Developing a harmonised approach to the digital economy would help Asean harness the opportunities of the Fourth Industrial Revolution (or Industry 4.0) and enhance the regional grouping’s digital competitiveness, writes Phidel Vineles.
As the 2018 Asean Chair, Singapore deserves high praise for driving forward a resilient and innovative Asean community as well as bringing about several agreements designed to invigorate the region’s digital economy.
One of these was the Asean Smart Cities Network (ASCN). The ASCN is envisioned as a collaborative platform of cities across Asean that work together towards the goal of smart and sustainable urban development. Asean’s first e-commerce agreement, which aims to spur the use of e-commerce as a driver of regional economic growth, was also inked in 2018. The e-commerce agreement will help the region to realise the projected growth of Asean’s internet economy to $200 billion by 2025.
Asean should adopt another Asean Economic Community (AEC) pillar devoted to engaging with the increasing role of digital technologies in commerce and industry. Developing a harmonised approach would help to streamline the necessary policies for enhancing Asean’s digital competitiveness.
There are existing frameworks and regulations designed for the development of the digital economy in Asean. For example, the Asean Information and Communication Technology (ICT) Masterplan 2020 underscores ICT’s role in supporting regional connectivity and development. The AEC Blueprint 2025 similarly includes e-commerce under its main pillar of enhanced connectivity and sectoral cooperation.
The AEC Blueprint 2025 also notes the importance of accelerating technological advancements in international production, trade and investment practices, and calls for the promotion of small and medium enterprises’ (SME) online presence.
Yet these existing frameworks and provisions will be implemented more efficiently if they are included under a new AEC pillar, which would help to articulate an overarching vision for advancing the region’s digital economy.
The new pillar would aim to make Asean a global powerhouse in the digital economy by setting several key objectives. The first should be pursuing universal internet access across the region. Asean member states should each establish a Universal Service Fund (USF) – a system for subsidising rural internet infrastructure and services using levies collected from telecom operators. This would expand the list of Asean member states that already have a USF, such as Malaysia, which uses its funds to provide free broadband access to underserved communities.
Building trust among the region’s consumers is also a priority. Lack of trust and low consumer awareness hinder the uptake of digital services. A survey conducted by GSMA Intelligence disclosed that 89 per cent of Malaysians and 79 per cent of Indonesians have concerns about sharing personal information online and through mobile devices. Developing digital literacy programmes for consumers and digital privacy compliance policies for businesses may help to alleviate this issue.
Promoting digital literacy and building Asean’s digital talent base must be another of the pillar’s objectives. Asean SMEs contribute to more than 50 per cent of Asean’s combined GDP and represent 99 per cent of the region’s enterprises. But 45 per cent of these enterprises lack an understanding of digital technology. Possessing the necessary digital skills would enhance the performance of SMEs and maximise the opportunities available for regional economic growth. Asean member states need to provide incentives that enable high-tech start-ups to thrive. One high-tech start-up success story is Vietnam’s Vietponics, which helps farmers improve agricultural yield and reduce water consumption.
Asean member states should also establish clear regulations for cross-border transactions, especially for digital financial services, to encourage an integrated digital economy. According to one estimate, digital integration could generate a $1 trillion increase in Asean GDP by 2025.
An AEC pillar on the digital economy would make Asean more responsive to trends in disruptive technologies, which could benefit other economic sectors. For example, the Internet of Things (IoT) is expected to provide significant opportunities for semiconductor companies, as this technology will increase demand for memory and sensors. It could also ramp up the annual revenue of the manufacturing industry by producing innovative products like IoT-integrated consumer devices.
Digital technology also helps businesses in the region access a bigger market for their products and services. E-commerce platforms such as Lazada and Shopee have become popular platforms for regional consumers who enjoy accessing a wide range of products at a single click.
Developing a harmonised approach to the digital economy would help Asean harness the opportunities of the Fourth Industrial Revolution (or Industry 4.0). Asean is expected to capture productivity gains from Industry 4.0 worth $216 billion to $627 billion.
It is imperative for Asean to include the digital economy as a new AEC pillar to make the most of the opportunities available. This effort would help to enrich the region’s digital experience and improve economic activities that contribute to inclusive growth.
Phidel Vineles is a senior analyst at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University. This comment first appeared in East Asia Forum.