Can the Digital Economy Foster Inclusive Growth in ASEAN?

By Frank-Jürgen Richter

June 26, 2019

Digitalization is an indispensable aspect of daily life – disrupting and transforming ordinary living, communication and business. Perhaps more than anywhere else, its implications on the ASEAN region have been profound.

Based on a report by Google and Temasek Holdings, the ASEAN region is forecast to be the next booming digital economy, expected to reach US$200 billion by 2025, and accounting for 6 percent of regional GDP. Of this projected growth, e-commerce alone will account for US$88 billion in ASEAN.[1] And if one is to consider the indirect impact of these expected developments, the benefits accrued will be substantially larger.

The growth in digitalization has been fueled by an increase in the size of the middle class, a rapid growth in the number of mobile internet users, the advent of 5G telecommunications and a thriving startup ecosystem. Currently, Asia as a region is home to the world’s highest number of internet users. This has contributed to the growth of the e-commerce sector, digital classrooms and video on demand services. The need for faster internet speeds has encouraged 5G connectivity – with several ASEAN countries (Malaysia, Indonesia, Philippines and Singapore) running 5G test trials in their respective markets.

Disruptive Technologies

Fintech is one sector that is expected to see significant growth due to the increase in digital transactions. Both governments and private companies are committing sizable investments in the fintech sector as they are mindful of the positive impact these investments can have on the financial sector in the region and the economy at large.

One of the underlying technologies fueling fintech is blockchain. Its importance is growing among businesses and governments in ASEAN, who have already started implementing this technology in applications. Cloud computing is another integral component of the digital revolution. Other disruptive technologies playing key roles in ASEAN’s digital growth are the Internet of Things (IoT), artificial intelligence (AI), robotics and automation. These are having a profound impact on how the workforce of the future will turn out and are presenting new challenges rather swiftly for governments and businesses alike, particularly in the areas of employment and pensions. On the flipside, they are also transforming manufacturing processes.

A Sampling of Initiatives

Governments in ASEAN have introduced several initiatives in IoT, blockchain, cybersecurity, AI, data analytics, cloud computing and robotics. The Malaysian government, for example, recently launched its National Policy on Industry 4.0 called ‘Industry4WRD’ which focuses on driving digitalization in local manufacturing companies. Through this initiative, the government hopes to solve several business concerns including workforce management such as health and safety, waste management, and operational efficiency and productivity.[2]

Elsewhere, the Philippines’ Inclusive Innovation Industrial Strategy (i3S) aims at growing innovative and globally competitive manufacturing, agriculture and services while strengthening their linkages into domestic and global value chains with innovation at the core of the country’s strategic policies and programs.[3] The Department of Information and Communications Technology, Philippines announced the National Cyber-Security Plan 2022 last year with a focus on cyber-security of their mission critical and non-critical infrastructure.[4] The Philippines government has also announced its National Broadband Plan which will deploy fiber optic cables and wireless technologies to enable faster and affordable internet access.[5]

Thailand’s Digital Economy Promotion Agency (DEPA) shares a roadmap of Thailand 4.0 – an effort to transform the economy into a value-based and innovation-driven economy with 10 S-Curve targeted industries including next generation automotive, smart electronics, agriculture and biotechnology, robotics and digital.[6]

Indonesia, too launched its industry roadmap Making Indonesia 4.0 in 2017 – this will support five key technological advances – namely, IoT, AI, human-machine interface, robot and sensor technology, and 3D printing. This roadmap has the potential to boost Indonesia’s economy by 1 to 2 percent.[7]

Singapore Sets an Example

Not surprisingly, Singapore is way ahead of other ASEAN countries in promoting digitalization. Singapore has initiated plans such as the Smart Nation Program, which aims at harnessing the power of networks, data and technologies to improve standards of living, create economic opportunity and build a closer community. To encourage digital readiness and foster inclusive growth among its citizens, Singapore’s government is also working on a Digital Readiness Blueprint based on four focus areas. They are to (i) expand and enhance digital access for inclusivity; (ii) infuse digital literacy into national consciousness; (iii) empower community and businesses to drive widespread adoption of technology; and (iv) promote digital inclusion by design.[8]

A Digital Future

ASEAN’s digital revolution has already begun but it will need to be sustained by its governments and businesses. ASEAN member states have built comprehensive digitalization blueprints to realize the potential of technology and to foster inclusive growth, investment and innovation across the region. Now these efforts must be continued and investments have to be made to ensure these plans come to fruition.

Efforts to make technology more accessible and affordable will be instrumental in ensuring inclusive growth in the region. The adoption of new technologies has indeed surged over the past few years, but its growth has been clouded with concerns over job losses. In this regard, collaborations among governments, educational institutions and businesses could foster a skills-based education system to prepare the current and future workforce for technological disruptions and to encourage growth for all sections of society.