Since its launch in 2003, the ASEAN Economic Community (AEC) has envisioned the ASEAN region, or the Association of Southeast Asian Nations, becoming a highly integrated, inclusive, and resilient regional economy by 2025. While there has been significant progress made towards many of its aims, not all goals can likely be achieved by 2025. This is partly due to global shocks including COVID-19, global conflict, high inflation, and the effects of climate change.
“ASEAN is projected to contribute US$360 billion to global digital trade by 2025 and is expected to grow to US$1 trillion, or about 10 per cent of global digital trade, by 2030”, said Julia Tijaja, Associate Senior Fellow at the ISEAS-Yusof Ishak Institute. “If ASEAN can agree on an ambitious digital economic framework agreement, it can, in fact, double these targets.”
She was speaking at the Lee Kuan Yew School of Public Policy’s
Building an AEC Beyond 2025 as a panelist alongside Maes Alconcel, International Trade Expert and Tan Hsien Li, Assistant Professor, National University of Singapore, Co-editor of the Centre of International Law, and Editor of the Asian Journal of International Law.
During the discussion, the panelists agreed that despite the global shocks and resulting setbacks, the potential of ASEAN’s economy, and in particular its digital transformation, is a strong growth area. This growth is also a crucial lever to realising the vision of the AEC and building a stronger ASEAN. To achieve this, the AEC’s vision must evolve to remain impactful and relevant.
ASEAN watchers have called for a new holistic approach to enhancing ASEAN’s digital economy, one that extends beyond economic domains and encompasses security, political, and socio-cultural factors. This was a significant focus of the discussion.
“The AEC will continue to take the lead on digital economy initiatives, but there needs to be a platform that allows for cross-pillar discussions,” said Dr Tijaja.
“This will help identify risks, opportunities, and facilitate collaborative work. Such a platform should also be kept open so that ASEAN can engage with relevant stakeholders, including industry experts, the private sector, and civil society representatives.”
Part of this evolution involves accessing the significant benefits that digitalisation has already enabled and determining how to further enhance these benefits. For example, enhancing ASEAN’s digital economy will have the knock-on effect of boosting many of the AEC’s aims, including growing productivity, narrowing the development gap, increasing connectivity, and enhancing ASEAN’s competitiveness. All of this is achievable due to ASEAN’s significant untapped potential in terms of policy making, implementation and capacity.
Taking capacity as one example, the number of internet users in ASEAN soared from 360 million in 2019 to 460 million in 2022, an increase of 100 million in just three years. Yet this latest figure accounts for only about 80 per cent of the region’s population. Furthermore, while many of these internet users are already engaged in e-commerce as consumers, the use of digital services for businesses remains limited and concentrated.
This presents an immense opportunity to increase internet penetration and the use of digital services among businesses, particularly among micro, small, and medium-sized enterprises (MSMEs), which account for 97.2 - 99.9 per cent of businesses in the region. This will help make ASEAN more connected, productive, and prosperous.
Hurdles to Implementation
When it comes to policy making, ASEAN has made strides in terms of cooperation towards its digital economy, introducing nine digital-related frameworks between 2016 – 2023 covering important areas including data protection, cross-border data flow, e-commerce and digital transformation.
“This is very commendable, but there are some limitations, particularly in terms of ensuring follow-up actions and monitoring progress,” said Dr Tijaja.
This theme cut across all the view of the participating academics in the discussions hosted by Denis Hew, Senior Research Fellow, Centre on Asia and Globalisation, Lee Kuan Yew School of Public Policy.
“ASEAN is not short of strategic blueprints and action plans at the regional level,” Prof Hew said. “But once it goes down to a national level, it’s a challenge to get them enacted.”
One reason for this is that many of the frameworks on ASEAN’s digital economy are non-binding, lacking legal obligations and enforcement mechanisms. Likewise, there are shortcomings related to reporting progress, which raises accountability and transparency issues.
It is also important to acknowledge the diverse range of development levels between ASEAN members, with their significantly different industries, digital infrastructure, and digital readiness in terms of literacy, skills, access to connectivity, and affordability.
For example, as of 2021, Myanmar's broadband internet speed measured 20.05 megabits per second (Mbps), while Singapore's reached 264.15 Mbps. These factors contribute to a digital divide, which impedes the goal of narrowing the disparities between member states.
“Digital transformation can either widen or narrow the gap,” said Maes Alconcel. “How about companies that are located in rural areas where they don't have access to the internet or even good internet?”
He emphasised that when digital initiatives are provided, there is a need to make sure that all possible options are provided based on the capacity of the company and region they are operating in.
Another issue is that many of ASEAN’s frameworks and associated publications are focused on economic issues, with limited coverage of other important issues such as socio-cultural and environmental, despite the wide impact of digital transformation.
“Digital transformation provides an opportunity for us to reduce our carbon footprint, but it comes at a cost to the environment,” said Dr Tijaja.
“The increasing use of digital services requires energy-intensive data centres, significant land use, and minerals to create the semiconductors.”
Despite these challenges, the benefits of creating a highly integrated, inclusive, and resilient regional economy are too great to ignore. Enhancing ASEAN’s digital economy is directly linked to the aims of the AEC, and achieving this depends on the transparent coordination among member states enabled by appropriate institutional mechanisms.
“Ultimately, this is about bringing people together regardless of nationality, race, or gender,” said Dr Tijaja.
“There's a strong commitment from all ASEAN countries to ensure that this movement benefits everyone, and for me, that’s what really matters. Demonstrating genuine commitment, love, and care to everyone in the region.”
The Lee Kuan Yew School of Public Policy’s Building an AEC Beyond 2025 can be viewed at this
link.