Asean and the Digital Economy

As Asean chairman this year, Singapore is focusing on the digital economy. How can the digital economy become a key driver to achieve a highly integrated and dynamic Asean Economic Community (AEC)?

Singapore Prime Minister Lee Hsien Loong inaugurated the country’s chairmanship of Asean for 2018 with the themes of resilience and innovation. This is to promote innovation through the use of technology as well as collective resilience against terrorism, cybercrime, and climate change. This year’s chairmanship will also focus on advancing the digital economy of Asean member states to make the region globally competitive while achieving sustainable growth, Eurasiareview reported.

Hence, it is necessary to know the opportunities that digital innovation brings to the Asean economies. Roadblocks between Asean and the digital economy must be identified as well to ensure effective policy formulation. However, doing all these requires a critical understanding of the trends that shape today’s digital economy. 

  Potential Leader

Where does Asean stand in the push for the digital economy today? Asean’s strong regional economy, favorable demographics, and Information and Communication investments lead the region to become a potential global leader in the digital economy.

Collectively, Asean is the sixth largest economy in the world, with a combined GDP of $2.5 trillion. Its total population of some 628 million people represents 10% of the world. Moreover, 40% of its citizens are under 30 years of age, and 90% of them have access to the Internet. Studies show that this group is technologically savvy who contributes significantly to the growth of the digital economy, using the Internet extensively for shopping, banking, booking hotels and hailing taxis.

Asean’s digital economy currently generates approximately $150 billion in revenues annually, according to a joint study by AT Kearney, a leading global management consulting firm, and Axiata, a Malaysian telecommunication conglomerate. The largest share of revenue comes from connectivity and online services, each accounting for 35 up to 40% of overall revenues. 

They are followed by user interface (20% of revenues), which includes devices, software and systems. Another component of revenue comes from content and enabling technologies, which constitute the remaining 10%.

ICT investments also boosted the region’s digital economy. According to the AT Kearney-Axiata study, ICT investment in the region has amounted to more than $100 billion in 2014, which grows at over 15% annually.

  Promoting a Dynamic Economy

Promoting the digital economy will help the bloc’s member-states propel their economic growth. Using the Internet will help entrepreneurs to gain access to new markets as well as construct new businesses. Moreover, according to the study, if Asean has successfully transformed itself into a global digital powerhouse, it could potentially generate an additional $1 trillion in Asean’s GDP by 2025.

Interestingly, digital innovation is already present in Asean. For example, Singapore’s Olam International, a conglomerate engaged in agri-business, has successfully promoted smart farming through the use of digital technology. The conglomerate’s Olam Farmer Information System, which registered more than 100,000 farmers in 21 countries in the system, serves as an online platform that provides a comprehensive view of operations in different farms.

This technology is useful for analyzing the collected data for mapping the exact location of farms, determining appropriate amount of fertilizers, and identifying which types of shade trees should be planted for better cocoa production.

Digital technology also creates new industries such as mobile financial services, e-commerce, big data analytics, cyber security solutions, and transport services. The presence of ride-sharing services through mobile applications—Uber, Grab and Go-Jek—illustrates how digitalization reshapes transport services in Asean. The widespread adoption of e-commerce and mobile financial services also boosted the growth of local business activities in the region.