Originally published in Advancing ASEAN in the Digital Age Book, 14 November 2017.
The Role of Digital Age in The Future of ASEAN and Cambodia
This year marks one of the greatest milestones in the history of the Association of Southeast Asian Nations (ASEAN) — the 50th commemorative anniversary of its establishment. For the past five decades of its existence, ASEAN has endured, strived, navigated through various turbulences, and in fact recognized as one of the world’s dynamic, successful and resilient regions, considering its robust economic growth, solid political-security stability, improved living standards, peace, and harmony. For next 50 years, we will witness the transformation of ASEAN in all areas: social, economic and political, in scope and scale that we have never experienced before, and in a new context that will be tremendously shaped by a rapid pace of technological advancement.
We all now know the world is indeed entering the new era of revolution, so-called the Fourth Industrial Revolution (Industry 4.0) that is affecting how governments run, businesses operate and people live. And we are feeling it now since technology has empowered and touched many aspects of people’s lives, societies, businesses, and governments in a way the world has never seen before, from self-driving cars and drones, to virtual travel arrangements, to 3-D printing, to Artificial Intelligence, and to other cloud-based innovations.
The rapid progress would also provide opportunities to address critical challenges in other areas as well, including but not limited to, education, public health, food security, and climate change. The FinTech can be, for example, a key to transforming the entire financial sector by reducing transaction cost and information asymmetry. On the economic front, forces of technologies in Industry 4.0 is a potential game-changer for more efficient, productive, cost-competitive and customized products and services. Industry 4.0 and the emergence of innovative technologies offer a huge potential for ASEAN to further integrate into the global value chains (GCV) and production networks. It would help re-structure economic, trade and industry by reducing costs and boosting productivity. ASEAN could be at the forefront of change – among all means – by leapfrogging or moving ahead with the adoption of latest technologies. By 2030, ASEAN, based on research by McKinsey Global Institute, could generate huge potential economic impact from technologies, estimated to be US$625 billion, equivalent to 4 to 12 percent of ASEAN’s GDP at that year. Recognizing its significance for the growth and development endeavors of Cambodia and the region, Cambodia is keen on one particular component of this revolution, the digital economy and its current trends.
The Internet of Things (IoT), a technological accelerator in the Industry 4.0, is set to become a megatrend. The unstoppable progress of the Internet, for instance, promises potential for online businesses and other means of e-commerce development for Micro Small Medium Enterprises (MSMEs) in ASEAN, which currently account for 99 percent of all enterprises and between 50 percent and 90 percent of employment. ASEAN’s internet penetration, based on a Temasek & Google’s recent report, was also remarkable, reaching 260 million in 2016, equivalent to over 40 percent of the total population, and is expected to be 480 million in 2020, which means 4 million new users coming online every month.
The importance of the Internet is in no way different for Cambodia in comparison to the other ASEAN member states since Cambodia is positioned to become a key player in production and movement of goods and services around ASEAN as well as becoming a regional hub for investors and entrepreneurs. This could lead to a promising rich and diverse economy that provides new jobs, increases financial inclusion, as well as contributes to improving the livelihood of the people in Cambodia and the region. In this connection, Cambodians are rapidly adopting e-commerce in various forms including as consumers and merchants, fuelled by rapidly growing internet users from 1.7 million users in 2011 to 7.16 million users in 20161. E-Commerce and online shopping have been increasing significantly in recent years; and with 60 percent of Cambodia’s population below the age of 25, it represents a huge potential not just for local but regional and international markets. Many cashless and electronic payments platforms, which are vital to the facilitation of e-commerce activities, have been introduced to the Cambodian consumers and merchants with considerable success. Moreover, the Cambodia’s government is in the process of having the law on e-commerce, which covers e-commerce provisions, such as, e-signature, online consumer protection, and personal information protection, e-government, e-payment, and e-evidence. Although such development is still in progress, this will pave the way for Cambodia’s economy to further integrate into the regional economy.
Taking ASEAN into consideration as a regional actor, countries will not be able to single-handedly work towards advancing their economies. This demands the need for cooperation both at the national and the regional levels. The digital economy, as well as, the Industrial 4.0 have become some of the most important topics that have been discussed among the ASEAN member states and its partners. More importantly, ASEAN has adopted ASEAN ICT Master Plan 2020 and Connectivity Master Plan 2016-2025 recognizing digital innovation as one of the five elements as well as setting it as an integral part of all three pillars (Physical, Institutional, and People-To-People Connectivity) of ASEAN Connectivity2. It is starting from supporting and promoting MSMEs and other financial access through digital technologies to improving open data use and enhancing data management among the ASEAN member states.
Yet to realize the full potential of technological advancement, ASEAN needs both hard and soft infrastructure to support the digital economy ecosystem. In addition to building hard infrastructure including broadband connections and mobile networks, aiming to expand and provide universal and low-cost internet access, ASEAN needs to further place an emphasis on soft infrastructure, which focuses on capacity building and skills development through platforms, business networking, and other ICT spaces to share international best practices, and on harmonization of regulations and rules across ASEAN member states. Any efforts by the government to manage or mitigate risks from privacy invasion and other cyber activities, however, must be done by putting the people first to maximize inclusion and digital transformation for all members of the society, including the poor, minorities, youths and women, as well as the economy as a whole.
To thrive in the dynamic social, economic and political architecture, ASEAN must constantly adapt to new conditions and retain an open and flexible attitude. This is because technological progress has come with a set of disruptions to the region, particularly as the level of readiness, application, access, and absorption of new technologies among the ASEAN member states vary considerably. The Industrial 4.0 can disrupt the labor markets in the form of worker displacement and job losses, affect current value chains with increasing volatility, shorter production life cycles and high product complexity, and expose the people to cyber risks. ASEAN, thus, must prepare their younger generations with the ICT digital literacy and skills to prepare for the future jobs that might not exist yet, to catch up fast with more developed ASEAN fellow members and encourage technological innovation through the promotion of STI-driven projects and R&D. Together, the ASEAN member states can prevent a notion of monopoly, which leads to a scenario – winner takes all or winner takes most – in the digital economy as this could widen inequality.
Given the astonishing progress, advancing ASEAN’s digital age is not an option, but a must that would require a whole-of-government as a holistic approach, matched by bold actions with the vision to change and explore new ideas. Thus, member states need to catch up fast through building a forward-looking, simplified and harmonized policies and regulations. The interface of digitalization, e-commerce, and pro-business environment requires the member states to change from working in silos to enhance synergies with other sub-regional and interregional frameworks through both existing and new initiatives to improve physical, institutional or people-to-people connectivity. With the continued national development of infrastructure to integrate into the regional digital economy, I firmly believe Cambodia and ASEAN as a whole would exploit the full benefits of the digital age as a part of our shared future.
About H.E. Hun Sen