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"Pursue Integration of ASEAN Digital Economy under ‘Open Regionalism’" by Sanchita Basu Das

2018/19, 5 March 2018

ASEAN’s digital economy has untapped potential. At the ASEAN Economic Ministers’ Retreat in Singapore from 1-3 March 2018, Mr. Lim Hng King, Singapore’s Minister of Trade, urged ASEAN governments to work together to facilitate trade and investment in the region. In his words, ‘our trade architecture might have served us well over the past years, but we need to enhance and update it to ensure that trade and investment flows continue unhindered throughout the region’. As ASEAN Chair in 2018, Singapore wants to work with the partner economies on digital connectivity and e-commerce flows in the region.

One way to achieve this is for the ASEAN countries to work on a digital economy simultaneously among themselves and with their key trading partners. ASEAN has followed this model, termed as ‘open regionalism’, for long. Member countries consider their own integration as important as their integration with the bigger economies of China, India, Japan, South Korea and others.

In the words of Minister Lim, this model of ‘open regionalism’ served ASEAN well in the past. ASEAN countries’ own integration was bolstered as many foreign MNCs from China, Japan and Korea incorporated ASEAN into their global value chains (GVCs). While ASEAN traded more with these countries in categories of intermediate and final products, foreign investment flows to the region increased as the foreign MNCs decided to enhance their presence in ASEAN.

As a result, all these big non-ASEAN economies provided ASEAN members with different technical and financial assistance measures, either as a precursor for their subsequent investment in the region or as a diplomatic tool to help ASEAN narrow its development divide and integrate better. For example, the US’ USAID program provided assistance to Laos and Vietnam to establish their National Single Window. It also helped ASEAN develop the technical and legal components of ASEAN Single Window and assisted in the implementation of pilot projects. Similarly, the Japanese government financed several infrastructure projects in ASEAN through their multilateral development agencies or specialised funds, like the Japan-ASEAN Integration Fund.

As it enters the digital economy era, ASEAN should adopt a similar approach. While seeking to have a conducive regulatory environment for digital economy among its members, ASEAN should practice ‘open regionalism’ with its key trading partners. It should facilitate both big and small firms to innovate and digitise their value-chains in the bigger geography of Asia. Market-driven activities have already begun. For example, the Chinese conglomerate, Alibaba, has committed US$2 billion and acquired an 83 per cent stake in ASEAN’s e-commerce player, Lazada. It is spending another US$1.1 billion on Indonesia’s online marketplace, Tokopedia.

ASEAN should also come up with a comprehensive document of digital activities that the 10 governments would like to pursue together. Currently, initiatives related to digital economy are spread across many ASEAN documents, i.e. e-ASEAN Framework Agreement, AEC Blueprint and ASEAN ICT Master Plan. A single regional document will provide a systematic way of providing information on the preparedness and gaps of ASEAN countries in terms of infrastructure, regulations and human skills in the new digital economy. Many ASEAN Dialogue Partners have already shown their interest to help ASEAN to overcome the issue of digital divide. In a recently concluded commemorative summit, ASEAN and India have expressed their interest to work together in this space. The EU has earmarked around US$210 million for the post-2015 ASEAN integration, part of which can be directed towards enhancing ASEAN’s digital connectivity. The Japanese private sector, such as NTT Docomo, Softbank and KDDI, are already financing many telecommunication projects in ASEAN.

Singapore, as ASEAN Chair, should also consider advancing digital initiatives to ASEAN+1 arrangements, and if possible, to the Regional Comprehensive Economic Partnership agreement, thereby continuing with ASEAN’s policy of ‘open regionalism’ in the future. The future of the region is as dependent on building digital highways as it is on conventional ones in the past.

Dr Sanchita Basu Das is Lead Researcher for Economic Affairs at the ASEAN Studies Centre of ISEAS - Yusof Ishak Institute.

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS-Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.