Harnessing ASEAN digital economy’s potential

Danial Norjidi

ASEAN is well-placed to leverage the potential of its digital economy to drive post-COVID-19 recovery efforts.

This is according to a statement by Managing Director Jeff Paine at the Asia Internet Coalition (AIC), an industry association comprising leading Internet and technology companies which seeks to promote the understanding and resolution of Internet policy issues in the Asia Pacific region.

Paine said “driving the region’s economic recovery post-COVID-19 must undoubtedly be at the top of the economic bloc’s agenda”.

“The good news is that ASEAN is well-placed to leverage the potential of its digital economy to drive recovery efforts,” he added.

In 2019, he said, Southeast Asia’s Internet economy hit USD100 billion, more than tripling in size over the preceding four years. By 2025, the region’s Internet economy is expected to grow to USD300 billion.

Paine believes the Internet economies in Malaysia, Thailand, Singapore, and the Philippines are growing by between 20 and 30 per cent annually. While this is a remarkable feat compared to other regions, Indonesia and Vietnam are the markets to watch – they boast growth rates in excess of 40 per cent a year.

“If ASEAN member states want to reap the immense benefits that the Internet economy can bring, the economic bloc needs to sow the seeds now. Member countries need to work together to develop smart, forward-looking policies that stimulate ASEAN’s digital economy by spurring innovation, encouraging greater entry and participation of small and medium enterprises (SMEs) and entrepreneurs, and empowering businesses with the ability to grow and invest for the future,” he said.

The managing director underlined that free cross-border data flows are critical to overall economic growth, noting that data by the McKinsey Global Institute shows that, over a decade, global flows of all types acting together have raised world gross domestic product (GDP) by 10 per cent over what would have resulted in a world without any cross-border flows, stating that this value amounted to some USD7.8 trillion in 2014 alone and that data flows account for USD2.8 trillion of this impact.

He said, “The critical role that cross-border data flows play in enabling global digital trade and e-commerce are recognised in global and regional digital trade agreements. ASEAN, however, needs to do more.

“While the ASEAN E-Commerce Agreement touches on cross-border data flows, member countries need to further build on this agreement to take on more binding commitments on data flows that will have a meaningful impact on the regional digital economy.

“Similarly, while the ASEAN Framework on Digital Data Governance is an encouraging commitment to setting the right policies for the seamless flow of data that drives innovation, efforts to enable greater regional digital trade and certainty need to be accelerated,” he added.

Paine also affirmed that discordant and conflicting policies across the region can hinder digital trade growth.

“If the region is committed to leveraging the digital economy to accelerate post-pandemic economic recovery efforts, governments need to create a business environment that brings long-term stability and certainty for businesses to continue to innovate and invest for the future,” he said.

He added, “To enable companies to plan for the future with a good degree of certainty and to provide them with a level playing field when operating across borders, ASEAN governments need to leverage digital trade agreements as umbrella frameworks to address policy issues in a coherent and consistent manner across the economic bloc.”

Paine also noted that the Organisation for Economic Co-operation and Development (OECD) is currently leading multilateral efforts to address international tax issues arising from the growth of the digital economy.

“The goal is to develop an agreement built around the key principles of neutrality, efficiency, certainty, and simplicity that will give governments comfort on revenues, businesses the ability to grow and invest for the future, and consumers an understanding of the impact on their wallets,” he explained.

“However, ” he said, “the adverse economic impact of COVID-19 has led to an acceleration in unilateral digital taxation measures by governments, including Indonesia, as a way of expanding state revenue. Such unilateral digital taxation measures are doing more harm than good by creating double-taxation and administrative hurdles for companies. The cost and complexity of individual countries creating and applying their own rules ultimately hits the pockets of the consumer and potentially delays market expansion”.

Concluding, the managing director said, “Brunei, as the new ASEAN Chair has a huge task ahead. There is no better time than now to galvanise member economies to work together and put the digital economy at the centre of the region’s economic recovery strategy.”