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Pulling down the digital iron curtain

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Technology companies need to focus on establishing collaborations that will ensure the world emerges from this pandemic stronger than before, not more divided between East and West.

The world economy has been hit hard by Covid-19, with OECD member countries reporting a contraction in GDP of 9.8 per cent. Clearly, there’s much to be done if we are to come out favourably on the other side of the pandemic.

Part of this change will require organisations and governments turning to digital solutions to limit future disruption. The pandemic has upended every walk of life, but technology has served to cushion the blow – it has enabled continuity and collaboration in both our personal and our professional lives. In some ways, it has meant we will be emerging from this crisis closer than ever before.

That said, the pandemic unwound in the midst of a growing East-West divergence. While technology has helped us work together during the crisis, there’s no hiding the fact that the two worlds are becoming less compatible – and this could see all of our progress made in vain.

A digital iron curtain has descended, but this time it is dividing our digital worlds. Under current circumstances, we should be working closely with the aim of driving growth post-pandemic; but the emergence of a digital iron curtain could see any sign of progress grinding to a halt. Technology has helped to limit the impact of the pandemic, and it’s my hope that the technology industry can help companies reach through the divide and help overcome the current turmoil.

The division between East and West grows. China’s Belt and Road Initiative, building a new Silk Road throughout Asia, the Middle East and Africa, is knitting together regions that will provide the future growth of the world economy. It’s creating a separate ecosystem where the likes of Alibaba, Tencent, WeChat and TikTok are thriving and becoming the world’s largest tech companies.

Countries like Kazakhstan, Uzbekistan, Kenya, Sri Lanka, Vietnam and Indonesia are all borrowing Chinese money to fund infrastructure projects – built by Chinese companies – and to trade with Chinese businesses. This anchors them to Chinese technology and ways of working. In fact, many of the countries involved have pledged to cooperate with China in areas of communication via advanced technologies such as 5G networks.

Some of these are already embroiled in Western conflict. Huawei is the obvious one, with the West slowing down or stopping plans to deploy its 5G technology. This has had a huge impact on the telecommunications equipment used in both Europe and China. European telecoms companies still have some tricky decisions in front of them, as do their governments.

TikTok (and its parent company ByteDance) is another example. It has already scrapped plans to build a London HQ because of current reluctance towards the use of Chinese tech. TikTok has also been forced to consider a sale, in order to create a Western version of the app that is acceptable to US authorities.

A recent report by the Henry Jackson Society, ‘Breaking the China Supply Chain’, found that the UK relies on China for more than 50 per cent of its supply of certain goods, including laptops, mobile phones, several drug compounds and goods with industrial applications, such as safety glass and steel-capped boots.

The banking industry is increasingly reliant on tech, and the sector could suffer from a further East-West divide. HSBC has historic ties to both China and the UK, although Asia constitutes the bulk of its earnings. Does that mean it will have to move away from UK customers because its technology will have to adapt to Chinese standards? It sounds inconceivable, but the question will be asked.

Becoming listed on stock exchanges in both East and West offers a practical solution to bridge the gap. Alibaba is one company that has recognised the need to maintain a foothold on both sides of the fence, and conducted such an approach.

However, the reality is that this fails to address the underlying issue of differing technology standards. Under current circumstances, it’s more important than ever for companies to be able to trade with one another. We’re already seeing the pool of business partners dwindle as the digital iron curtain continues to emerge – so how can we hope to build resilience?

As trailblazers of innovation, technology companies must lead the way in finding a solution to the digital iron curtain. Strategic investments in an independent integration layer will enable collaboration on both sides of the digital iron curtain. Future prosperity is reliant on the world working together once again. To this end, the tech industry has an opportunity to bring order to hybrid environments, complex migrations and differing technology standards. Doing so will go a long way towards helping us emerge from the pandemic stronger than ever.

Sanjay Brahmawar is CEO at Software AG.

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