The private sector is one of the key stakeholders of the ASEAN Digital Economy Framework Agreement or DEFA. DEFA is the first region-wide agreement that aims to create a more predictable, inclusive, and competitive digital economy in the region.

The study on ASEAN DEFA, commissioned by the ASEAN Economic Community (AEC) Pillar, identified nine core elements to be included in the agreement.

These are:

1. Digital Trade
2. Cross- border E-Commerce
3. Payment and E-Invoicing
4. Digital ID and Authentication
5. Cross Border Data Flow and Data Protection
6. Online Safety and Cybersecurity
7. Cooperation on Emerging Topics
8. Talent Mobility and Cooperation
9. Competition Policy

The provisions under these issues are expected to create programmes and incentives that businesses could capitalise on, as well as regulations that may impact existing business operations or models for tech companies or digitally enabled businesses.

Recognising the importance of involving the business community in the formulation of ASEAN DEFA, the ASEAN Secretariat with the support of Australia for ASEAN Futures – Economic and Connectivity (Aus4ASEAN ECON) and Tech for Good Institute organised the 10th AEC Dialogue to unpack the key policy recommendations of ASEAN DEFA and gather business inputs for the agreement. The highlights of the business aspirations shared during the dialogue are featured in the subsequent part of this article.

The 10th ASEAN Economic Community Dialogue

The 10th AEC Dialogue was attended by more than 600 business representatives from across 10 ASEAN Member States, multinational companies, and international organisations and forums, such as the United Nations Commission on International Trade Law (UNCITRAL), World Economic Forum (WEF), and Digital Cooperation Organization (DCO). The dialogue commenced with an introductory presentation on the ASEAN DEFA by the Chair of the DEFA Negotiating Committee and the Boston Consulting Group (BCG), the appointed consultant for the ASEAN DEFA study.

Additionally, the dialogue featured two panel discussions focusing on the implications of the ASEAN DEFA for the region and the business sector’s aspirations for the agreement.

The dialogue underscored that DEFA presents an opportunity to show global stakeholders that cooperation is possible despite the diversity in the state of the digital economy in the region. ASEAN DEFA is anticipated to set ambitious goals for regional digital integration while ensuring the agreement is practical and feasible for implementation by all ASEAN Member States.

The business community offered several recommendations, summarised as follows:

Summary of the recommendations and aspirations shared by the business community

1. The benefits of DEFA should be equitably distributed across all countries, sectors, and individuals. DEFA is expected to benefit not only tech companies or digitally-enabled businesses but also MSMEs and smaller players in ASEAN’s digital economy ecosystem. Hence, DEFA should include provisions to empower individuals for meaningful participation in the digital economy and access to sustainable, resilient livelihoods.
2. Rather than a prescriptive treaty, DEFA should strive to be a principle-based and outcome focused agreement. DEFA could provide a basis for cooperation and interoperability, offering ample policy space for ASEAN Member States to tailor governance approaches to their local contexts. However, it is crucial for Member States to ensure local laws and regulations support cross-border interoperability, underpinned by clear principles, a common taxonomy, and standard definitions.
3. DEFA should be evolving, forward-looking, agile, and flexible enough to accommodate new technologies. While existing trade agreements offer best practices, DEFA presents an opportunity to build a digital-first agreement from the ground up. It’s important for DEFA to be “future-proofed” and technology-neutral, maintaining relevance amidst technological breakthroughs, new digital solutions, or innovative business models.
4. DEFA elements that are more developed and have the greatest impact can be the priority for cooperation initiatives. Harmonisation in ASEAN is not an ‘all-or-nothing’ option. Progressive alignment through a modular approach can be pursued, meaning not all countries or DEFA elements need equal maturity levels before finalising the framework. DEFA elements with clear alignment pathways and high impact potential should be prioritised. At the same time, nascent digital economy areas can be subject to principle-based collaborations. For example, progress has already been made in digital trade and logistics, such as the ASEAN Free Trade Agreement and Regional Comprehensive Economic Partnership. Negotiations can build on these existing trade agreements to shape the digital trade provisions under DEFA. On the other hand, ASEAN’s digital identity and authentication initiatives may need further conversation on cross-border recognition of digital identities. Still, ASEAN Member States can agree on common values and principles that would serve as the foundation of the policies.
5. Trusted free flow of data is integral to DEFA’s goal of digital economic integration. Data is the backbone of the digital economy. Data flows are crucial for digital integration, making the region more attractive to global investors. However, data localisation laws and disparities in data governance can hinder free data flow. To maintain trust in the digital economy, common frameworks, standards, and principles for online safety, cybersecurity, and personal data protection should be in place.
6. To foster an investable digital economy, DEFA should promote ease of doing business in Southeast Asia. Ease of doing business includes a level playing field for all, both large and small companies. The private sector emphasised that policy certainty fosters growth as companies look to operate across multiple ASEAN Member States. The agreement should also ensure that provisions remain minimally restrictive, particularly for digital trade and cross-border e-commerce.
7. DEFA should develop Southeast Asia’s tech talent, including through capacity building and knowledge exchanges. Globally, there’s high demand for digital talent. ASEAN Member States have various capacities in nurturing digital talent, with some countries more mature than others. However, all need to keep pace with innovation. Proper funding must be allocated to capacity building initiatives to foster knowledge-sharing and training sessions to bridge the skills and capacity gaps. These initiatives should include not only reskilling but also upskilling that would make it easier for the existing workforce to transition into jobs in the digital economy. In addition, capacity building for civil servants should not be overlooked. Public-private partnerships for technical assistance across the region are recommended, with several private sector participants offering support.
8. A transparent and consistent stakeholder consultation platform should be implemented throughout the DEFA negotiations. DEFA can establish a foundation for a future ASEAN, encompassing technologies, business models, and use cases yet to be discovered. Significant innovation is taking place in academia and the private sector, groups that have offered to share perspectives and expertise to support and inform the negotiation process. A multi-stakeholder and consultative approach to DEFA negotiations will ensure that specific provisions in the agreement are fit-for-purpose, future-proof, responsive, responsible, and flexible.

This article was first published in the ASEAN for Business Monthly Bulletin (Special Edition), a bulletin by the Enterprise and Stakeholders Engagement Division of the ASEAN Secretariat, providing updates on the ASEAN Economic Community (AEC) for businesses in the region.