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Innovation and Inclusivity in the Age of COVID-19: Southeast Asia’s Path to a Resilient Digital Economy

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Today, we face one of the greatest challenges of our generation. In just a short span of time, the coronavirus pandemic has upended lives and livelihoods around the world, exacerbating longstanding socioeconomic inequalities and plunging global financial markets into a deep recession. As the virus gradually made its way throughout Southeast Asia earlier this year, border controls further debilitated economies around the region, many of which were reliant on both regional and international tourism as a main driver of economic growth. Yet, despite the heavy toll of the coronavirus pandemic on the ASEAN-5 economy, several jurisdictions have emerged more resilient than ever.

This is, of course, not a new phenomenon. In many ways, history is repeating itself and we need to look no further than the 2003 SARS epidemic which was arguably responsible for accelerating major tech developments across China’s e-commerce and digital payments ecosystem. Holed up in their homes, Chinese consumers were forced to turn to previously untrusted e-commerce sites and virus-proof contactless payment options in the place of brick and mortar storefronts and cash. Despite being a cash-based economy only two decades ago, as of 2018, 83 percent of all payments in the country were now being done via mobile applications.

We can begin to see similar early stirrings of shifts in consumer habits and preferences across ASEAN nations, often most pronounced in early adopter markets whose lawmakers recognised the need for digital agility. Though disparate across developing and developed markets, this approach has informed a “smarter” model of policy-making and the fruits of this have been no more pronounced than during the COVID-19 crisis. When coupled with government aid initiatives and a collectivist culture across the region, Southeast Asia is primed to further its economic growth and chart its technological development towards a more inclusive and resilient digital economy.

Laying the digital groundwork

Thanks to its increased mobile connectivity and growing online population, Southeast Asia has one of the largest and fastest growing internet markets in the world. However, a resilient digital economy does not stem from digital readiness alone. This is instead a matter of smart regulation, anchored by the pillars of data-driven decision making, progressive policy-making, and an inclusive digital literacy model.

Arguably, the best example of this across the region can be found in Singapore’s Smart Nation plan. Launched in 2014, this ingrained tech-forward mindset informed the government’s strategies as the nation progressively built up critical digital infrastructure and promoted the adoption of smart technologies. Thanks to its extensive digital transformation work over the past 6 years, Singapore’s early response to COVID-19—which included chatbots and a national WhatsApp channel to educate and inform citizens—earned praise from the World Health Organisation.

To that end, Brunei unveiled its first five-year Digital Economy 2025 Masterplan, which aims to turn the country into a digital and future-ready Smart Nation. This included the creation of eKadaiBrunei, a national e-commerce platform aimed at providing a safe and convenient way for local businesses to continue connecting with customers during the pandemic. Brunei’s masterplan exemplifies the key role that such a digital roadmap can play in leading a local economy to a more sustainable future, coupling digital transformation initiatives with institutional backing to boost long-term resilience.

Shaping the path to recovery

Digital transformation, of course, is a long-term endeavour and while progressive policies can help to encourage the adoption of novel infrastructures and tools, it’s crucial that a workforce itself is equipped with the necessary skills to ensure wide scale digital literacy—one that doesn’t discriminate based on age, class, or sector.

Though commonly thought to be far more digitally savvy than older generations, youths themselves have voiced concerns that they aren’t sufficiently equipped with the right skills to tackle technological disruption. Last year, the World Economic Forum’s ASEAN Youth Technology, Skills and the Future of Work report found that three of the four skills that ASEAN youth regard as their weakest are STEM skills, including technology design and data analytics. Higher education institutions need to ensure their course offerings reflect the realities of the digital economy, covering topics such as entrepreneurial innovation, emerging technologies, and start-up practicums. With help from governments and enterprises alike, educational curricula should concentrate on fostering and attracting the next generation of talent, while mitigating the skills gaps in today’s workforce.

