosting efficiency and resilience, and in the pursuit of novel opportunities and revenue streams.The advent of digital transformation has the potential to enhance growth and efficiency, diversify operations, and lessen administrative workloads and associated expenses.

Three objectives are outlined in the Digital Decade Plan for the digital evolution of businesses.A key point is that a minimum of 75 per cent of European Union companies ought to be utilizing cloud computing, big data, or AI.Secondly, over 90% of small and medium-sized enterprises in the EU are expected to achieve a fundament al degree of digital transformation intensity. Thirdly, encourage the extensive expansion of creative businesses, generate financial prospects, and ensure a minimum of twice the unicorns count.

Linking and interconnecting for shared advancement

From the EU’s perspective, the varying degrees of digital technology among its member countries impede the advancement of European unification. Thus, by integrating digital technologies, establishing a unified digital market, ensuring equitable competition among businesses of diverse sizes and industries in the area, and fostering a balanced economic climate is crucial.It’s essential to create an authentic European unified data market – a data realm rooted in European regulations and principles.Reflect on the fact that numerous European firms, particularly small and medium-sized enterprises, have lagged in embracing digital solutions, failing to capitalize on them and overlooking chances to expand their operations.Consequently, creating a substantia l European market dedicated to digital integration can foster an equitable business climate for various member countries, including small and medium enterprises.

China’s and the EU’s leaders highly value the collaboration between China and Europe in digitalization, exemplifying regional cooperation.Chinese authorities convened with German Chancellor Angela Merkel, European Council President Charles Michel, and European Commission President Ursula von der Leyen on September 14, 2020.Following deliberations, the decision was made by the leaders to establish the China-Eu Green Partnership and the China-Eu Digital Partnership.Forming a digital alliance between China and Europe is a mutual goal, benefiting the social and economic growth of both parties.It’s imperative for China and the EU to capitalize on the collaborative prospects presented by digital advancements, synchronize their digital tactics, leverage their digital development capabilities, establish agreed-upon digital regulations and stipulations, and substantially improve the digital interconnection between China and the EU.

Concurrently, Europe ought to establish a society that is open, democratic, and sustainable.To foster a secure and reliable so cial setting that bolster s and safeguards European societal n orms, it’s crucial to safe guard information about the conduct and interplay of citizens.Consequently, digitalization ought to provide society with the deserved security measures.

By Yiqi Wen

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