- The Association of Southeast Asian Nations has everything it needs for a digital economy: a young, tech-savvy population of more than 400 million digital consumers and increasing internet penetration.
- But there is a digital divide between nations and within nations.
- “The reason for this uneven development is the unequal distribution of the benefits of the digital economy. This is because different countries are at different stages of developing their regulatory frameworks,” said Kenddrick Chan, Fellow at the Portulans Institute.
A woman (right) adjusts the Philippine flag before the 51st Ministerial Meeting of the Association of Southeast Asian Nations (ASEAN) and the Republic of Korea August 3, 2018 in Singapore.
Mohd Rasfan | Afp | Getty Images
Southeast Asia’s digital economy has great growth potential, backed by strong fundamentals, including over 460 million digital consumers, a young and tech-savvy population, and increasing internet penetration.
The digital economy in six countries within the Association of Southeast Asian Nations bloc — known as ASEAN-6, made up of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — is expected to grow at 6% annually.
That’s according to the latest e-Conomy SEA 2022 report released by Google, Temasek, and Bain & Company, which predicted the market could reach as much as $1 trillion by 2030.
But roadblocks remain. From the urban-rural divide to low levels of digital literacy, the region continues to grapple with challenges that could slow that growth.
“ASEAN’s digital economy is expanding, but there is the digital divide,” said Anthony Toh, a research analyst at the S. Rajaratnam School of International Studies, a think tank at Nanyang Technological University.
“Singapore is the most digitized ASEAN member. Malaysia, Indonesia, Brunei, Thailand and Vietnam tend to lack some indicators, while Myanmar, Laos and Cambodia lack digitization prospects,” Toh said.
The 10-strong bloc, a regional grouping dedicated to promoting economic and security cooperation, includes those countries and the Philippines.
According to the ASEAN Digital Integration Index report, Singapore and Malaysia perform well on multiple digital inclusion indicators.
Brunei, Indonesia, Thailand, the Philippines and Vietnam are missing one or more indicators, the report said.
Indicators include privacy and cybersecurity, digital payments and digital skills, innovation, entrepreneurship and infrastructure readiness.
Cambodia, Laos and Myanmar underperformed on all indicators and still have a lot of catching up to do in regional digital inclusion efforts.
“Myanmar will fall even further behind all other ASEAN countries,” Toh said of the deepening crisis in Myanmar. Two years after the February 2021 military coup, Myanmar is still mired in a deep conflict that tore the country apart.
Philippine President Ferdinand Romualdez Marcos Jr. (left), Singapore Prime Minister Lee Hsien Loong (2nd left), Thai Foreign Minister Don Pramudwinai (3rd left), Vietnamese Prime Minister Pham Minh Chinh (4th left), the Indonesian President Joko Widodo (5th left). ). PDR Laos Prime Minister Sonexay Siphandone (centre), Sultan of Brunei Hassanal Bolkiah (4th R), Cambodian Prime Minister Hun Sen (3rd R), Malaysian Prime Minister Anwar Ibrahim (2nd R) and Timor Prime Minister -Leicester, Taur Matan Ruak ( R) poses for a family photo during the 42nd ASEAN Summit in Labuan Bajo, East Nusa Tenggara province, Indonesia May 10.
ASEAN2023 Host Photographer | Handout | Agency Anadolu | Getty Images
In order to participate in the digital economy, it is “very important to have basic regulatory frameworks in place,” said Kenddrick Chan, a fellow at the Portulans Institute, an independent research institute based in Washington.
“The reason for this uneven development is the unequal distribution of the benefits of the digital economy. That’s because different countries are at different stages of developing their regulatory frameworks,” Chan said.
ASEAN has established key policies and frameworks — such as the ASEAN Digital Masterplan 2025 and the Master Plan on ASEAN Connectivity 2025 — to outline actions that guide government digital collaboration.
However, according to the World Economic Forum, “these goals require detailed research, visionary policy making and significant involvement of regional stakeholders”.
“Ultimately, they have to have at least the same ideas or regulations, for example for cross-border data transfer,” Chan said. “Singapore has laws that ensure user privacy and secure cross-border transfers of financial information, but Cambodia has none.”
“Regulations often lag behind innovation and there needs to be new, effective legislation in areas like data and privacy as the landscape evolves,” said James Tan, managing partner of Singapore-based venture capital firm Quest Ventures.
Also, within each country, there is a digital urban-rural divide. With the exception of Singapore, Malaysia and Brunei, more than 40% of the population of the other Southeast Asian countries live in rural areas, according to World Bank estimates from 2021.
While Indonesia records fast internet penetration every year, the country still faces a huge urban-rural digital divide. The rapid development of digital technology increases the risk of some rural communities being left behind, Tan said.
“Before the pandemic, the digital rural-urban divide in Indonesia was 24.8 percentage points. The gap narrowed slightly to 22.5 percentage points in post-Covid 2021,” the Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy cited data from the Indonesian Bureau of Statistics.
“With the exception of Singapore, some countries have low digital skills. Look at the population of Cambodia – they still live in villages,” Toh said. World Bank data shows that 75% of Cambodia’s population lives in rural areas.
Although ASEAN countries have a high Internet penetration rate of over 70% and the majority of the population has smartphones, this does not necessarily mean digital literacy.
“Southeast Asians have no shortage of cell phones,” Chan said. “For them, the Internet is their mobile phone. However, the main problem is that it is dominated by social media.”
“You are probably not accessing a web browser. The way they use the internet is always through Facebook, Instagram, TikTok — so getting into the whole digital economy requires more digital literacy,” Chan said.
The digital divide in Southeast Asia is the most pressing issue for the region’s digital progress, Toh said. “I don’t think it will be taken to a better level. Instead, the digital divide is currently widening.”
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