EXECUTIVE SUMMARY
- Thailand is among the ASEAN countries that have seen the most rapid growth in digital infrastructure and e-commerce since the COVID-19 pandemic.
- In a 2022 study conducted by the Asian Development Bank, Thailand was among just eight countries in the Asia-Pacific region that have implemented comprehensive legislation governing digital trade.
- In the absence of a multilateral agreement, Thailand, like many other countries, is leveraging its participation in FTAs to shape global rules for digital trade; but this approach requires significant administrative resources and can lead to regulatory fragmentation and increased business costs.
- Alternatively, the standalone Digital Economy Partnership Agreement (DEPA) is emerging as a key consensus-building platform towards a multilateral digital economy regime that Thailand may consider joining.
* Antonio Postigo is Associate Fellow at ISEAS – Yusof Ishak Institute, Singapore, Visiting Fellow at the Department of International Development, London School of Economics and Political Science (LSE), London, United Kingdom, and Senior Research Fellow at the Barcelona Institute of International Studies (IBEI), Barcelona, Spain.
ISEAS Perspective 2023/58, 24 July 2023
INTRODUCTION
The world economy is increasingly dependent on the cross-border flow of digital information. Data can serve as inputs to a final product, function as final products themselves, or facilitate the production and/or trade of other goods. Between 2007 and 2017, the flow of data increased by more than 20 times.[1] The COVID-19 pandemic has accelerated the digital transformation of many economies and boosted digital trade. At the same time, the rapid digitalisation of the global economy has prompted national governments to introduce new legislation, often leading to increased regulatory fragmentation and barriers to digital trade.[2]
While there is no single definition of digital trade, the comprehensive definition proposed by the OECD as “digitally enabled or digitally ordered cross-border transactions in goods and services that can be delivered digitally or physically”[3] has gained widespread acceptance. While electronic commerce (e-commerce) is the most commonly reported component of digital trade because it is the easiest to assess, it is just one element on the broader digital trade landscape.[4] Estimates suggest that a 20% increase in the size of the digital sector from the 2020 baseline would result in a 5.4% global output increase and a 6.1% increase in Asia’s gross domestic product by 2025.[5] Similarly, a 10% increase in digital connectivity can boost trade in goods and services by 4% and 3%, respectively.[6]
Since the onset of the COVID-19 pandemic in March 2020, there has been a surge in digitalisation accompanied by an increase in legislation related to digital trade. However, many developing countries either lack entirely or have insufficient digital trade legislation.[7] At the same time, certain domestic regulations can create barriers to digital trade, including:[8] a) Forced data localisation: While data localisation measures can enhance data privacy, consumer protection, and cybersecurity, they can also limit firms’ access to global networks[9]; b) Customs duties on electronic transmissions: In 1998, WTO members agreed to a moratorium on tariffs for electronic transmissions (see below), which requires periodic renewal;[10] and c) Inconsistency and lack of interoperability between national regulations.
To assess the restrictiveness of domestic regulations on digital trade, several indexes have been developed. The United Nations Economic and Social Commission for Asia and the Pacific (UN-ESCAP) has created the Regional Digital Trade Integration Index (RDTII), which measures regulatory measures affecting digital trade integration.[11] Additionally, the Organisation for Economic Co-operation and Development (OECD) has compiled the Computer Services Trade Restrictiveness (STRI) and Digital Services Trade Restrictiveness (DSTRI) indexes, which quantify regulatory barriers impacting trade in services, including digitally-enabled services.[12]
THE DIGITAL ECONOMY IN THAILAND
In 2021, e-commerce alone in ASEAN was valued at US$170 billion in gross merchandise value and is projected to reach US$360 billion by 2025 and US$1 trillion by 2030.[13] Thailand is one of the countries in ASEAN and Asia that witnessed the fastest growth in digital infrastructure and accessibility, a trend that has been further accelerated by the COVID-19 pandemic (Table 1).
Thailand boasts the second-largest penetration of e-consumers in ASEAN, at 48 million internet users and 9 million new digital consumers since the start of the pandemic until mid-2021. Notably, 67% of these users are located outside the Bangkok area. In 2021, the internet economy in Thailand reached US$30 billion in global merchandise value, marking a 51% increase compared to 2020, and is expected to reach US$57 billion by 2025. Thai e-commerce alone accounted for US$21 billion in 2021, ranking 19th globally in terms of value.[14]
Table 1: Selected digital indicators in Thailand
* Population between 16 and 64 years old.