Governments also need to future-proof their nation’s workforce, ensuring that they emerge more resilient in a post-COVID environment. In tackling the pandemic’s immediate economic implications, emerging markets such as the Philippines have looked to upskilling to ground forms of financial assistance. For one, the country’s Technical Education and Skills Development Authority initiated a PHP 3 billion programme to upskill and reskill temporarily displaced workers. Amid high rates of retrenchment across various sectors such as F&B, hospitality, retail, and tourism, such programmes will be especially vital for mid-career and senior executives as they participate in new arenas of the digital economy.

Southeast Asia is home to an abundance of small and medium enterprises (SMEs)—accounting for between 88.8 to 99.9 percent of total establishments in the ten ASEAN Member States. To help these SMEs adapt to the “new normal” governments across the region have introduced grants and initiatives to incentivise their transition and promote the adoption of digital technologies such as artificial intelligence, IoT, automation, and robotics.

With such businesses forming the bedrock of the region’s economy, business owners need the right training and digital skills to better build up their digital capabilities and implement digital solutions to rapidly increase production and streamline their operational efficiency when the economy recovers. From government-funded accelerators to locally built e-commerce networks, SMEs across the region have been offered a vast range of opportunities to aid in their online transition. As part of Malaysia’s National Economic Recovery Plan, the Malaysia Digital Economy Corporation has pledged to onboard SMEs and micro SMEs onto e-commerce platforms, offering training, seller subsidies, as well as sales support to kickstart their digital journeys.

It’s clear that the future is inherently digital, but no country can afford to leave any fresh graduate, professional, or business behind. With progressive policymaking anchored by an emphasis on education and upskilling, Southeast Asia certainly has the potential to secure its competitive standing on a global stage.

Collectivism at scale

And yet, the will to change ultimately begins at an individual level. Despite the disparate cultures, beliefs, and politics that continue to prevail across the region, Southeast Asia has fast-distinguished itself in its collective approach to addressing the realities of the pandemic. Absent are charged conversations surrounding stimulus payouts or the politicisation of healthcare measures, spanning crowd control at political rallies or mandatory mask-wearing—instead, communities have rallied together, falling in line across the public and private sector, to benefit the greatest number rather than a privileged few.

Though digital transformation continues to materialise at a varied pace from country to country, the pandemic has pushed many governments, enterprises, and individuals to adapt rapidly to unfamiliar challenges and new ways of working. Now more than ever, the impact of progressive measures and initiatives to support the region’s growth towards a more advanced digital economy, are clear. Denoted by an underlying collective approach and smart regulation, fostering continuous innovation, building up critical workforce capabilities, and increasing the business resilience of SMEs will be the catalysts that underpin Southeast Asia’s growth in a  post-pandemic future.

Danny Phan is the managing director of Wachsman Asia Pacific. Equipped with over 20 years of experience across APAC and the US, Danny is an award-winning communications consultant, having advised some of the world’s largest tech companies on policy and regulatory communications, including Southeast Asian ride-hailing giant Grab, American online platform marketplace Airbnb, and the Asia Internet Coalition. Danny has received multiple accolades, recognised as “Young PR Professional of the Year” at the Asia Pacific PR Awards and included in Campaign Asia's "40 under 40".

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Economy

Role of WTO in Regularization of International Trade

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International trade is one of the main features of the globalized world and global economy. There it needs also a well-organized institutional mechanism to regulate it. World Trade Organization is an international organization established in 1995, whose main objective is to facilitate trade relations among its member countries for their mutual benefits. Currently 164 states are its members. The activities and works of WTO are performing by a Secretariate of about 700 staff located in Geneva, Switzerland, led by the Director General. English, Spanish and French are the official languages of World Trade Organization. The annual budget of WTO is about 180 million dollars.

Since its creation it is playing an important role in the regularization of international trade. It offers a forum and facilitation for negotiating trade agreements in order to reduce the barriers in the way of smooth international trade among member countries. Thus, the role of this organization is playing very important role in the regularization of international trade which is contributing to economic development and growth of member countries in this globalized world. The World Trade Organization also offers an institutional structure and legal framework for the execution and supervising of the international trade related agreements which are very helpful in regularization of international trade. It also settles disputes, disagreements and conflicts occurring during the interpretation and execution of the components of the international agreements related to international trade. During the past 60 years, the World Trade Organization and its predecessor organization the GATT (General Agreement on Tariffs and Trade) have assisted to establish a solid and flourishing global trade system, by this means helping to extraordinary international economic development.

