IV.

ASEAN's Digital Economy Landscape

1. The Current State of the Digital Economy in ASEAN
Digital economy is an economy that operates mainly on digital technology. In most
Southeast Asian countries, especially ASEAN countries, the digital economy is not
only a "launching pad" for economic growth, but also a basis for promoting ASEAN
connectivity with partner countries inside and outside the region. ASEAN's digital
economy is thriving, with the potential to become one of the world's top five digital
economies. The ASEAN digital market has tripled in three years (2017-2020) and
accounts for 7% of ASEAN's GDP. It is forecast that ASEAN digital economy growth
will reach 300 billion USD by 2025.
ASEAN is a region with strong e-commerce growth. The field of e-commerce and
digital economy is benefiting especially thanks to the breakthrough technological
innovations and digital transformation efforts of most countries around the world.
Thanks to the convenience and efficiency of e-commerce, the sector is forecasted to
continue its impressive growth momentum despite the gradual end of the Covid-19
pandemic. According to Statista's report, ASEAN is forecast to achieve a compound
annual growth rate of up to 11.43% in the next 5 years, comparable to developed
countries in the world such as the US, China, Canada. Revenue at the end of 2023 is
forecast to reach $113.90 billion and could reach $175 billion by the end of 2027.
Shopee shopping platform is rated as the most outstanding platform, accounting for
44% of the total revenue rate of the region. With this momentum, ASEAN is on track
to become a $1 trillion internet economy by 2030.
In the context of ASEAN, fintech contributes significantly to economic and financial
inclusion. It challenges traditional financial institutions through advanced
technologies such as AI, blockchain, and data analytics. The digital payments
transformation has streamlined processes, reduced costs and improved efficiency. The
support fintech has for SMEs and its role in promoting financial literacy through
various platforms is also noteworthy.
The fintech landscape has great promise in the long run, and investors can make
money as more innovative solutions develop. However, adaptability will be critical
for founders to weather these challenging times. Besides, collaboration between
fintech companies and regulators in ASEAN is also important to ensure an innovative
financial ecosystem.
Internet penetration rates are increasing, so the digital capabilities of people in the
region are also increasing. For example, the e-commerce market in Southeast Asia is
the fastest growing in the world and is expected to be worth $1 trillion by 2030,
according to a Google report. This growth is driven by the widespread use of
smartphones, along with improvements in internet infrastructure. With an expected
GDP growth of 5% by 2024, Southeast Asia will become an attractive investment
destination.
2. Opportunities of digital economy in ASEAN
The digital economy is bringing countless great opportunities to the ASEAN region,
which can promote economic growth, improve quality of life and make ASEAN one
of the most dynamic and innovative regions in the world. gender. Below are some
typical opportunities:
- Promote economic growth:
Large consumer market: ASEAN has more than 670 million people, one of the largest
consumer markets in the world with a growing middle class. This is huge potential for
businesses participating in the digital economy, especially in the fields of e-
commerce, fintech and on-demand services.
Infrastructure development: ASEAN countries are investing heavily in developing
digital infrastructure, including 5G networks, fiber optic cables and broadband
internet. This will help improve internet access and facilitate the development of
digital economic sectors.
Support policies: ASEAN countries are implementing many support policies to
promote digital economic development, including encouraging investment in
technology, training human resources and building a favorable business environment.
- Improve quality of life:
Improved access to services: Digital economy can help improve access to essential
services such as education, healthcare, finance and e-government, especially for
people in rural and regional areas. remote areas.
Job creation: The digital economy can create many new job opportunities in fields
such as information technology, e-commerce, fintech and startups.
Increasing income: The digital economy can help people increase their income
through participating in e-commerce platforms, providing online services or starting a
business.
- Turn ASEAN into a digital economic center:
Strategic location: ASEAN is located in a strategic position on the World Economic
Map, connected to major markets such as China, India and the EU. This is a great
advantage for ASEAN to attract investment and develop the digital economy.
Dynamic startup banking: ASEAN has a dynamic startup ecosystem with many
innovative startups developing innovative solutions to the region's problems.
Young human resources: ASEAN has abundant young and technology-savvy human
resources, which is an important factor to promote digital economic development.
3. Key Challenges of the Digital Economy in ASEAN
The digital economy encompasses many different activities, including e-commerce,
digital payments, and online services. The digital economy offers many opportunities
for ASEAN members to transform their economies and increase their
competitiveness. For example, Indonesia's share of the digital economy already
accounts for 40% of the Southeast Asian market, making it a major player in the
region's digital economy. By 2030, ASEAN's digital economy is projected to reach $2
trillion and contribute about 28 percent of the region's GDP. However, there are 4
challenges that ASEAN faces in this economy.
First, one of the main challenges ASEAN faces in the digital economy is the need for
digital infrastructure and connectivity. Building a digital infrastructure to facilitate
connectivity is essential to enable people to make transactions between countries.
ASEAN has recognized the importance of digital connectivity and has taken steps to
support the creation of an ASEAN digital community through cooperation and
strategic planning. However, there is still a long way to go to improve infrastructure
and digital connectivity in the region. However, the digital economy in ASEAN is
growing, especially in the start-up and e-commerce sectors.
Second, the major challenge facing ASEAN in the digital economy is the need for
digital education and skills. Enhancing digital literacy skills is critical in supporting
progress and contributing to the successful transformation of the digital economy. The
development of digital skills is a key pillar in creating a single market base as
technology, industry and demand evolves within ASEAN. However, there are still
significant gaps in digital skills across the region, with some countries struggling to
keep up with digital transformation.
Third, cybersecurity and data privacy are also major challenges for ASEAN in the
digital economy. Cybersecurity threats are becoming increasingly sophisticated and
complex, and ASEAN nations need to take steps to protect their citizens from these
threats. In addition, personal data protection is an urgent issue that needs attention in
the digital economy. For example, mobile phone service providers need to ensure the
protection of consumer data while still providing valuable service. Overall, addressing
these critical challenges is critical for ASEAN to fully realise the potential of the
digital economy and ensure that all its citizens can take advantage of the
opportunities.
Fourth, an equally important challenge is to create opportunities for the younger
generation to develop different innovations by offering inclusive policies to
policymakers. Currently ASEAN has 52 "unicorn" companies (startups worth $1
billion or more), this breakthrough needs to be supported and enhanced to have more
digital companies born in ASEAN countries.