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

 

The Future of ASEAN is Digital

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The future is digital. Nowhere is this more obvious than Asia, a region that has wholeheartedly embraced the Fourth Industrial Revolution, allowing entire countries to leapfrog redundant technologies right into the digital era.

Pensioners in China pay for vegetables at the wet market with QR codes, unbanked Indian workers receive wages on their mobile phones, Filipinos with no credit cards purchase flights via text message. What’s most impressive is the speed at which these changes are taking place. It took Sweden decades to transition to a practically cashless society1. We now see the same thing happening in China’s big cities in the span of about 10 years.

Everywhere in Asia, people are rapidly adopting digital technologies and adapting them to the local context. This is particularly true for ASEAN, which is an exciting piece of Asia’s digital landscape puzzle. Cheap mobile devices and affordable data plans mean more people connect to the internet using their phones. ASEAN’s mobile penetration rates are some of the highest in the world. A young population that came of age during the digital revolution means a tech-savvy generation that is comfortable with interacting and transacting via mobile apps.

This is important for ASEAN – a diverse region of more than 630 million people and countries at every stage of economic development – because digital technology is the great equaliser that lowers barriers of entry to take part in the digital economy. Many small e-commerce retailers are nothing more than a mobile phone, maybe a desk and a computer. Starting your own business now just takes a few swipes and clicks, and minimal capital.

Because of this rapid growth in e-commerce, the number of online consumers in ASEAN has surged 50 percent over the last year to 200 million and the region’s digital economy has grown to more than US$50 billion2 – about the size of Cambodia’s GDP.

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ASEAN also is home to some of the world’s fastest-growing economies. Of the top 10 fastest-growing economies in 2017 as forecasted by World Bank, four are in ASEAN – Laos, Cambodia, Myanmar and the Philippines3.

ASEAN’s affinity for digitalisation, coupled with its rapid growth, means the region is home to some of the most competitive digital economies. Singapore leads the pack, followed closely by Malaysia, Indonesia, the Philippines and Vietnam. In fact, Malaysia is seen as an exemplar of how Asia is “the most exciting region in the world” when it comes to the digital revolution, right alongside the powerhouse that is China4.

The biggest drivers for future growth in the digital space will be travel and e-commerce. Travel accounts for 44 percent of the ASEAN digital economy (US$22 billion), followed by e-commerce (US$15 billion)5.

Recognising this, Singapore has declared the digital economy a key focus area when it takes over the ASEAN chair next year, with a focus on promoting innovation, digital connectivity and e-commerce flows that will benefit businesses, especially small-to-medium enterprises (SMEs). Singapore also intends to expedite customs clearance via a regional electronic platform that will help ASEAN businesses lower the administrative costs of trade.

It’s not just SMEs that stand to benefit. Going digital also has the potential to supercharge large businesses, including AirAsia. That’s why we are investing in heavily in data and digitalisation as we move towards becoming a truly digital airline.

AirAsia has always been ahead of the curve. We debuted SMS bookings in 2003 before apps were a thing, we put our lowest fares on airasia.com back when airlines still sold seats through travel agents, we introduced our AskAirAsia page with search box to answer frequently asked questions and, of course, we rolled out our ubiquitous airport kiosks so guests can check in or print their boarding passes with ease.

More recently, we have pursued even greater automation at the airport counter, from home bag tags to self bag drop. Eventually, AirAsia guests will be able to go through the entire check-in process from start to finish at their own convenience. We are working with technology partners, airports and regulators to develop the airport of the future offering a seamless experience based on facial recognition.

Existing businesses aside, ASEAN has also emerged as an excellent breeding ground for new startups. The region benefits from a highly educated workforce, entrepreneurial spirit and gaps in service that attract innovative solutions. Grab, Go-Jek and Garena are some of the examples of local unicorns that not only add convenience and improve quality of life, but also create jobs and attract significant foreign investment.

 

Governments hold the key to ensuring Asean maintains its trajectory and develops a robust digital economy.

 

Governments hold the key to ensuring ASEAN maintains its trajectory and develops a robust digital economy. Investments in infrastructure and education, harmonising standards, facilitating investments by improving access to funding, providing technological and business mentorship and responding quickly to change by crafting laws and regulations that support disruptive but beneficial businesses can mean all the difference.

Crucially, the digital economy has potential to catalyse infrastructure developments over the long term. Digital integration allows businesses to move to the front of the pack and connect ASEAN member nations with regional supply chains in production and distribution. This in turn stimulates physical infrastructure development, fostering more inclusive growth, setting in motion a virtuous cycle of development.

With big neighbours like China and India who have invested heavily in the digital infrastructure and technologies, who possess access to deep capital markets and boast huge populations, the onus is on ASEAN to do all it can to ensure sustainable development of an indigenous digital economy that can compete on equal footing.


1 Cash transactions made up less than 2 percent of the value of all payments made in Sweden, according to central bank Riksbank.
2 Digital Acceleration in Southeast Asia: Navigating Tectonic Shifts, Bain & Company (2017).
3 Global Economic Prospects, World Bank (2017).
4 Digital Evolution Index 2017, Harvard Business Review (2017).
5 Digital Acceleration in Southeast Asia: Navigating Tectonic Shifts, Bain & Company (2017).


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About Tan Sri Tony Fernandes


Tan Sri Tony Fernandes
Tan Sri Tony Fernandes is the co-founder of AirAsia, Asia’s largest low-cost carrier by passengers. He studied at the London School of Economics and is a qualified chartered accountant. Fernandes has received numerous honours, including the Honour of the Commander of the Order of the British Empire and Commander of the Legion d’Honneur for his contributions to aviation.