The WTO is regularizing international trade more specifically through negotiating the decrease and finally elimination of barriers to trade among countries and try to make smoothly the working of the rules and principles governing the international trade e.g. tariffs, subsidies, product standards, and antidumping etc. It also administers and monitor the execution of the World Trade Organization’s determined guidelines for trade in services, goods as well as intellectual property rights related to international trade. It also monitors and review the member states international trade policies as well as make sure the transparency in bilateral and multilateral trade agreements. Likewise, it also solves disputes arising among members related to trade relations or related to the explanation of the provisions of the trade agreements. It also offers services to the governments of the developing states in the fields of capacity building of officers in matters related to international trade. WTO is also doing research on matters related to international trade and its related issues and collect data in order to find better solutions of the problems and obstacles in regularization of international trade. It is also trying to bring into the organization the 29 states who are yet not members of the organization aimed to assist and regulate their international trade according to the international standard.

One of the main barriers in way to international trade is disputes between the engaged parties. Since long this was a very critical issue limiting the trade among states. The WTO is playing very good and instrumental role in the solution of trade related disputes. Since the establishment of WTO in 1995 over 400 disputes related to trade have been brought by its member countries to WTO. The increasing number of bringing trade related disputes to WTO is showing the faith of member countries in the organization. Close trade relations have massive advantages but also create disputes and disagreements. With the increase of international trade, the possibility of its related disputes also increases. Previously, such problems and disagreements have caused in severe disputes. But at present, in the era of WTO the international trade related disputes are decreased because the member states have now dispute’s solution platform, and they are turning to the World Trade Organization to solve their trade related disagreements and disputes. Before the World War Second, there was not any such international organization or forum which could facilitate international trade and its related affairs, and there was also noany legal framework for solving trade related disputes among states of the word.

One of The World Trade Organization’s guiding principal is to continue the open boundaries for trade, ensure the Most Favoured Nation (MFN) status among member countries and stop discriminatory behaviour of members towards other member(s) and bring transparency in doing international trade. It is also assisting counties to open their indigenous markets to global trade, with justified exemptions or with suitable flexibilities, promote and support to durable growth, reduce trade deficit, decrease poverty, and promote economic stability. It is also working to integrate different international trade policies and principles. The member countries of WTO are also under the compulsion to bring their trade related disputes to this organization and avoid unilateral actions. WTO is the central pillar of the current international trade system.

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Economy

Russia and France to strengthen economic cooperation

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On April 29, Russian President Vladimir Putin held videoconference with leaders of several French companies-members of the Franco-Russian Chamber of Commerce and Industry (CCI France-Russia) to discuss some aspects of Russian-French trade, economic and investment cooperation, including the implementation of large joint projects as well as the prospects for collaborative work.

Putin noted that the Economic Council of the Franco-Russian Chamber of Commerce and Industry is still operational in spite of difficulties, and the late April meeting was the fourth time since 2016. From the historical records, France has been and remains a key economic partner for Russia, holding a high but not sufficiently high, 6th place among EU countries in the amount of accumulated investment in the Russian economy and 5th place in the volume of trade.

Despite a certain decline in mutual trade in 2020 (it went down by 14 percent compared to 2019) the ultimate figure is quite acceptable at $13 billion. French investment in Russia is hovering around $17 billion, while Russian investment in France is $3 billion.

Over 500 companies with French capital are operating in various sectors of the Russian economy. French business features especially prominently in the Russian fuel and energy complex, automobile manufacturing and, of course, the food industry. “It could have been more if the French regulatory and state authorities treated Russian businesses as Russia is treating French businesses. We appreciate that in a difficult economic environment, French companies operating in Russia have not reduced their activity,” Putin pointed out.

The Russian Government established the Foreign Investment Advisory Council, which includes six French companies. Further, there is an opportunity to discuss specific issues related to the economic and investment climate in Russia, and that opportunity is traditionally provided at the St Petersburg International Economic Forum, which will be held on June 2-5.