Abbreviation: The PDPA = Personal Data Protection Act
Sources: Bangkok Post 2 July 2021; 3 September 2021; and 27 August 2022;
Thailand Digital Outlook 2022 (https://tdo.onde.go.th/)
The digitalisation wave has also transformed numerous service sectors in Thailand, with most notable advancements observed in financial services. Foreign investment in digital services has surged, particularly in e-commerce, fintech, e-health, and online education. This growth has been driven by increased Internet and mobile phone penetration, as well as the improvement of logistics and e-payment systems.[15] In terms of e-commerce transactions, 50% are business-to-consumer (B2C), followed by business-to-business (B2B) at 27%, and business-to-government (B2G) at 23%.[16] One-third of B2B e-commerce transactions are in the food and service sector, with manufacturing at 16% and retail and wholesale at 15%.
In 2016, Thailand introduced the Thailand 4.0 Strategy, aiming to transition the country to developed status through an industrial transformation in ten key sectors, including digital industries, and position Thailand as ASEAN’s innovation and knowledge-based digital hub.[17] Similar to traditional industries like automotive, electronics, petrochemicals, and heavy industries, Thailand has prioritised digital transformation in the Eastern Economic Corridor (EEC), which accounted for 60% of total FDI inflows in 2021.[18]
Furthermore, in recent years, Thailand has implemented several projects to promote and strengthen the digital economy and digital transformation across various dimensions.
First, in the e-commerce ecosystem, the Department of International Trade Promotion (DITP) at the Ministry of Commerce established Thaitrade.com in 2011. Thaitrade.com serves as a B2B electronic marketplace connecting over 25,000 Thai exporting firms, particularly small and medium enterprises (SMEs), with international importers.[19]
Second, to bolster digital infrastructure, Thailand initiated the construction within the EEC of the Digital Park Thailand in late 2021.[20]This public-private partnership aims to promote the development of digital infrastructure, enhance digital connectivity and aspires for the Park to become an ASEAN hub for digital innovation by attracting high technology and digital industries. [21]
Third, to facilitate trade, encompassing both digitally enabled and digitally delivered goods as well as traditional goods and services, Thailand launched the pilot stage of the National Digital Trade Platform (NDTP) in September 2022.[22] The NDTP will serve as the centralised point for communication and electronic document delivery between trading partners.[23] The NDTP is linked with Thai facilities such as the National Single Window and will be integrated with similar digital platforms in other countries.[24]
DOMESTIC REGULATIONS ON DIGITAL TRADE
In 2016, Thailand launched the Office of the National Digital Economy and Society Commission to draft national policies for the digital economy and society. A year later, a Digital Economy Promotion Agency was created to facilitate the growth of digital industries and promote the use of digital technologies. Both have been later integrated into the Ministry of Digital Economy and Society, which was established in October 2016 as a replacement for the Ministry of Information and Communication Technology.[25] The Digital Development for Economy and Society Act (2017) established the legal framework for the digital development of both the economy and society in Thailand.[26] It also created a Digital Economy and Society Development Fund to finance future digital economy and social development plans.
In the past five years, Thailand has introduced a substantial number of new regulations concerning the digital economy.[27] According to a recent ADB report,[28] Thailand is one of only eight countries among the 49 surveyed in the Asia-Pacific region which has implemented digital trade legislation. The current Thai regulatory framework on digital trade encompasses various dimensions, including electronic transactions, consumer protection, privacy, data protection, cybercrime, and the adoption of the United Nations Commission on International Trade Law (UNCITRAL) model law on e-commerce.[29].
The Electronic Transactions Act (2019) established the legal equivalence of electronic records and signatures with paper records and handwriting signatures.[30] All digital businesses in Thailand are required to register under the Commercial Registration Act.[31] The Personal Data Protection Act (PDPA) issued in June 2022, outlines the obligations for both overseas and domestic e-commerce businesses regarding the collection and use of personal data.[32] In December 2022, Thailand issued the Decree on Digital Platforms, which establishes the obligations of digital platform providers.[33]
Of note, the PDPA does not require data localisation, and Thailand has lower tariffs and non-tariff barriers on information and communication technology (ICT) goods compared to the Asia-Pacific average.[34] However, Thailand imposes stricter restrictions on foreign investments and the operations of telecommunication businesses, as well as on online sales and transactions. Consequently, Thailand’s score on the UN-ESCAP’s RDTII is higher (indicating more digital trade restricting policies) than the ASEAN and Asia-Pacific averages.[35] Thailand also receives higher scores (more restrictive) in both OECD’s indexes, with the fourth-highest DSTRI and second-highest STRI in ASEAN.
