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Achieving an inclusive and sustainable digital economy in Asean

September 19, 2019

EDSEL TUPAZ

THE Asean Science and Technology (S&T) Fellowship was held last June 23-30, 2019, in Nusa Dua, Bali, Indonesia. This was organized by the Association of Southeast Asian Nations (Asean), the Asean Foundation, the United States Agency for International Development (USAid) and the US Mission to Asean. This program aims to foster a culture of science-based policy-making throughout the region by providing opportunities for early and mid-career scientists from Asean member states to contribute their knowledge and analytical skills to their national governments.

During the fellowship, I had the privilege of serving as a speaker, panelist and facilitator to speak about the nexus between 1) law, policy and the digital economy; and 2) achieving an inclusive and sustainable digital economy for the Asean Community before an audience of leading scientists, scholars, academics and policymakers. The goal is to form concrete steps towards an “inclusive” and “sustainable” digital economy for the Asean community.

An inclusive and sustainable digital economy is important for Asean-minded stakeholders for two reasons. First, Asean is the fastest growing internet market in the world today. Data show that with 125,000 new users coming into the internet daily, the Asean digital economy is projected to grow significantly, adding an estimated $1 trillion to Asean GDP over the next decade. Second, this growth is attributed to an increasingly tech-savvy younger population, which is rapidly rising up the socioeconomic ladder (Thomas, 2019). By demographics alone, a policy focus on digital economies could be a powerful growth-driver for the rest of the Asean economic space. This is low-hanging fruit which policymakers and government actors can look into.

To know where the Asean digital economy framework currently stands, I pointed to four relevant Asean instruments. These are 1) the Asean Economic Community Blueprint 2025; 2) the Masterplan on Asean Connectivity 2025; 3) the e-Asean Framework Agreement; and 4) the Action Plan of Action on Science, Technology and Innovation 2016-2025, the most recent plan.

To better situate and apply the four Asean frameworks and policies within the context of digital economies, I defined an inclusive and sustainable digital economy as an economy that 1) has minimal digital divide; 2) has micro, small and medium enterprises, or MSMEs, which are digitalized; and 3) has adaptable regulations to innovation. These three areas can also serve as guideposts for problem solving and reform. To work towards these goals, I proposed to apply the World Bank’s six particular areas for improvement: 1) improve the availability of affordable, high-speed internet; 2) strengthen the digital skills of the population; 3) increase digital payment use; 4) improve digital policy regulations; 5) create a supportive macroeconomic business climate; and 6) remove e-commerce logistics barriers.

In thinking about the World Bank’s plan of action in the Philippine context, achieving high speed Internet may be less a technological question but more a competition question. Developing the digital skills of Filipinos may be through harnessing online vocational and competency-based courses. Government may defuse distrust and lack of awareness of leading financial technology (fintech) initiatives by increasing the use of government-based digital services (e.g., online tax payments). To propagate digital payment use, policymakers can aim to increase general comfort levels over e-wallets. In considering the new Ease of Doing Business and Efficient Government Service Delivery Act of 2018, whose implementing rules were recently introduced, government regulators ought to think in terms of issuing clear compliance and permit frameworks for e-commerce platforms. Lastly, digitalizing typical government application processes can bring about transparency and expedited applications.

For the last leg of the S&T Fellowship, plenary discussions revealed that while information and communication technology (ICT) infrastructure is important, vernacular is shifting away from “infrastructure” into “infostructure,” “communities,” “linkages” and “applications.” Participants readily acknowledged the rise of the harbingers that are blockchain, artificial intelligence, big data, and the disproportionately high impact of lifelong e-learning. A common problem highlighted during the discussions was the communication gap between those designing disruptive business models and regulators who still struggle in their appreciation of cutting-edge business decks and new business models — an evident digital economy roadblock.

To conclude, taking a cue from a Bain and Company report, I suggested targeting five key sectors which will bring about significant benefits from digital integration within the Asean economic space to achieve the highest marginal returns: manufacturing, agriculture, retail, transport and logistics, and ICT. Together, these sectors represent more than 50 percent of Asean GDP and employ more than 60 percent of the Asean workforce. More importantly, while 75 percent of SMEs see digital integration as an opportunity for growth, regrettably only 16 percent of SMEs are truly digitally integrated (Bain & Company, 2018). In sum, by enforcing these action plans, there is no doubt that opportunities for digital economies to flourish within the Asean economic space are better today.

Edsel F. Tupaz is a lawyer, law professor and writer. Currently senior partner at Gorriceta Africa Cauton & Saavedra, Tupaz’s practice focuses on the nexus of law, policy, and technology. He has a Master of Laws from Harvard Law School and a Juris Doctor and a Bachelor of Arts in Economics from the Ateneo de Manila University. He studied fintech and blockchain technologies at the Massachusetts Institute of Technology. The author would like to thank Marian Merino for her thoughts, comments and contribution.

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