While the digital revolution has already brought many benefits to Southeast Asia, the region has a unique opportunity to achieve even faster progress by reinforcing the foundations of its growing digital economy. To realize this vision, a new World Bank report, The Digital Economy in Southeast Asia – Strengthening the Foundations for Future Growth, analyzes the opportunities and challenges facing the region to scale up digital development, and for ensuring the economic and social dividends of technology can reach everyone.
“Every sector of the economy in ASEAN countries can do more to use digital technologies and smarter business models. To help our private sectors governments also need to transform themselves: to use technologies such as data analytics and intelligent systems, develop our digital platforms and harmonize our approaches to regulatory procedures particular for cybersecurity, digital identity, and data management. We should work towards a regional digital market,” said H.E. Dr. Pichet Durongkaveroj, Minister of Digital Economy and Society.
“Southeast Asian countries has made significant headway in the digital sector,” said Boutheina Guermazi, the World Bank’s Director for Digital Development. “But even though the population has embraced digital services, adoption by businesses and governments has generally been slower. Regulatory bottlenecks and a lack of trust in electronic transactions stifle the growth of digital systems. This groundbreaking research can help ASEAN countries overcome these challenges to create strong, inclusive digital economies.”
The report identifies six main areas of focus for digital development in Southeast Asia, starting with the expansion of connectivity, the backbone of the digital economy. Although half of the region’s population uses the internet—on par with the global average—this can continue to be expanded with policies and actions that will significantly lower prices, increase speeds, and bring reliable broadband internet to underserved areas. In middle income countries in this region only 2 out of 5 people have access to high speed (4G) mobile internet—in lower income countries it’s only 1 out of 5. Active collaboration between the public and private sectors and proactive regulatory approaches will be critical to unlocking the needed investments in digital infrastructure and fostering greater competition across the telecommunications sector.
With digital technology transforming almost all sectors of the economy, the skills of the region’s workforce need to keep pace. Education systems will have a key role to play in developing the technical knowledge and soft skills that are required to compete in the global digital economy. Given the rate of technological change, adaptability and lifelong learning will be more important than ever, as well as more effective collaboration between the public and private sectors.
Digital payments are another essential underpinning of the digital economy, but the report finds that they remain underdeveloped in Southeast Asia compared to other parts of the world. In most countries in Southeast Asia, payments are overwhelmingly cash based. The World Bank’s global financial inclusion (findex) data shows that only 19 percent of financial account holders in the region access their accounts via the internet. Implementing robust regulations and modern digital identification systems can help create the enabling environment for digital finance. At the same time, the digitization of government payments—for pensions, cash transfers, and other social programs—can incentive more change and generate momentum.
The report stresses however that Southeast Asia’s digital development cannot rely solely on virtual foundations. A well-functioning logistics sector is crucial to the growth of the digital economy, especially e-commerce. In the region, a modernized regulatory framework for logistics could increase competition, reduce logistics costs and improve the quality of services. In particular, streamlining customs procedures can make shipping faster, cheaper, more predictable, and give e-commerce a major boost.
Likewise, regional integration, including harmonizing regulations and facilitating transactions between ASEAN countries, can create an integrated digital market benefiting both businesses and consumers.
Finally, to address the risks and vulnerabilities that come with digital transformation, the report suggests prioritizing effective standards and regulations for electronic transactions, cross-border data flows, cybersecurity, data privacy, and consumer protection. Solid measures in these areas are essential to build trust in online platforms and create secure, sustainable digital economies.