Unlocking Southeast Asia’s Potential through the ASEAN Digital Economy Framework Agreement

ASEAN can demonstrate to global stakeholders how digital integration is possible through cooperation. This article outlines how for DEFA to achieve its aspirations, it should be principle-based and impact-focused, learn and adopt existing digital provisions, and foster continuous innovation and inclusive growth.

By: Ming Tan, Founding Executive Director, Tech For Good Institute; Maria Monica Wihardja, Visiting Fellow, ISEAS – Yusof Ishak Institute.

Guided by the 2021 ASEAN Bandar Seri Begawan Roadmap, the ASEAN Digital Economy Framework Agreement (DEFA) — poised to be the world’s first regional digital economy agreement — is timely.

Much like existing traditional free trade agreements and other digital economy agreements, the goal is for DEFA to result in legally binding commitments by ASEAN Member States (AMS) to advance regional digital integration. It aims to unlock an additional USD 1 trillion for the region’s digital economy by 2030, compared to the business-as-usual trajectory. Nine areas of the digital economy, ranging from cross-border data flows to digital ID, as well as talent mobility, are set for negotiations, which began on December 1, 2023 and are expected to conclude in 2025.

Coupled with ASEAN’s diversity across legal, socio-economic, and political spheres, DEFA presents an opportunity to show global stakeholders how digital integration is achievable through cooperation.

Negotiators face at least challenges in unlocking Southeast Asia’s digital potential. The first is to strike a balance between respecting the national policy objectives and regulatory systems of sovereign member states while enabling digital interoperability across the region through alignment, standardisation, and harmonisation of regulations and infrastructure (known as “horizontal integration”).

The second challenge involves maintaining focus on the ultimate goal of global competitiveness by developing standards, frameworks, and systems that suit the region while also allowing for global interoperability (termed “vertical integration”).

The third challenge is to close the significant digital divide across ASEAN member states (AMS) by giving time and space for AMS to adopt and implement the newly agreed standards, frameworks, and systems, and securing commitments for capacity building to ensure that the benefits of DEFA are inclusive and equitable.

How might DEFA address these challenges? Drawing on insights from experts working in government, business, and civil society at the 10th ASEAN Economic Community Dialogue in Jakarta last November 30, 2023, we identify three key policy recommendations to advance ASEAN’s digital economy.

DEFA’s success rides on ambition and commitment to solve fundamental elements of the digital economy, especially regarding seamless data flow and talent development.

First, rather than being a prescriptive treaty, DEFA should aim to be a principle-based and impact-focused agreement. It should provide the basis for a framework on cooperation while allowing ample policy space for AMS to determine governance approaches that suit their local contexts. However, it is crucial for AMS to ensure that their local laws and regulations support interoperability across borders within and beyond ASEAN. This should be underpinned by clear principles, a common taxonomy, and standard definitions. Aligning visions and agreeing on baseline rules can also establish a policy base for achieving desired outcomes.

The elements proposed for DEFA negotiations, such as harmonising standards, frameworks, and systems – particularly those requiring legal compliance – are not a case of “all or nothing.” Areas in DEFA that are more developed and impactful can be prioritised for implementation. Regulations can be progressively aligned using a modular approach, while newer areas can be developed through principle-based collaboration. Digital trade and cross-border e-commerce have progressed, as most AMS have already adopted paperless trade and the UNCITRAL Model Law on Electronic Commerce into their domestic law. DEFA negotiations could build upon these existing country-level achievements and agreements like the ASEAN Agreement on E-Commerce. While further discussions are needed to enable cross-border recognition and cooperation in digital identity initiatives and the governance of emerging technologies. AMS can, however, agree on common values and guiding principles, such as responsible AI practices.

Second, to ensure interoperability and integration into the global market, DEFA should learn and adopt existing digital provisions in free and plurilateral trade agreements, digital economy agreements, and country- and region-level initiatives. Notable references include the Regional Comprehensive Economic Partnership, the Singapore-Australia Digital Economy Agreement and Digital Economy Partnership Agreement, the e-commerce chapter of the ASEAN-Australia-New Zealand Free Trade Area agreement, and APEC’s Cross-Border Privacy Rules. Nevertheless, ASEAN should develop its own unique and pragmatic approach to DEFA, tailored to the region’s diverse society and culture.

