Connectivity is key to digitalization and services

Services is the largest part of all OECD economies. More than 70 percent of GDP is generated from services, with about the same share of overall employment. A similar development can be seen in many developing countries.

With increasing technological development and connectivity, new forms of services have become essential for future economic development. Digitalization and services are areas of growing importance for both Japan and EU. Digitalization enhances abilities for both private and public sectors to increase efficiency and develop new services. That means new possibilities that create both smarter public sectors and more competitive industrial sectors in Japan and EU.

This development is at the core of the ambition to strengthen the connectivity within and between Japan and EU. The pandemic showed the importance of a resilient society, where digitalization plays a stronger role. In addition, digitalization creates the foundation for the development of digital services and the facilitation of value at the intersection of manufactured goods and services, referred to as servitization.

Connectivity is at the core if this development in relation to infrastructure, transfer of data, people to people exchange through collaboration in research and education, and the development of a more sustainable and resilient society. In other words, connectivity is at the very center of the transition towards the green economy.

Without increased connectivity horizontally cutting across sectors and industries, it will be challenging for Japan and EU to reach our ambitious green economy goals. Connectivity help transform industries such as energy. Digitalization and services are natural parts of creating new structures in relation to renewable power generation, and, maybe even more importantly, smart, resilient and efficient grids. The potential on the back of connectivity is clear for Japan and EU, but through collaboration it should also bring new possibilities for developing countries.

Patrik Ström is Director of the European Institute of Japanese Studies (EIJS) and Center for Asian Studies (CAS) at Stockholm School of Economics. His research is focusing on the development of the advanced service industry and the transformation of economies that are becoming more service and knowledge based. This also includes the transition towards the green economy.