French companies are involved in the implementation of globally famous landmark projects, such as the construction of the Yamal LNG and Arctic LNG 2 facilities and the Nord Stream 2 gas pipeline project. This, Putin regrettably said “We are aware of and regret the amount of political speculation concerning the latter. I would like to point out once again that it is a purely economic project, it has nothing to do with present-day political considerations.”

Russia intends to increase assistance to the development of science and technology. Funds will be directed primarily to innovation sectors such as pharmaceuticals and biotechnology, nuclear and renewable energy, and the utilisation of carbon emissions.

“We are interested in involving foreign companies that would like to invest in Russia and in projects we consider high priority. In order to do this, we will continue to use preferential investment regimes and execute special investment contracts, as you know. A lot of French companies successfully use these tools on the Russian market. For example, more than one third of 45 special investment contracts have been signed with European, including French, partners,” he explained during the meeting.

He also mentioned continuous efforts to attract foreign companies to localise their production to state purchases and to implementing the National Development Projects, as well as existing opportunities for French businesses in special economic zones. Today there are 38 such zones created throughout the Russian Federation.

Russia pays particular attention to attracting high-quality foreign specialists. Their employment is being fast-tracked, and their families can now obtain indefinite residence permits. There is a plan to launch a special programme of ‘golden visas’ whereby to issue a residence permit in exchange for investment in the real economy, a practice is used in many other countries.

Taking his turn, Co-Chair of the CCI France-Russian Economic Council, Gennady Timchenko, noted that the pandemic has changed the world, people and business, and that French companies in Russia are responsible employers and socially responsible members of Russian society.

Despite the crisis and the geopolitical situation, a number of French companies have launched production in 2020–2021. Companies such as Saint-Gobain and Danone have renewed their investments. French companies have increased their export of products manufactured in Russia; they are investing in priority sectors of the Russian economy. For example, this year the French company Lidea is launching a plant called Tanais to produce seeds. Russia is dependent on the import of 30 to 60 percent of these seeds, according to various estimates.

Despite the current geopolitical conditions and information field, there are important signals for French business and the Russian side to strengthen economic cooperation, attract investment, and create partnerships on a new mutually beneficial basis.

Co-Chair of the CCI France-Russian Economic Council, Patrick Pouyanne, noted that the meeting has become an excellent tradition, the presence of 17 CEOs and deputy CEOs of French companies shows the importance of these joint meetings, and further reflect the deep interest of French business in Russia.

In addition, Patrick Pouyanne further offered some insights into Russia-French cooperation. By 2020, twenty members of the Economic Council invested a total of 1.65 trillion rubles, supporting 170,000 jobs. These companies have operated in Russia for decades and continue investing in the Russian economy despite the sanctions and the epidemic. These companies help France maintain its status as the second largest investor in Russia. In 2020, France invested over $1 billion in Russia despite the economic difficulties caused by the pandemic.

Concluding his remarks, Patrick Pouyanne stressed that the economic operators believe everyone will benefit if Russia, France and all of Europe are not divided or isolated. This is the challenge today. Indeed, diplomacy has to continue playing an important role in settling differences, and businesses are convinced that meetings like this create bridges between Russia and France to strengthen investment and economic cooperation.

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Economy

Iran’s Economic Diplomacy through CPEC

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U.S. sanctions against Iran are characterized by strategic flexibility and adaptability. They are designed to have maximum negative and deterrent effect on Iran’s military, economic and diplomatic growth.  Tehran is exploring ways to counter these sanctions most probably by economic engagements with the regional countries. Iran’s perception of CPEC lends some credit to this argument.

Since the initiation of CPEC, the regional perception has already started to change as many countries have begun to see the project within the domain of their national interests. Iran has expressed its long-standing interests to join the CPEC viewing the corridor as a cornerstone for the country economic prosperity and regional connectivity.

