Originally published in Advancing ASEAN in the Digital Age Book, 14 November 2017.

 

Digital Revolution: A Momentum for ASEAN Economic Cooperation and International Integration in the Forthcoming Years

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ASEAN has achieved remarkable success in economic cooperation and international integration since the 1990s. In fact, ASEAN has become an important part of the world with its own global competitiveness. The fast integration and economic cooperation of ASEAN nowadays calls for a digital revolution, though the region is still facing several challenges in terms of infrastructure, human resource and technology.

Achievements in economic cooperation and international integration

Consisting of 10 member states, with 50 years of development, ASEAN is now the 6th largest economy in the world with a combined GDP of more than US$ 2.55 trillion in 2016. With steady growth momentum, ASEAN is expected to become the 4th largest economy in the world by 2050. The establishment of ASEAN Economic Community (AEC) in 2015 has proven the synergy and the strong determination to foster regional economic integration of the member states.

Concerning regional integration, efforts have been made to promote liberalization of trade in goods, on the basis of the ASEAN Trade in Goods Agreement (ATIGA). As a result, by the end of 2016, ASEAN eliminated import duties for 96.01 percent of total tariff lines. Regarding the liberalization of trade in services, within the ASEAN Framework Agreement on Services (AFAS), ASEAN has been working on the signing, ratifying and implementing 10 commitment packages on trade in services, 8 commitment packages on financial services, and 10 commitment packages on air transport services under AFAS.

As regards international integration, ASEAN signed Free Trade Agreements (FTA) with 6 partners, namely China, Japan, the Republic of Korea, India, Australia and New Zealand. In addition, ASEAN has recently concluded the negotiations for the ASEAN-Hong Kong, China FTA (AHKFTA) and is now in the process of negotiating Regional Comprehensive Economic Partnership Agreement (RCEP).

Active integration into the international economy has opened up great opportunities for business communities to access and expand their markets, improve domestic productivity and increase the competitiveness of goods and services.

With deepening economic cooperation and integration, it is believed that the implementation of a comprehensive digital agenda could possibly add US$1 trillion to the region’s GDP over the next 10 years. Digital revolution will also help build a stronger, faster and more integrated economy.

ASEAN into digital age

ASEAN has its own strengths and opportunities to move forward to the digital age. ASEAN is the 3rd most populous economy in the world with a population of 630 million people, and more than half of them are Internet users. There is no doubt that the digital sector is drumming up a lot of interest across the region.

The advantages of ASEAN lie not only in population but also in its several well-developed IT clusters being in place across the region. Attracting innovation and investment in new technology, the clusters have leveled up worker productivity and brought in new digital industries.

Moreover, in the next few years, the region is expected to have embraced “Industry 4.0”, which will help enhance efficiency, level up flexibility and actualize great customization in production.

Nevertheless, there remains a number of challenges for ASEAN member states. By and large, ASEAN is still at lower levels of technology, capital and high-quality workforce in comparison with other peers in the world. Entering the digital age, the region will have to face threats from cyber-attacks and have to ensure data security, especially when data becomes common data, and the broadband network coverage is much wider.

Moreover, the Industry 4.0 is about a revolution in substance or depth, not about an expansion of scale or volume. Key to open the 4th generation door are technologies and innovations, the factors that are not part of current ASEAN’s advantages. Mostly they must be imported from the west. This dependency leads to a requirement, and also a vast difficulty, in a timely manner, for the region to adjust its living practice and consuming custom of the people, especially in countryside areas. On the demand side, the ability to adapt with and to afford new highly technological facilities and utilities will determine the actual need for 4.0 industry modernization. On the supply side, if a worker wants to join the 4th generation, he needs to upgrade his skills, so as to meet the new standards of the wave. This is never an easy task for any individual, not to mention a nation as a member of a group. There is hardly any shortcut for an economy to move fast on this front.

A call for action

For the region to be propelled into the digital age, taking into consideration all these aforementioned challenges, we need to work towards several solutions.

 

…it is high time ASEAN Governments embark on re-education and capacity-building policies for the workforce to acquire the knowledge and skills needed in a digital age.

 

Firstly, it is high time ASEAN Governments embark on re-education and capacity-building policies for the workforce to acquire the knowledge and skills needed in a digital age.

Secondly, ASEAN needs to strengthen local and regional digital economy as there are now only a few countries in the region that have developed digital economy. In order to be successful in building digital economy, we need to develop collaborative innovations so as to meet the expectations of digitally empowered customers.

Thirdly, in order to truly step into a digital revolution, ASEAN should foster e-commerce as well as financial services. We should invest more in ICT infrastructure to make these services more appealing to ASEAN citizens. Only then could we increase the usage of those services in both public and private sectors.

Finally, we need to ensure data security and cyber security, not only on national scale but also across the region through introducing privacy laws in some member states and setting up a regional organization that fights against cybercrimes.

Actions of Viet Nam

In preparation for the digital age, Viet Nam has started to embrace “Industry 4.0”. In May 2017, Vietnamese Prime Minister Nguyen Xuan Phuc issued Order No 16/CT-TTg on strengthening access to the 4th Industrial Revolution. Thereby he directed the nation to concentrate on ICT infrastructure development and encouraged start-ups with innovative technology.

Viet Nam has also been developing “smart cities” across the country. In particular, many large cities and provinces are moving forward with plans to build smart cities, such as Ha Noi, Can Tho, Da Nang and Binh Duong. In May 2017, Viet Nam installed its first smart city communication platform in Ho Chi Minh City. The city is expected to become the “Silicon Valley of the Pacific”.

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There is still a long journey ahead for ASEAN to actually prove its important role in the digital age. In order to successfully acquire the digital advantages, the region should build a comprehensive agenda and officially start the digital revolution. The outcomes of digital revolution will propel the region’s economic cooperation and international integration to a higher level of development. This can only be done by concerted ASEAN’s efforts and synergy building, like what the region has been doing for 50 years now.


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About H.E. Minister Tran Tuan Anh


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H.E. Mr. Tran Tuan Anh was born in 1964 in Quang Ngai, Viet Nam. He holds a Ph.D in Economics. He is now Minister of Industry and Trade of Viet Nam, Member of the Central Committee of the Communist Party (12th tenure) and Deputy to the National Assembly (14th tenure).