INTERNATIONAL GOVERNANCE OF THE DIGITAL ECONOMY
A plurilateral negotiating platform at the WTO, the Joint Initiative on Electronic Commerce (JIEC), was established in 2017 to build consensus on trade-related aspects of electronic commerce.[36] Progress among the current 86 JIEC members has been most notable in the following areas: online consumer protection, electronic signatures, spam, open government data, electronic contracts, transparency, paperless commerce, and open Internet access.[37]
The Asia-Pacific Economic Cooperation (APEC) has launched discussions among interested members on trade facilitation and data privacy and on making the WTO moratorium on electronic transmissions permanent.[38] Despite these efforts, variations in national regulatory frameworks and the absence of multilateral rules and standards governing digital trade and data-driven markets can create what some authors refer to as a “digital noodle bowl”, which entails additional costs for businesses.[39]
While a multilateral digital trade agreement materialises, countries are relying on regional and bilateral free trade agreements (FTAs) as well as ad hoc digital economy agreements as the main mechanisms to establish international rules on digital trade. As of May 2023, there were 356 free trade agreements (FTAs) in force, with over half of them implemented in the last decade incorporating provisions related to digital trade.[40]
However, analyses of digital trade provisions in FTAs reveal a fragmented landscape, with three primary templates for digital chapters emerging in FTAs: those led by China, the European Union (EU), and the United States (US).[41] Digital trade provisions in Chinese FTAs tend to be less comprehensive and focus on facilitation and e-commerce; provision in the EU’s and the US’ FTAs are broader and deeper, and while the EU’s FTAs emphasise personal data protection, the US’ FTAs stress non-discrimination of digital products provisions. [42]
Although digital trade chapters have been included in many recent FTAs, the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) distinguish themselves through their extensive geographic reach and comprehensive provisions on digital trade rules.[43] RCEP’s liberalisation in traditional goods trade and other trade-related issues is less comprehensive and deep than the CPTPP.[44] The digital trade in the RCEP overlaps with that of the CPTPP in areas such as paperless commerce, electronic signatures, and online consumer protection. However, the RCEP, which is shaped by the digital trade framework of its members, especially ASEAN and China, allows for greater flexibility in restricting data flows if it is deemed necessary to achieve legitimate public policy objectives or protect security interests. In contrast, the CPTPP, building upon the initial membership of the US in its predecessor (the Trans-Pacific Partnership, TPP), incorporates the US model of digital trade provisions in FTAs, including non-discrimination of digital products, prohibition of source code access, prohibition of localisation requirements, and prohibition of cross-border data transfer restrictions, thereby emphasising open data flows.[45]
In December 2021, ASEAN implemented the ASEAN Agreement on E-Commerce, which closely aligns with the digital chapter in the RCEP covering various digital trade rules on cross-border trade facilitation, electronic payments, internet neutrality, personal data, and consumer protection.[46] Also, like the RCEP, the agreement does not include provisions on non-discrimination of digital products or restrictions on source code requirements.
Among the FTAs that ASEAN has already implemented with Australia/New Zealand, China, Hong Kong, India, Japan and South Korea, only the first FTA (AANZFTA) has been upgraded to include a digital chapter.[47] The e-commerce chapter in the AANZFTA, which could serve as a model for other ASEAN’s FTAs, covers various digital trade issues such as transparency, consumer protection, online personal data protection, authentication, certification, electronic signatures, and paperless trade administration. However, it does not include applicability of WTO rules (e.g., digital service supply), non-discriminatory treatment of digital products, or the moratorium on tariffs on digital products.