Iran solely focuses more on the economic aspect of CPEC. Regional connectivity through CPEC can boost Iran’s stake in the global output. In 2015, on the sidelines of the United Nation General Assembly (UNGA) address, Iran’s President Hassan Rouhani expressed a desire to be the part of CPEC. He emphasized the importance of connectivity projects for the region. Iran’s initial reluctance to CPEC was transformative in nature and heavily came down with the unfolding of new geoeconomic realities.

Iran’s inclination for the CPEC project even becomes the part of official discourse. Iran’s ambassador to Pakistan Mehdi Monardost showed keen interest to participate in the CPEC and named it as one of the greatest projects in the history of the region. He envisioned a great boost to bilateral trade between Pakistan and Iran under the framework of this regional connectivity corridor. In 2017, Iran’s economy minister Ali Tayyebnia participated in the New Silk Road summit. He praised the New Silk Road concept for regional connectivity.

Iran’s economy is already clutched due to the international sanctions invoked by the Trump administration after pulling back from the Iranian Nuclear Agreement formally known as the Joint Comprehensive Plan of Action (JCPOA) in May 2018.Downplaying the perception of geopolitical competition between Gwadar and Chabahar, Iran higher officials negated the impression of competition falsely exaggerated by International and India media and insisted on the complementary nature of two ports.

In 2016,Iran and India signed an agreement for the development of Chabahar port and it was view as the counterweight to Gwadar port. Without explicitly mentioning India by name, Iran’s ambassador to Pakistan Syed Mohammad Ali Hoseeni defended the decision of his country to drop out India from the project in Chabahar by stating “when some foreign governments found reluctant in their relations with Iran and need other’s permission for even their normal interactions, for sure they would not be capable of planning and implementing such long-term cooperation contracts”.

The same rhetoric appears in the views of Chinese leadership. Brushing aside the allegations of Iran’s perceived resistance to CPEC and Gwadar port, Iran’s foreign minister Jawad Zarif dismissed the allegations and supported growth and development anywhere in Pakistan.

Chabahar is often seen as a rival to Gwadar port. However, Indian discourse has got an altogether different lease of life in the media compared to the Iranian one. Iran’s ambassador to Pakistan Mehdi honardoost utterly disregarded the narrative of competition of two ports. He invited both Pakistan and China to closely work in Chabahar port.

China considers Iran as an important country for its energy security, BRI and in the larger context of global competition with USA. China dual role both in Gwadar and Chabahar, according to the analysts, will likely reduce the impression of competition between two ports. Chinese stance on the Chabahar port also complement the Iran’s position on Chabahar. Chinese premier Le Keqiang rejected the notion that Chabahar port is in competition with the Gwadar. He is convinced with the idea that both ports have the potential to complement each other.

Tehran global status goes upward with the emerging financial and diplomatic backing of China. Beijing openly backs Tehran in the face of U.S. might.  On March 26, 2021, China and Iran signed an agreement expressing a desire to increase cooperation and trade relations over the next 25 years. Wang Yi, Chinese foreign minister, said that USA should rescind the sanctions against Iran. The 25 years deal is considered as part of the Belt and Road Initiative (BRI). According to Tehran Times analysts Peyman Hassani and Ammar Hossein Arabpour, this deal is considered a relief to Iran’s gas and oil sector against USA sanctions.

USA sanctions forcefully bar the countries from purchasing oil from Iran. The US Department of Defense’s report notes that China Pakistan Economic Corridor (CPEC) focus on pipelines and port construction. Pakistan’s reluctance to follow the Iran-Pakistan gas pipeline which is stalled due to American pressure can be reviewed, too much sigh of relief for Tehran’s energy export.

Triangular relations of China, Pakistan and Iran will likely put Iran on the strong footing. Richard Caplan, a professor of international relations at the university of Oxford, notes, “The agreement which predates Biden, undercuts U.S. efforts to isolate Iran economically and, to some extent, diplomatically.

Diplomatic and economic isolation remain at the center of Iran’s foreign policy under the severe U.S. sanctions. Iran’s perceptions of CPEC revolves around the same fact that through regional engagements under CPEC and BRI, it can tackle its global problems to some extent.

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