Challenges and opportunities: Democratising ASEAN’s digital sphere

The ASEAN digital economy is growing at a frenetic pace. While millions are enjoying the economic and social benefits of improved connectivity, hundreds of millions more run the risk of getting left behind.

By Preetam Kaushik

In the last decade, digital technologies have had a profound transformative effect on ASEAN’s economies and societies. For example, Grey Wolf, a Burmese startup, combines traditional wood carving techniques with computer-controlled 3Dcarving technology to create wooden phone cases. In nearby Malaysia, a young woman with a passion for baking has created a growing online brand called KekMolek.

Across Vietnam, Indonesia, and the Philippines, several young social entrepreneurs are transforming the lives of local farmers and fishermen with the Internet of Things (IoT) and other cloud-based technologies.

These are just a handful of ASEAN’s digitalisation success stories highlighted by the ASEAN Coordinating Committee on Micro, Small and Medium Enterprises in a publication released in 2018, at the ASEAN Business and Investment Summit (ABIS) in Singapore. 

Millions are disenfranchised by a growing digital divide

But this pace of development comes with its own unique set of challenges. In a region of more than 600 million people, increased connectivity does not necessarily translate into equal access for all. Significant sections of the ASEAN economy still do not get the benefits of modern technology.

The digital divide between the emerging economies of Southeast Asia and the more developed nations is stark. This is at its widest in nations like Cambodia, Laos and Myanmar less than 50% of the population use the internet. In contrast, nations like Singapore, Thailand and Malaysia fare better with around 80%.

Source: IWS

But connectivity, or rather, lack of infrastructure is not the only issue. Lack of education and relevant online skills presents a formidable barrier to people in the region who may have access to the infrastructure. According to the World Bank Findex Report 2017, factors like income and age also play a crucial role in inhibiting access to the digital economy. Individuals from low-income groups and those above the age of 55 are less likely to own mobile phones, have internet access, and use it for digital payments. These digital divides disenfranchise whole groups from the region’s economy.

Digital democracy is the need of the hour

In just a few years, digital technologies have transformed the way humans live and interact. In many developed societies, connectivity is already seen as a basic need, just like power and water.

The participation divide in the digital economy has given birth to the concept of digital democracy. Democracy in the social-political sense calls for the political participation of all citizens. Such a principle of inclusivity is equally important in the digital sphere as well, a new EIU report concludes. “Digitisation is all about increasing active participation by all, especially those who are at the bottom side of the pyramid,” says Rama Sridhar, Executive VP, digital and emerging partnerships and new payment flows, Mastercard Asia Pacific.

Connectivity helps bring people closer together. For the lower economic classes, it can facilitate access to government services and welfare. Middle-class consumers gain access to novel products and services while businesses find new markets for growth.

The small and medium-sized enterprises (SMEs) highlighted at the ABIS all benefited massively from their access to the digital market. But according to Florian Hoppe of at Bain & Company Singapore, they are a minority in the region. Just 16% of SMEs have access to the digital economy. This is throttling the growth of the digital market in the region.

SMEs contribute 50% of the region’s GDP and generate jobs for 80% of the working population. To put it further in perspective, the GDP contribution from the digital economy in the ASEAN region is just 7%. In China, the digital economy contributes 16% of GDP. In the US it makes up 35%.

The potential for economic growth through digital democracy is vast. “Digital democracy will facilitate trade flows among nations in the region,” says Rama Sridhar, “and could potentially boost ASEAN’s GDP by US$1 trillion by 2025 alone.”

ASEAN is rolling out ambitious master plans

The roadblocks facing the region on its path towards digital democracy and increased prosperity are considerable. Weak information and communications technology (ICT) infrastructure is a major issue, especially in the less developed nations of the region. Lack of awareness, education, skills among the populace is another. All of this is compounded by the absence of a common digital legislative framework for the region.

That last point is particularly important for Rama Sridhar. “Regulations must aim to converge and clarify collective action across ecosystems, platforms, and countries,” she says. A common digital market, much like the one shared by EU nations, is essential if ASEAN nations want to bridge the divide that exists between different socio-economic groups within societies, and between small advanced nations like Singapore and their larger, less developed neighbours like Vietnam and Indonesia.

The policymakers in the region are well aware of this reality. Since 2011, ASEAN member states have been working under a common roadmap for the development of IT infrastructure. The first stage of the initiative, called the ASEAN ICT Master Plan (AIM) ended successfully in 2015, with a majority of the projects completed within the stipulated time period.

Currently, the nations in the region are working towards the goals set in ASEAN ICT Master Plan 2020, or AIM 2020. It focuses on ICT infrastructure investments, increased support for startups and innovation, and digital literacy campaigns. Another initiative in its early stages is the Master Plan on ASEAN Connectivity 2025, or MPAC 2025. It aims for a seamless continuation of the progress set by the 2020 Master Plan.

There is no lack of initiative or ambition, the challenge lies in converting the ambition into concrete realities. The early signs are positive, with various projects showing satisfactory progress across the region, and valuable contributions from partner nations like China and Japan

But ASEAN is a diverse geopolitical region with a dozen different economies, varying levels of development and corruption. The region is also highly vulnerable to natural disasters due to its geographical location. Smaller, richer nations like Singapore will find it easier to adhere to ambitious deadlines than bigger nations like Indonesia or Vietnam. One cannot underestimate the scale of the task ahead.