Summary

The World Bank's analysis of business activity development in East Asia and the Pacific region highlights the crucial role of multinational corporations (MNCs) in generating added value, promoting employment, and disseminating innovations across local enterprises. Despite significant digital transformation efforts, the region faces a paradoxical decline in private sector productivity, even among technology leaders. Comparative data reveals this growing gap: while global IT companies achieved 76% growth in total factor productivity between 2005-2015, their counterparts in Indonesia, Malaysia, the Philippines, and Vietnam managed only 34% growth during the same period. This productivity challenge stems from three fundamental constraints: a persistent shortage of skilled labor, uneven access to digital infrastructure, and insufficient management capabilities. To address these issues, the report recommends a comprehensive policy approach focusing on three key areas: eliminating barriers to competition to stimulate market efficiency, increasing strategic investments in both human capital development and digital infrastructure, and implementing targeted support programs for industries facing specific structural bottlenecks. The findings underscore the need for balanced strategies that combine market liberalization with capacity-building interventions to enhance the region's competitive potential in an increasingly digital global economy.