Thailand participates in the WTO’s JSIEC but, like other countries, has leveraged its engagement in FTAs to shape global rules and standards for digital trade. It has implemented six bilateral FTAs and is a party to eight regional agreements, namely ASEAN, the six ASEAN-centred FTAs, and the RCEP (Table 2).[48]
Among the bilateral FTAs, only the Thailand-Australia (TAFTA) and Thailand-New Zealand (NZTCEP) FTAs contain digital provisions, albeit that they are fairly generic.[49] Both FTAs include provisions on consumer protection, online personal data, paperless trade administration, customs facilitation, applicability of WTO rules to e-commerce, and a pledge to follow UNCITRAL’s model law. Unlike the NZTCEP, TAFTA also includes provisions on authentication, certification, electronic signatures, the applicability of trade rules to digital services, and a moratorium on tariffs on digital products.[50]
All members of ASEAN are part of the RCEP, but only Brunei Darussalam, Malaysia, Singapore, and Vietnam are members of the CPTPP (Table 2). While the Thai government has expressed interest in the CPTPP, it has not yet joined due to strong opposition from civil society organisations.[51]
Table 2: Digital provisions in the FTAs and digital agreements participated by Thailand and other ASEAN countries
Abbreviations: AANZFTA: ASEAN-Australia-New Zealand FTA; EU: The European
Union; GCC: Gulf Cooperation Council; US: The United States of America
Sources: Honey (2021); ADB (2022); Corning (2023); WTO-JIEC (undated)
Beyond FTAs, some countries are negotiating standalone bilateral or plurilateral digital economy agreements. For example, the US and Japan have signed an agreement on digital trade.[52] Singapore has taken a leading role in establishing international rules and standards for the digital economy and has bilateral digital partnerships with Australia (2020), the United Kingdom (2022), the European Union (2023), and South Korea (2023). But it is the Digital Economy Partnership Agreement (DEPA) signed by Singapore with Chile and New Zealand in 2020 that has garnered the greatest attention.
Unlike other digital agreements, DEPA is an “open agreement” that allows for the inclusion of additional countries.[53] South Korea, Canada, and China have initiated negotiations to join DEPA, potentially giving the agreement the necessary critical mass to become a consensus-building platform in the harmonisation or convergence toward a multilateral digital economy regime. In May 2022, Singapore extended an invitation to Thailand to join DEPA, and both countries have signed a memorandum of understanding (MoU) covering several key issues of the digital economy.[54] However, Thailand is still to decide whether it will join DEPA or not.
Another distinctive feature of DEPA is its modular approach. DEPA is organised into 16 modules, each addressing specific aspects of the digital economy. This allows for future revisions as the digital economy evolves and new issues arise. It also offers flexibility, allowing countries to join DEPA in its entirety or incorporate specific modules into their domestic policies or other trade negotiations.[55]
While DEPA and other bilateral digital agreements do not address traditional issues like cross-border services, financial services, and intellectual property included in FTAs, they offer greater coverage in terms of the digital economy.[56] DEPA and Singapore’s bilateral digital partnerships align with the CPTPP digital trade template, encompassing provisions on data flows, data localisation, electronic transactions, and non-discrimination of digital products. However, its scope extends beyond digital trade, aiming to cover the entire value chain and various aspects of the digital economy, like open government data, internet access, competition, fintech and e-invoicing.
EXPLORING THAILAND’S FUTURE CHOICES IN DIGITAL ECONOMY GOVERNANCE
While FTAs and standalone digital agreements have made important strides in building an international digital trade regime, there is still a pressing need for substantial progress at the multilateral level through the JIEC. An agreement facilitated by the WTO offers distinct advantages.
Firstly, it can better accommodate the “special and differential treatment” for developing and least developed countries compared to FTAs. Secondly, it enables the integration of rules for digital trade with those governing traditional goods, services, and intellectual property rights. Most importantly, it ensures interoperability and prevents fragmentation within the digital trade system. However, the institutional gridlock within the WTO hampers negotiations and makes it unlikely for any digital trade agreement to be reached quickly.[57]
In this scenario, Thailand faces the decision of whether to upgrade its existing FTAs to include digital trade rules, join the CPTPP with its more comprehensive digital chapter compared with RCEP, or join DEPA.
Upgrading existing FTAs to include digital trade rules with specific partners allows for the customisation of digital trade provisions based on bilateral or regional needs. This approach will require significant administrative resources and contribute to increased regulatory fragmentation and higher costs of doing business.
Joining the CPTPP would grant Thailand access to a more comprehensive digital chapter, compared to the RCEP. However, it would also require Thailand to meet a broader and more extensive set of requirements in other trade-related areas and could limit the policy space to implement certain developmental strategies.
Finally, and due to the evolving nature of the digital economy, a standalone and adaptable digital agreement such as DEPA can more adequately and rapidly address the barriers encountered by businesses better than FTAs. Although DEPA’s membership is still small, several major economies have expressed interest in joining it.
The existing MoU and the range of cooperative efforts in the digital economy between Singapore and Thailand have the potential to generate momentum for Thailand’s membership in DEPA. Early membership will also provide Thailand with the opportunity to actively participate in shaping the agenda of the agreement.
ENDNOTES
For endnotes, please refer to the original pdf document.
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