In this webinar, Ms Alpana Roy, Dr Maria Monica Wihardja, and Mr Hadri Sopri discussed the potential of the ASEAN Digital Economy Framework Agreement and the possible challenges in the negotiations phase that need to be addressed to ensure its entry into force.
ASEAN STUDIES CENTRE WEBINAR
Wednesday, 7 February 2024 — The ASEAN Studies Centre (ASC) of the ISEAS – Yusof Ishak Institute organised a webinar titled “Making the ASEAN Digital Economy Framework Agreement (DEFA) a Reality”. Ms Alpana Roy, Singapore’s Senior Economic Official to ASEAN and Director (ASEAN) at the Ministry of Trade and Industry; Dr Maria Monica Wihardja, Visiting Fellow at the ISEAS – Yusof Ishak Institute; and Mr Hadri Sopri, Head of Trade Policy for Asia-Pacific & Japan at Amazon Web Services (AWS) presented at the webinar. The session was moderated by Ms Kristina Fong, Lead Researcher for Economic Affairs of the ASEAN Studies Centre at ISEAS.
Ms Roy started off the session with a broad overview of the DEFA and its importance in ASEAN’s next phase of digital integration. As a start, she shared the vast opportunities for the digital economy that the ASEAN region holds on account of its attractive economic and demographic characteristics. The region is poised to be the fourth largest economy in the world with a digital economy worth USD 1 trillion by 2030, supported by a young population aged below 35 and an additional 40 million internet users annually.
To reap the benefits of these attractive trends, businesses can leverage Digital Economy Agreements (DEA) to facilitate seamless end-to-end digital trade, enable trusted data flows, and build trust in digital systems. Tools such as paperless trading, e-invoicing, and liberalisation of cross-border data flows in a secure manner can help to reduce business costs and increase operational efficiencies. Ms Roy shared that Singapore has made credible efforts to tap into the potential of the digital economy bilaterally and multilaterally through DEAs with five countries, as well as proactively being at the forefront of global rulemaking in the digital space with the World Trade Organisation and the European Union. ASEAN itself also does not start from ground zero. A range of digital economy strategic frameworks and roadmaps, modular initiatives such as use-case cooperation undertaken by numerous sectoral bodies, and trade rules that include e-commerce matters in various trade agreements are already in place.
In a deeper look at the DEFA, Ms Roy reiterated that the agreement aims to deepen existing digitalisation efforts and address emerging technological issues, all the while being flexible to account for member states who are at different points on digitalisation. The ASEAN DEFA Study completed by the Boston Consulting Group identified digital development gaps amongst the ASEAN Member States (AMS) and recommended nine core elements (including cybersecurity, cross-border data flows and digital ID and authentication) to be included in the negotiations. Projections also showed that the successful implementation of the DEFA would double the value of the digital economy to USD 2 trillion by 2030. Ms Roy shared that in the first round of negotiations held in December 2023, negotiators reaffirmed the importance of the ongoing engagement of industry and stakeholders in the process, the focus on the nine core areas recommended, as well as underlying principles that the DEFA should be a living agreement with flexible construct to provide tangible benefits to its stakeholders.
Dr Wihardja followed this by presenting her views on how domestic digital policies could be aligned with the vision of the DEFA. She started off the discussion by presenting the different starting points of each country in their digitalisation ambitions including in areas of infrastructure, payment and e-invoicing systems and cybersecurity amongst others. Regulations on personal data protection and cybersecurity are uneven in ASEAN, where most countries in the region lack rigorous cybersecurity frameworks and only half have passed their own personal data protection laws. Data localisation, that is where data is stored and processed within the borders of the source nation, remains a contentious issue as countries try to balance business and security needs within the limits of their storage infrastructure.
Dr Wihardja then proceeded to provide an overview of the challenges to the DEFA negotiations. Apart from the different levels of digital development, different demographic cohorts in a country may also have differing knowledge and skills, with respect to the digitalisation agenda, and may harbour concerns about how their data is being used and overbearing surveillance. Apart from the human element, other obstacles may include the challenges posed by different political regimes in the AMS, existing domestic regulations as well as the presence of digital provisions in other Free Trade Agreements (FTAs) and DEAs that could create fragmentation between countries as well.
The presentation then segued into the biggest challenges to translating DEFA terms to domestic policies. These include getting domestic buy-in, passing legally binding laws, alleviating the lack of public trust in the government and institutions as well as the ability to monitor compliance, unfamiliar concepts that do not translate well to local context or languages, and knowledge gaps amongst the population. To tackle this, Dr Wihardja proposed that stakeholders should be involved from the start to give them a sense of ownership, studying the winners and losers of the DEFA to identify what can be done to compensate the latter, and ensuring comprehensive representation in data collection to avoid biases. She also proposed that the DEFA be principle-based and impact-focused rather than be prescriptive by remaining cognizant of the legislative and regulatory priorities of different countries. The DEFA should also be future-proofed with rules and cooperation evolving whilst promoting standards that encourage competition, crafting a middle ground that preserves strategic autonomy whilst having an inclusive agreement and mechanisms to ensure accountability. Dr Wihardja concluded that the DEFA should enhance the welfare of everyone, contribute to international rulemaking and lay the foundations for the ASEAN Digital Community 2045 vision, while noting future challenges that may constrain growth of the digital economy such as the ageing population.
The final presentation was given by Mr Hadri from the perspective of the private sector regarding the DEFA. After reviewing some of the regional activities AWS has been involved in including the establishment of data centres servicing both industry and customer needs in data processing, as well as the development of SEA-LION, a Large Language Model (LLM) pre-trained for the Southeast Asian region with AI Singapore, Mr Hadri went on to discuss the main priorities for businesses that the DEFA should include. On a broad level, he emphasised the importance of digital trade rules to promote a more inclusive digital economy, leveraging existing FTAs and DEAs as a baseline for the Agreement, as well as the Data Free Flow with Trust (DFFT) Agreement which emphasises seamless data flows with necessary safeguards. More specifically, it would be important for the DEFA to develop high-standard digital trade rules, discourage data localisation, embrace international standards and best practices to integrate emerging technologies into systems, promote non-discrimination and risk-based approaches to cybersecurity, and adopt fair public procurement frameworks to enable digital transformation.
Mr Hadri rounded up his presentation with a discussion on how digital services have benefited a range of industries in their operations including businesses in the small and medium-sized enterprises (SMEs) segment. Some key examples included harnessing the cloud to enhance cybersecurity, protecting consumer data, and adjusting the scale of services provision for its users in different countries. AI and machine learning have also been used for inventory management and pricing models. Lastly, Mr Hadri touched on the agriculture industry due to its large contribution to gross domestic product and employment in the ASEAN region and how companies have leveraged the cloud to make data-driven farming decisions, succeeding in expanding their domestic customer base and being able to better comply to overseas regulations, thus facilitating market entry.
During the Q&A session, questions raised include how cross-border intellectual property enforcement could be enhanced, the likelihood of negotiations completing on schedule in 2025, impact on legal and regulatory frameworks in ASEAN member states, in particular how domestic strategic autonomy could be preserved without compromising the quality of the DEFA and what a “middle ground” strategy for the DEFA would likely look like. Other than that, there was also interest in how the main provisions of the DEFA could be integrated into existing frameworks, as well as how SMEs could better leverage the benefits from the DEFA. Lastly, the status of green economy considerations in current negotiations were brought up as well as how countries implementing their own digital laws and regulations prior to the conclusion of the DEFA negotiations could affect the outcome.
The webinar was attended by more than 80 participants from the region and beyond.