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

 

Harnessing ASEAN’s Potential in Digital Revolution

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The ASEAN Economic Community (AEC) envisioned a deeply integrated and highly cohesive regional economy, which involves strengthening the overall competitiveness of ASEAN by means of fostering regional inclusive growth and development. Part of the integration process is to recognise Information and Communication Technology (ICT) as a key driver of ASEAN’s economic and social transformation.

To survive the global competition, ASEAN needs to promote digital economy in the region. This goal is supported by the current ASEAN ICT Masterplan (AIM) 2020, which focuses on the adoption of sustainable and environmentally friendly ICT. However, promoting digital innovation in ASEAN requires policy approaches that are designed to reap the benefits and address the challenges of digital economy in the region.

Currently, the ASEAN digital economy generates approximately US$150 billion in revenues per year. According to an American global consulting firm, connectivity and online services account for around 40 percent of overall revenues in ASEAN digital economy. What is even more important is that ASEAN is predicted to have the potential to become one of the top five digital economies in the world by 2025.

ASEAN’s strong and vibrant economy is one of the fundamentals that puts the region in the trajectory to become a global digital leader. It is projected that ASEAN economy will grow six percent annually over the next decade which is an indicator of rising income level and more disposable cash. This economic trend will open avenues for a strong consumption of digital services by a large and youthful population in the region. Favourable demographics is also ASEAN’s sweet spot for the growth of its digital economy. It is estimated that 94 percent of its population are literate and over 50 percent are under the age of 30 years old. This group of people are technologically savvy who participate actively for the growth of digital economy by means of using the Internet.

ASEAN ICT investment amounted to US$100 billion in 2014, which is presently growing at more than 15 percent annually. The growth of ICT investment could be attributed to the continuous efforts of governments across the region to build ICT infrastructure. Furthermore, the ongoing implementation of AEC could further boost the growth of digital economy in the region, especially when its policy goals are centred towards becoming a single market with free flow of goods, services, labour, and capital, in which digital technology has an important role to play.

However, ASEAN’s path to being an inclusive digital economy is not without its challenges. Limited broadband access in rural areas is a major challenge. A large segment of the population, especially in countries like Indonesia, Thailand, the Philippines and Viet Nam, live in rural areas where Internet connectivity remains relatively poor.

A large number of consumers in the region still lack access to proper banking facilities, limiting their ability to make payments online and hinders the growth of the sector. According to the World Bank’s 2014 Global Findex database, only 36 percent of adults in Indonesia have bank accounts. Even among those who have access to banking services such as credit and debit cards, there is a reluctance to conduct transactions and share their financial details online. Except for Singaporeans, ASEAN citizens are 10-30 percent more reluctant to share their financial information for an online purchase compared to the global average.

Appropriate policy measures should be implemented to harness the full benefits of the digital economy in ASEAN. These policies must be geared towards assisting ASEAN member countries to collectively benefit from the movement of this technology wave. One of the policy measures that should be implemented is to promote digital literacy that could be done through improving the educational curriculum. This should provide the students with working knowledge of computers that equip them with the right tools to perform the functions of Internet. There should also be ICT training to help increase the productivity of the workforce.
 

Government support is also important for digital content firms to thrive. This could be in the form of providing tax breaks and subsidies for start-ups that are engaged in the digital content industry.

 

It is also necessary to support digital innovation that will help to move up the economic value chain of ASEAN. For example, integrating technology sensors and devices into equipment and machinery will ramp up the productivity of the manufacturing sector by the increase of value-added activities in the production process. Government support is also important for digital content firms to thrive. This could be in the form of providing tax breaks and subsidies for start-ups that are engaged in the digital content industry. Some experts have mooted the idea of a Digital Economy Promotion Board in ASEAN, which is tasked to conduct market analysis and monitor the progress of digital innovation in the region.

E-commerce plays a key role in facilitating both cross-border trade and foreign investment. ASEAN countries are gearing up to this trend, as seen by the rise of regional e-commerce platforms such as Lazada and Alibaba’s trade platform across Malaysia, Thailand and Indonesia. Such facilities can enable ASEAN to deliver on the potential of global e-commerce.

In terms of legal protection of intellectual property, ASEAN still has a long way to go. According to the 2015 International Intellectual Property or IP Index, Singapore is ranked at 25.38 out of 30, due to the strict IP laws it has in place as well as effective enforcement of IP rights, including action against online piracy and prevention of copyright infringement.

Malaysia scored an average 14.62 in the IP Index. While Malaysia has increased its enforcement activities to curb online piracy and amended its copyright law to include penalties for unlawful Web hosting, streaming and linking, incidence of piracy is high.

Indonesia scored 8.61 on the IP Index, mainly due to software piracy levels and lack of stiff penalties for infringement. Thailand and Viet Nam were placed below Indonesia because of various reasons, principally weak protection of IPs.

Until policy makers in ASEAN come together and put out a comprehensive plan to tap into the digital economy, the various challenges are likely to go unaddressed. ASEAN has a winning ticket in digital development and member states should rally to cash the benefits. An updated ASEAN legal framework is the first step.


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About H.E. Ong Keng Yong


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Ong Keng Yong is Executive Deputy Chairman of the S. Rajaratnam School of International Studies and ASEAN Secretary-General (2003-2007). During his term as ASEAN Secretary-General, he campaigned for ASEAN’s increased regional integration. He led the ASEAN Secretariat to facilitate the early adoption of the blueprint for ASEAN economic integration which laid the foundation for the establishment of the ASEAN Economic Community in 2015. Ambassador Ong is concurrently Ambassador-at-Large at the Singapore Ministry of Foreign Affairs, non-resident High Commissioner to Pakistan and non-resident Ambassador to Iran.