Could Asean be the next global digital leader?

Asean National Flags in JakartaPhoto: Gunawan Kartapranata

By: Ardi Wirdana

ASEAN has the potential to transform itself into a global digital elite if its member countries can work in unity to tackle the challenges and seize the vast digital opportunities that the region holds, according to a report released by global management consulting firm A.T. Kearney in conjunction with Axiata Group Berhad (Axiata).

With a population of more than 628 million, around 40 percent of whom are young digital natives, ASEAN is home to a generation that is learning to champion disruptive thinking and one that is primed to innovate.

“When it comes to market size and growth opportunities, there are few economic regions that can match ASEAN’s potential, especially when it comes to the digital economy. More than half of the bloc’s population is aged 30 or below. This is the consumer group which is most likely to contribute to digital economy as they are most tech savvy,” says Naveen Menon, partner and Asia-Pacific head of communications, media and technology practice at A.T. Kearney and one of the authors of the report.

The region has also been witnessing remarkable growth in the infocomm technology (ICT) sector driven by phenomenal rate of investment. ICT investment in the region, amounted to more than US$ 100 billion in 2014, and is projected to grow more than 15 percent annually.

Another development in ASEAN that is expected spur growth in the digital economy is the implementation of the Asean Economic Community (AEC). The economic integration, which promotes free movement of goods, services, investment, skilled labour, and capital, is bound to have a massive effect in various sectors of the economy.

Currently, the Asean digital economy currently generates approximately $150 billion in revenues per year, the report said. This is predominantly contributed by connection and online services as well as the user inter face segments which includes products and services connected to devices, systems and software.

What Asean could be in 2025

If Asean can start working effectively towards a digital revolution, it has the potential to transform itself into a “global digital economy powerhouse” by 2025, the report suggested. Current digital leaders in the region such as Singapore, Malaysia and Thailand should be in the top 20 of the global digital ranking, while the other should be ranked in the top 40.

Furthermore, such a digital revolution could potentially generate an additional US$ 1 trillion over the next 10 years, the report projected. The significant uplift in the GDP will be driven by a marked increase in broadband penetration which will not only boost productivity of workers, but also spur the development of new industries, such as e-commerce, mobile financial services and Internet of Things (IoT) and cloud computing.

The establishment of more smart cities could also be on the cards for Asean, if countries manages to undergo a digital transformation, which would ultimately improve the quality of urban life in the region.

A smart city is basically an urban development vision to integrate multiple information and communication technology (ICT) solutions in a secure fashion to manage a city’s assets.

Currently, Singapore is the Asean country with the most outstanding smart city initiatives, while Malaysia and Thailand are also starting to gain recognition the implementation of smart city projects in a couple of their major cities.

By 2025, however, the report argues that Asean should boast up to 35 smart cities from all across the region, including four in Philippines, five in Vietnam, and 15 in Indonesia.

The first cities to become smarter are likely to be the largest metropolitan areas in Asean, where the challenges posed by rapid urbanisation are at their most intense. If key smart city technologies are standardised across Asean, implementation of smart cities will be quicker and more cost effective.

Call to Action for Governments

The report identifies a number of roadblocks that could hinder the efforts to transform Asean into a fully digital economy, such as weak business case for building out broadband, regulations restricting innovation in mobile services and low customer awareness of digital services.

These roadblocks, the report argued, could only be eliminated by strong policies and support by lawmakers all Asean countries. Each government need to take a number of synchronised actions to help accelerate digital revolution such as accelerating innovation in mobile services and e-commerce, strengthening the local digital economy and enhancing trust and security in Asean’s digital economy.

The most pressing policy to be made, however, is the pursuing universal broadband access, as about 67 percent of Asean’s population – close to 417 million people are living without access to basic internet services. There are many reasons for the lack of internet access in Asean, ranging from the high cost of deploying broadband in rural areas to a lack of understanding of the benefits of the internet.

This challenge, like all the major challenges connected to digital development, should be tackled by all parties involved. However, governments in the region have the biggest role to play as they have the biggest influence on the masses, which is vital for a revolution to take place.

“Through accelerated innovation, mobile network operators are ready to support and grow the ASEAN digital economies of cashless societies, smart cities, borderless digital services and financial inclusion,” Jamaludin Ibrahim, President and Group Chief Executive Officer of Axiata said.

“However, for mass adoption of the services to drive digital economies, policies and a strong digital agenda is required in the region with visionary government and industry collaboration. It is our hope, therefore, to see operators and governments quickly come together to accelerate this development. I believe a ‘revolution’ is required!” he added.