THE sheer cost of adopting new technology gives larger companies an advantage which could end up limiting competition, the chairman of SM Investments Corp. said.
Amando M. Tetangco, Jr., who is also a former central bank governor, said at the FINEX Conference 2023 that although digitalization and technological innovation are beneficial, they have the potential to disrupt the market, noting how artificial intelligence (AI) has redefined how businesses operate.
“However, AI systems benefit from economies of scale which favors larger firms who can afford to invest more in AI research and development,” Mr. Tetangco said.
“This can lead to the creation and dominance of a few super firms (which) could potentially restrain competition and innovation,” he added.
He said nevertheless that it is essential to embrace technology as businesses can harness big-data applications and machine learning.
“Overall, the use of technology in the conduct of surveillance will help firms to make well-informed and data-dependent decisions,” he said.
“Technology can also be used to innovate, redefine and enhance delivery of products and services. You have seen how the pandemic accelerated digital transformation across industries,” he added.
Meanwhile, he said that climate change and the transition to sustainable energy pose physical and transition risks which could affect the broader economy.
The physical risks stem from the direct effects of severe weather disturbances, while transition risks stem from the economy’s steps to shift to a low-carbon economy.
“While (the transition is) beneficial, the process can be very costly with large macroeconomic implications … For instance, the large investments needed in green technologies could further increase interest rates which in turn could lead to changes in asset prices,” he said.
He called for collective effort to address the global challenges, especially the effects of climate change, that the economy is facing.
“Collaboration brings together diverse perspectives to tackle complex challenges comprehensively. It also paves the way for shared capacity and resources when tackling resource intensive challenges,” he said.
Mr. Tetangco said economies also face a higher-for-longer interest rate environment and greater geo-economic fragmentation.
“In such a challenging environment, our best strategy is to build resilience. Resilience that can be achieved by pursuing diversification, embracing technology, and working together to greater cooperation and collaboration,” he said.
“These will not only help us weather these challenges but also gain clarity to discern opportunities that will help stir us towards sustainable growth,” he added. — Justine Irish D. Tabile