In the evolving landscape of automation and digitalization, the traditional path of labour-intensive industrialization is becoming less viable for countries in special situations in Asia and the Pacific. The shift towards technology-driven processes is decreasing manual labour reliance, while boosting the tradability of services across borders. Although a substantial portion of the workforce in these countries continues to engage in low-productivity agriculture and informal services, digitalization offers a unique opportunity for leapfrogging because of the lower capital requirements and efficiency gains in business operations and public service delivery. However, realizing these benefits necessitates adequate infrastructure, adaptive capabilities and supportive policies.

This report examines the transformative role of digitalization and automation in enhancing the productive capacities of these countries. It zeroes in on the services sector and the digitalization of agricultural and industrial activities, which has the potential to enhance productivity and job creation. However, it also cautions against potential risks, including job displacement and cybersecurity threats. To navigate these challenges, the report includes policy options for enhanced connectivity and infrastructure, education and training tailored to the digital economy, and regional cooperation to foster a conducive environment for digital trade and investment.