As the digital revolution sweeps across Asia, governments across the continent now have the opportunity to expedite progress and reap even greater rewards from digital technologies. By enacting policies that reinforce the foundations of the digital economy, governments can encourage economic development while ensuring that both businesses and consumers are protected.
In Southeast Asia, the region’s Internet economy, which includes e-commerce, online advertising, gaming, music and video on demand, as well as food delivery and online transport, is predicted to reach US$240 billion by 2025. That’s US$40 billion more than earlier expectations.
While this growth is happening at a rapid pace, a World Bank report titled The Digital Economy in Southeast Asia notes that the full potential of digital technology as a driver of economic growth isn’t being fully realised.
Specifically, the report identifies six areas where government policy can help spur digital development in the region. These are:
- Workforce skills
- Digital payments
- Regional integration and cooperation
- Effective regulation
While places such as Japan, South Korea, Hong Kong and Singapore have Internet-penetration rates well above 80%, many parts of Asia still have a long way to go. In the Philippines, for example, only 41% of adults are Internet users. Government policies can play a crucial role in expanding connectivity, allowing for lower prices, faster speeds, and better coverage in underserved areas. The benefits of Internet penetration also affect the economy. Research by Vodafone, highlighted in a World Economic Forum report, has shown that a 10% increase in mobile penetration leads to a 0.6% increase in GDP.
Governments can also help create the infrastructure to educate the workforce, ensuring their skills keep up with the rapid pace of development in digital technology. The education system must be capable of developing both the technical knowledge and the soft skills required for future workers to join the global economy. It’s for this reason that initiatives like the Association of Southeast Nations (ASEAN) ICT Masterplan 2020 are so important, as they help the region move towards a technology-enabled digital economy. For emerging economies in Southeast Asia such as Cambodia, Myanmar and Indonesia, these partnerships also offer an opportunity to stay abreast of best practices in digital hubs such as Singapore.
Meanwhile, digital payments are making headway across many parts of Asia. In China, platforms like Alipay and WeChat Pay are paving the way for a cashless future. Emerging markets in Southeast Asia such as Thailand and Vietnam are also experiencing rapid adoption of mobile payments (or “e-wallets”). The Vietnamese government, seeing this growth, has asked its central bank to draft new proposals to encourage the use of e-wallets, such as allowing consumers to top-up their wallets without a bank account.
More-developed countries such as Singapore and Malaysia are also actively encouraging the adoption of cashless payments. In 2018, the Singapore government announced plans to make Singapore cheque-free by 2025.
Payments aren’t the only thing being digitalized. As more retail companies move their operations online, the digitalization of logistics is something governments will have to tackle. The World Bank report notes that high logistics costs caused by the challenging geography of countries in Southeast Asia are being exacerbated by regulations that discourage competition in the logistics sector. This also makes it difficult for cross-border e-commerce to operate quickly and affordably. Governments need to rethink their approaches to border clearance, recognizing the fact that the vast majority of small packages crossing borders from e-commerce companies are legitimate shipments.
Finally, while ASEAN has made great strides towards harmonizing regulations and encouraging transactions between member nations, this is just a brief glimpse at the greater opportunity that can be seized if multiple Asian nations come together to create an integrated digital market. It’s in this respect that effective standards and regulations will come into play, laying the ground rules for electronic payments, cross-border e-commerce, data privacy, consumer protection and cybersecurity.
If anything, the World Bank report shows that government regulations need not restrict growth caused by disruptive technologies. The combination of openness to change, research, and astute policymaking will ensure that Asia can position itself to maximize the full potential of the digital economy.