Third, it’s crucial for DEFA to be ‘future-proof’ and not become outdated as new technologies emerge. Therefore, DEFA should be technology-neutral, neither favouring nor discriminating against any type of technology. This will protect DEFA from becoming obsolete amidst technological breakthroughs, new digital solutions, or innovative business models. Nurturing continued digital and technology innovation through a fair level playing field for both large and small companies, and for both existing and new players, should be prioritised.

Continued cooperation among governments, and between the public and private sectors, as well as civil society, is vital given the rapid pace of technological innovation. For example, while artificial intelligence is currently a major topic of discussion, new technologies and business models could soon make existing governance and market structures obsolete. Emerging topics may require ongoing learning as companies experiment with innovative solutions and expand them safely across the region. Initiatives like regulatory sandboxes, which promote regulatory learning while encouraging innovation to meet regional needs, are a good start. Even more ambitious would be a regional approach to regulatory sandboxes, such as sandbox corridors across several countries, to foster growth and alignment at scale.

Beyond these specific recommendations, DEFA’s success depends on the ambition and commitment to address fundamental elements of the digital economy, especially seamless data flow and talent development. The trusted free flow of data is vital to DEFA’s goal of digital integration, but data localisation laws and disparities in data governance regulations reduce this potential. Common frameworks, standards, and principles for online safety, cybersecurity, and personal data protection can tackle many concerns about cross-border data flows. DEFA should encourage talent development and mobility across technical, business, and governance domains through capacity building, knowledge exchanges, and mobility across countries and sectors. Such progress would lay the groundwork for fruitful public-private partnerships for technical assistance, governance initiatives, and standards alignment. DEFA could forge a new path in global trade and technology governance as they evolve in the digital age. It could serve as the foundation for meaningful cooperation and coordination, leading to an empowered, safe, and integrated ASEAN that is innovative, interoperable, and investable.

About the writers

Ming Tan is founding Executive Director for the Tech for Good Institute, a non-profit founded by Grab to catalyse research and collaboration on social, economic, and policy trends accelerated by the digital economy.

Maria Monica Wihardja is an Economist and a Visiting Fellow in the Media, Technology and Society Programme, the Regional Economic Studies Programme and the Indonesia Studies Programme at ISEAS – Yusof Ishak Institute.

This article was first published by Fulcrum on December 12, 2023.

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Mouna Aouri

Programme Fellow

Mouna Aouri is an Institute Fellow at the Tech For Good Institute. As a social entrepreneur, impact investor, and engineer, her experience spans over two decades in the MENA region, South East Asia, and Japan. She is founder of Woomentum, a Singapore-based platform dedicated to supporting women entrepreneurs in APAC through skill development and access to growth capital through strategic collaborations with corporate entities, investors and government partners.

Dr Ming Tan

Founding Executive Director

Dr Ming Tan is founding Executive Director for the Tech for Good Institute, a non-profit founded to catalyse research and collaboration on social, economic and policy trends accelerated by the digital economy in Southeast Asia. She is concurrently a Senior Fellow at the Centre for Governance and Sustainability at the National University of Singapore and Advisor to the Founder of the COMO Group, a Singaporean portfolio of lifestyle companies operating in 15 countries worldwide.  Her research interests lie at the intersection of technology, business and society, including sustainability and innovation.

 

Ming was previously Managing Director of IPOS International, part of the Intellectual Property Office of Singapore, which supports Singapore’s future growth as a global innovation hub for intellectual property creation, commercialisation and management. Prior to joining the public sector, she was Head of Stewardship of the COMO Group and the founding Executive Director of COMO Foundation, a grantmaker focused on gender equity that has served over 47 million women and girls since 2003.

 

As a company director, she lends brand and strategic guidance to several companies within the COMO Group. Ming also serves as a Council Member of the Council for Board Diversity, on the boards of COMO Foundation and Singapore Network Information Centre (SGNIC), and on the Digital and Technology Advisory Panel for Esplanade–Theatres on the Bay, Singapore’s national performing arts centre.

 

In the non-profit, educational and government spheres, Ming is a director of COMO Foundation and Singapore Network Information Centre (SGNIC) and chairs the Asia Advisory board for Swiss hospitality business and management school EHL. She also serves on  the Council for Board Diversity and the Digital and Technology Advisory Panel for Esplanade–Theatres on the Bay, Singapore’s national performing arts centre.

 

Ming was educated in Singapore, the United States, and England. She obtained her bachelor’s and master’s degrees from Stanford University and her doctorate from Oxford.