2018/21, 7 March 2018
An idea of a ‘single digital market’ in ASEAN was shared by Mr. Tharman Shanmugaratnam, Deputy Prime Minister of Singapore, during a panel discussion in Jakarta, organised by Bank Indonesia and the International Monetary Fund (IMF) last week. He said that ASEAN is excited to provide opportunities for businesses in the digital space and is working to provide the regulatory framework. He further mentioned a new initiative of a network of smart cities that is expected to facilitate smooth digital commerce in the region. While the idea itself is a good start, it will take ASEAN a long time to serve such an ambition.
Earlier, in 2003, ASEAN had promised to deliver a ‘single market’ by 2015. Member countries committed to lower their border tariffs and eliminate non-tariff barriers, enhancing connectivity in the region. The aim was to increase the attractiveness of the ASEAN market to foreign investors. But as the deadline of 2015 approached, ASEAN was still far from its promise to deliver what it had envisaged. Hence, the idea of a ‘single market’ was amended to an aspiration, which stakeholders understood as a work-in-progress for many years to come.
The past ASEAN documents never clearly defined the term ‘single market’. Economists generally see it as a geographical space with the same price for all goods and services. But many conditions have to be met for this, such as a robust competition policy, complete transparency, removal of all border restrictions, equal treatment for foreign and local companies and harmonisation of measures for all participating countries.
But ASEAN integration was never that far-reaching as the member countries are very different from each other in terms of their economic and governance structure. So the aim was to promote integration where it is already happening through market-driven activities. For the rest, member countries were encouraged to embrace some policy measures in a timely fashion to become more competitive globally.
Moving to the digital era, it is again hard to believe that ASEAN can achieve a ‘single digital market’ anytime soon. The region has significant digital divide ranging from issues like extent of internet availability, accessibility and affordability to regulations and availability of skills. The World Economic Forum in its 2016 Global Information Technology Report stated that while Singapore leads the Networked Readiness Index at #1, the Philippines is at #77and Cambodia and Myanmar are at #109 and #133 respectively.
In addition, ASEAN governments are struggling to understand the implication of the risks of a digital world. They are introducing barriers on cross-border data flows, arguing that such regulations will enhance national security and protect privacy. Moreover, some countries feel this is to their economic advantage as companies may move their data-related activities within their national boundaries, thus creating jobs and income. For example, Indonesia requires companies that serve consumers through online means to locate their data centres within the country. Malaysia has enacted the Personal Data Protection Act that requires data about Malaysians to be stored on local servers. Even Vietnam mandates all companies providing internet service to have at least one server within Vietnam’s jurisdiction.
ASEAN has embarked on cooperation on digital economy for a while, but the pace has accelerated more recently. ASEAN countries are currently working on harmonisation of regulatory issues, like consumer rights and online dispute settlement mechanism. They will be subsequently working on mechanisms for authentication of e-signatures, establishing national cyber-security agencies and others. Going forward, the member countries need to address concerns over cross-border information flows so that businesses can operate through e-commerce platforms rather than establishing commercial presence in every country.
But all these will take time. It seems very difficult to have seamless movement of goods and services in a digital ASEAN region anytime soon. Even the smart-city initiative in the region is on a small scale where member countries are going to nominate only three cities each to adopt digital technologies in some of their public delivery systems.
Nonetheless, it is high time for ASEAN to start thinking about moving to ‘single digital market’. The world is fast moving towards the Fourth Industrial Revolution and use of technologies is encouraged for innovation and prosperity. Hence, Mr. Shanmugaratnam’s thoughts are opportune and will ensure that the region gets started on the road to digitisation. Although tech giants and start-ups have to wait for a while before they can thrive in a ‘single digital market’ in ASEAN, it will be at least heartening for them to see leaders in the region proposing vision in the right direction.
Dr Sanchita Basu Das is Lead Researcher for Economic Affairs at the ASEAN Studies Centre of ISEAS - Yusof Ishak Institute.
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