Originally published in Advancing ASEAN in the Digital Age Book, 14 November 2017.
Stepping into the Digital Age
“Advancing ASEAN in the Digital Age” brings to readers the future that is upon us even as the regional organization celebrates its 50th anniversary. It is a publication that focuses entirely on digitization and its impact on the ASEAN economy in so many different ways. It is the only book I know of that does this among all that have been published on ASEAN’s past 50 or next 50 years.
The CIMB Asean Research Institute (CARI) is privileged to draw on contributions from top government leaders, leading business executives, and public intellectuals, from across the region as well as beyond it. Some of the contributors are from global alpha companies at the forefront of the digital revolution.
There is undoubted optimism in ASEAN on the future driven by what is now being called the Fourth Industrial Revolution (4IR). There are however some cautionary notes pertaining to ASEAN’s preparedness in facing some of the requirements and challenges of the Digital Age.
Against the massive, phenomenal disruptions taking place across the globe, ASEAN has not been a laggard. With the world’s third largest population, 70 percent of whom are under 40 years of age, ASEAN is big and dynamic. It is one of the fastest growing Internet regions in the world, with an expected 480 million users by 2020. Tencent counts ASEAN and China as the second largest centre of innovations behind only North America.
There is no denial. Business leaders, whether directly operating in the digital space or obviously affected by it, embrace the digital revolution. As noted by some of the contributors to this volume, the ASEAN Internet economy is expected to reach USD200 billion by 2025. A quarter of the ASEAN population are already shopping online. No doubt digital innovation will shape the next 50 years of Asean economic development.
Singapore leads the ASEAN field – by a long chalk. Indeed it is so far ahead it is attracting the world’s leading artificial intelligence (AI) talent that it could very well become a mega hub for start-ups involved in the sector. There is strong state backing for technology research. Alibaba, for instance, has decided to site one of its global AI research facilities in the island republic. A Singapore-based company has also announced it would set up an AI hub of its own which would incubate 100 start-ups every year.
The city state’s massive digital strides highlight a problem in ASEAN integration that could be caused by the digital divide in the region, extending the already existing economic divide into the Digital Age.
Singapore takes the chair of ASEAN in 2018 when it is expected to make the Digital Age the centre of the regional grouping’s attention. It would be a good time for ASEAN to take stock then not just of the vast opportunities but also some of the serious challenges of digitization to individual members state economies as well as to regional integration.
One of ASEAN’s foundational narratives is that its greater economic integration will attract foreign manufacturing investment based on low labour cost in such destinations as Myanmar, Indonesia, the Philippines or Vietnam. However, even now, the low cost labour argument is gone. Cheaper, intelligent robotics, particularly robotic manufacturing, is readily available to displace human labour. Re-shoring is already taking place. There is the serious issue of ASEAN manufacturing employment not taking place in many of its member states.
The challenge is not limited to manufacturing employment. It cuts across all sectors, including services. A study in Malaysia puts the probability factor of computerizable jobs at 0.8 for unskilled and semi-skilled jobs. The threat to an individual ASEAN economy therefore could be higher the lower down the economic ladder it is.
It might be useful if ASEAN commissioned baseline studies of the risk to employment in individual economies from this challenge of the Digital Age.
Concomitantly, such studies should also examine the upskilling needs of the 4IR. Even the U.S. fails on this score. But, again, Singapore has an effective policy framework to achieve this which could be a model for other ASEAN member states. Schemes might have to be put in place for cross-border mentoring and retraining.
Further, as noted by some of the contributors, the ASEAN education system must be fit for purpose of the Digital Age. While new jobs may be created, the work force has to become, in the words of one of the contributors “a Think Force” that is “E-Fit.”
There is a consensus, especially among business leaders, that the current education system across much of ASEAN does not deliver the skills requirements for new jobs in the Digital Age, particularly cognitive skills. Overhaul of education systems takes time, but must begin. Investment decisions in the 4IR world are based on skilled and innovative human capital. One contributor warned ASEAN economies not to be caught in a perpetual cycle of playing catch up.
For the benefits of the Digital Age to flow across Asean, policy guidelines and regulations will have to be liberalized. Yet there will be an inclination to be protectionist from the fears aroused by the digital divide. As with protectionism in the real economy arising from the economic divide, this is short-sighted and will only result in ASEAN member states at the back being left further behind.
Yes, ASEAN must work together to address the major challenges of the Digital Age, but it has also to facilitate it by not constricting its benefits through policies that inhibit cross-border e-commerce, electronic payments, logistics and data exchange. Thus while ASEAN so readily recognizes the massive benefits of the Digital Age, it cannot afford to allow them to be minimized by the undoubted challenges the 4IR also poses. As always there has to be political leadership to negotiate this dilemma.
(This article is the Introduction of the publication.)
About Tan Sri Dr. Munir Majid
Tan Sri Dr. Munir is Chairman of CIMB ASEAN Research Institute, and also of Bank Muamalat Malaysia Berhad, of the Financial Services Professional Board, of ASEAN Business Advisory Council, Malaysia, as well as President of the ASEAN Business Club. He sits on the board of the Institute of Strategic and International Studies (ISIS) Malaysia and on the Financial Services Talent Council of Bank Negara Malaysia.