By Ming Tan, Founding Executive Director, Tech For Good Institute
The allure of a step change in achieving national priorities through technology is strong. The general narrative of “leapfrogging” suggests that less-developed countries may not need to follow traditional development stages but can instead adopt new technologies to accelerate progress. The assumption is that by adopting new technology and the business models they enable, it is possible to catch up and potentially surpass competitors..
In Southeast Asia, the ASEAN Digital Economy Framework Agreement (DEFA), currently being negotiated among ten ASEAN Member States (AMS), is expected to unlock up to US$2 trillion in digital economy growth by 2030. 77% of the 600 million ASEAN population is online, which includes the additional 100 million new internet users which came online from the year 2019 to 2022. This optimism is driven by the rapid digital adoption across the region, propelled by a young population, with more than 60% under the age of 35, who are increasingly becoming mobile-native and AI-native.
Leapfrogging often centers around two key concepts:
- Stage-Skipping: Avoiding legacy technology debt by adopting the latest advancements directly, such as mobile-first financial services.
- Path-Creating: Defining new ways to achieve outcomes, such as using digital financial services to provide credit to the underbanked.
The adoption of mobile technology is a prime example of stage-skipping, while the use of digital financial services by the unbanked or underbanked represents path-creating. Nandan Nilekani, co-founder of Infosys and Chairman of the Unique Identification Authority of India, cited the scale of large Internet databases, mobile and data connectivity, biometric technology, device technology such as smartphones, and battery technology, as complementary essential factors to the rollout of India’s digital ID programme, Aadhaar.
Another clear demonstration of leapfrogging is the rise of digital financial solutions. In 2021, 75% of small businesses that received loans from digital providers had previously been unable to secure financing from traditional banks and other lenders. While credit card usage varies significantly across ASEAN — 30% in Thailand, 11% in Vietnam, and just 6% in Indonesia — digital payments now account for over 50% of total transaction value. The 2023 e-Conomy SEA report by Google, Temasek, and Bain & Co. revealed that Southeast Asia’s digital economy generated US$100 billion in revenue across various sectors for the first time in 2023.
However, technology alone is not enough. For leapfrogging to succeed, it requires concerted effort to drive confident adoption, fit-for-purpose business models and forward-looking regulatory environments.
Pillars of Leapfrogging
While technology makes leapfrogging possible, widespread adoption is crucial. Several ASEAN countries have implemented large-scale initiatives to encourage digital adoption:
- India: 25,000-30,000 enrollment centres were made possible through the scale of Aadhaar, implemented by over 100,000 partners complementing the 300 people working within the Authority.
- Malaysia: The national effort to promote artificial intelligence literacy, known as “AI Untuk Rakyat”, partnered with community centres, schools and volunteer organisations to raise awareness for the programme and even offer incentives for adoption. The programme was also offered in Bahasa Malaysia, English, Tamil, and Mandarin for accessibility.
- Philippines: The Social Security System (SSS) developed partnerships across digital platforms to increase enrolment into their social protection schemes. For example, SSS set up booths at roadshows organised by Grab to onboard driver-partners.
Technology enables new business models that capitalise on digital capabilities, such as data-driven decision-making, automation, and hyper-personalisation. Digitalisation has enabled new business models across almost every industry. In ASEAN, e-commerce platforms allow businesses to invest in product development without physical storefronts. Digital payments made up over 50% of total transaction value in 2023. Many users skipped traditional providers, such as banks, which often require collateral for loans, or credit card companies, which typically demand a credit history, due to these institutions’ inability to meet their needs with outdated business and risk management models.
Technology and business model innovations require policies that are specifically designed to support them. However, the rapid pace of innovation often leaves policies outdated or incomplete. As a result, regulatory frameworks must evolve in parallel with technological and business model advancements. In ASEAN countries, there have been varying approaches to policy development. For instance, Malaysia, Singapore, and the Philippines introduced their personal data protection laws in 2013, 2014, and 2016, respectively. Yet, it took another six years for Thailand and Indonesia to implement similar laws in 2022, while Vietnam passed its comprehensive data protection law in 2023. During this period, best practices in data protection regulation evolved significantly, shifting from a focus on consent and compliance to a greater emphasis on accountability and risk management. The “latecomer advantage” was evident, as countries with older laws had to amend and update them in response to the evolving landscape. Effective policy coordination and innovation are crucial for policy leapfrogging, as emerging technologies and business models benefit from an iterative, learning-based approach that supports both innovation and effective governance.
A unique opportunity for leapfrogging traditional development stages lies in the integration of digital transformation with sustainable development. For example, while Vietnam’s per capita electricity consumption has increased more than eightfold from 2000 to 2022, nearly half of its power generation now comes from renewable sources, surpassing many developed countries.
Similarly, Singapore’s moratorium on data centers from 2019 to 2022 led to an increase in data center construction in neighboring countries, but it also allowed Singapore to strengthen green data center standards and foster private-sector innovation for more sustainable solutions and designs.
The Road Ahead
Southeast Asia’s swift adoption of technologies such as generative AI, voice search, and e-payments signals a growing optimism about technology. In addition, the region’s openness to reskilling and the development of supportive regulatory frameworks around AI governance suggest that Southeast Asia is well-positioned for leapfrogging through digital technologies. If governments continue investing in digital infrastructure while prioritising future readiness and sustainability, the region has a strong case for leveraging digital transformation as a driver of progress.
About the writer
Dr Ming Tan is the founding Executive Director at Tech for Good Institute, a non-profit organisation seed-funded by Grab to catalyse research and collaboration on social, economic, and policy trends accelerated by the digital economy. She is concurrently a Senior Fellow at the Centre for Governance and Sustainability at the National University of Singapore. Her interests lie at the intersection of technology, business and society, including sustainability and innovation.
