Despite ASEAN’s digital economy making head waves through its projected growth of more than $1 trillion by 2030, ASEAN’s digital future still faces tough challenges arising from the tightening security environment.
Digitalisation is a major catalyst of our evolving social landscape. Digitalisation offers immense opportunities towards uplifting standards of living, reduction of poverty and the deepening of economic integration.
ASEAN has always placed great stride in fostering digitalisation. Over the years, ASEAN has adopted frameworks at improving technology governance, cyber security, digital innovation, and entrepreneurship. At the recent ASEAN Summit in Labuan Bajo, Indonesia, ASEAN member states reaffirmed digitalisation as a core priority in transforming ASEAN into economic bloc powered by efficient and reliable digital services.
Moreover, demographics confers yet another advantage towards ASEAN’s digital economy. According to the Economic Research Institute for ASEAN and East Asia, ASEAN’s digital economy would expand rapidly given the region’s burgeoning population of internet users as well as greater broadband access.
While all these illustrates the promising future of ASEAN’s digital economy, it is important to take stock of the increasingly challenged security environment that threatens to undermine prosperity of ASEAN’s digital economy.
Myanmar’s deteriorating crisis is ASEAN’s immediate concern. Complicated by conflicting parties’ reluctance to settle differences through peaceful means, the seemingly endless civil conflict undercuts Naypyidaw’s ability to commit in existing ASEAN’s digital initiatives.
For instance, the move to increase online surveillance to deter anti-regime protestors derails Myanmar’s capacity towards achieving the desired outcomes stipulated in ASEAN Digital Masterplan 2025, compromising ASEAN’s goal to attain ubiquitous connectivity throughout Southeast Asia.
The protracted civil conflict has thrusted Myanmar into economic crisis. The rapid currency depreciation, rampant inflation in commodities, and increasing unemployment in Myanmar will not only stymie digitalisation but also further widen Myanmar’s digital gap among ASEAN members.
With Myanmar’s digital economy falling far behind the rest of ASEAN member states, there will be repercussions for ASEAN which is currently working towards the Digital Economy Framework Agreement (DEFA) that aims to create a seamless digital trade ecosystem across Southeast Asia. Given Naypyidaw’s poorly developed digital economy ravaged by the long-standing civil chaos, ASEAN will encounter technical issues towards integrating post-conflict Myanmar meaningfully into DEFA.
Beyond ASEAN’s regional borders, geopolitical rivalries and the COVID-19 pandemic have exacerbated beggar-thy-neighbour sentiments and set the stage up for digital protectionism. The pursuit of technological supremacy, the safeguarding of national security, and the protection of local industries against foreign competition have pushed countries towards digital protectionism.
Developed economies like the US has been weaponizing digital trade by curtailing Chinese investments in high-tech firms regardless of military affiliation. Likewise, China enacted the Data Security Law which restricts data flow in the name of national security and prohibited operations of foreign cloud service providers. Emerging economies such as India has imposed increasingly tighter surveillance on internet users.
Thriving under an environment beset by rising digital protectionism pose challenges for ASEAN’s digital economy. It will be tougher for ASEAN to reap optimal returns from the digital investments and projects it has made or continue to make, in foreign digital economies. On the other hand, E-commerce and FinTech companies from ASEAN will have lesser opportunities for cross-border expansion. ASEAN firms operating overseas may encounter hindrance such as long delays in transferring data back to headquarters stationed in home countries and experience difficulties in accessing consumer bases.
Meanwhile, despite pledged commitments to foster digital trade, digital barriers are still prevalent among ASEAN member states. The digital trade restrictiveness index study, conducted by the European Centre for International Political Economy found Indonesia, Vietnam, Thailand, and Malaysia to be highly restrictive regimes for digital trade. Another study found differing degrees of data localisation in 6 out of 10 ASEAN member states.
More importantly, the state in which ASEAN member states progress towards the liberalisation of digital trade has been lacklustre. While Singapore and Philippines have made concrete progress in liberalising digital trade, other ASEAN member states have pursued increasingly restrictive digital regimes. For instance, Cambodia steps up its 2015 Law on Telecommunications by implementing the National Internet Gateway (NIG) in 2022 which allows Phnom Penh to monitor all internet traffic through a state-run portal.
According to “New America,” numerous ASEAN member states such as Cambodia, Laos, Thailand, and Vietnam also face obstacles such as low digital literacy rates, poor digital infrastructures, and rising inequalities, all of which will stifle digitalisation.
These conditions will compromise the realisation of DEFA and the creation of a highly integrated digital zone. The failure to conclude DEFA will certainly disadvantage competitiveness of ASEAN’s digital economy in the longer term as other blocs such as the European Union (EU), African Union (AU) and Latin American countries in MECOSUR are actively working to establish integrated digital trade zones in their respective region.
The prosperity of ASEAN’s digital economy is integral towards achieving the region’s aspiration to become the epicentrum of growth. While the challenges facing ASEAN’s digital economy are highly complex in nature, ASEAN must not lose sight of the importance of digitalization and double down on its efforts to foster a conducive environment for digital trade.
[Photo by Gunawan Kartapranata, via Wikimedia Commons]
*Anthony Toh Han Yang is a research analyst at S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore. His research interests include ASEAN and China affairs. The views and opinions expressed in this article are those of the author.
