Asean needs to put pedal to metal on digital integration

Singapore

SOUTH-EAST Asia must pick up the pace on digital policy even as the region presses on with initiatives for trade and e-commerce in the Asean Economic Community (AEC) 2025 blueprint.

Arrangements around trade, logistics, e-commerce and payments were tackled at a gathering here of Asean economic ministers in late August.

The Asean Agreement on E-Commerce, which ministers hope to sign in November, has provisions for paperless trade; cross-border data flows; and electronic payment, among other issues. Also endorsed at the meeting was the Asean Digital Integration Framework, which proposed, among other actions, bringing all digital integration initiatives under the Asean Coordinating Committee on E-Commerce.

In a report, Bain & Co analysts echoed the call for a single body to manage all areas of the framework. "You have a separate body driving physical logistics and transport and working to improve that. And you have a separate body on financial, and a separate body on e-commerce," said partner Tony May, co-author of the report, at a briefing.

"They have all had their own mandates, they're all moving at their own speeds - which often may not be the same speed. We thought it was important for one body to be specifically overseeing the priorities, and making sure, if you really want to see progress made quickly, that someone has got a to-do list across all the other actions."

Lee Chen Chen, director of policy programmes at the Singapore Institute of International Affairs, told The Business Times that "AEC's greatest success has been in tariff reduction", but the abolition of almost all tariff lines "has been offset by an increase in non-tariff measures", which have ballooned.

"Asean countries should break from the 'trade negotiation' approach, which sees non-tariff measures as a source of revenue, and strive instead for regional transparency and co-operation in conformity assessment procedures," she said.

Steps that leaders have taken on trade include the Asean Single Window for customs clearance for states to share data electronically, and the Asean-wide Self-Certification scheme, which lets exporters certify goods' origins to enjoy preferential tariffs, without going through agents.

Meanwhile, worldwide software industry lobby BSA has called for "market-led, globally adopted technology standards and minimally burdensome technical regulations".

Darryn Lim, its Asia-Pacific policy director, told BT that requirements for data to be kept on in-country servers - a trend "cropping up in privacy laws, cyber security laws, and government procurement" - pose a key concern for businesses. "There should be no data localisation. Data should be allowed to flow freely across borders, because it facilitates commerce and also cloud services."

Payments network provider Swift has made recommendations such as establishing plans to adopt the ISO 20022 standard for communication among financial institutions across the region, and has called for more flexibility with trade settlement and investment in local currencies.

Sharon Toh, Asean head of international bank payment system Swift, said policymakers should make a regional rulebook a priority: "The banks and financial entities don't have to reinvent the wheel . . . but they can agree on rules for how they transact with each other around, say, the fees that we're going to charge for Asean."

Swift is also studying how to store trade documents centrally and tag them to specific transactions, she said.

Ken Chia, a principal at law firm Baker McKenzie Wong & Leow, even suggested that emerging economies tap the blockchain ledger to catch up with more mature peers: "This could be an interesting way of leapfrogging, essentially, by not having to have your own national single window first ... We're talking about something a bit more technology-neutral, which has the capacity to be trusted."

But Mr May said that small and medium-sized enterprises (SMEs) may have yet to reap rewards fully: "Large companies have got the scale. They can invest probably modest resources to do all the paperwork... and now they can benefit from the simplicity. The SMEs may not make that first step.

"As the Asean policymakers start thinking about how to implement some of this, we propose that someone think about whether that's going to create more complexity for SMEs in the early stages."

Ms Lee added that SMEs face high costs from digital solutions, such as forking out commissions to use payment services in online sales. "In addition, they may lack the necessary manpower and know-how, which can be addressed through government schemes that provide grants, reskilling workshops, et cetera."

Another suggestion is for states to harmonise domestic policies with not just Asean's personal data protection framework, but also international standards like the Apec Cross Border Privacy Rules (CBPR). Singapore joined the system in February, the sixth of the Asia-Pacific Economic Cooperation group's 21 members to do so.

"Not every Asean member will have the ability to step up to Apec," said Mr Chia. "But you can definitely... test the waters in places like Singapore, Malaysia, first, and hopefully get people like Vietnam coming on board... And that could solve some of the data localisation issues..."

His colleague Anne Petterd, also a principal, said a regional business might bear extra costs trying to obey "slightly different rules" in each country for issues such as data breach notification. "Harmonisation of those sorts of rules would take away one cost component for selling consumer products across Asean.

"And if all of Asean was operating on a common set of data protection rules for privacy, then that might also mean that Asean has a stronger voice in dealing with other jurisdictions.

Credit Suisse analyst Johnson Loh said mobile payments "can offer a great solution" for unbanked populations.

"However, for that to happen, we believe governments will have to drive investments and initiatives such as national payments interoperability, which means governments across 10 markets have to take steps to harmonise regulations, technological specifications and protocols."

He added that e-commerce growth will let SMEs reach larger markets at lower costs, but "a greater harmonisation of regulations" and effective competition are required.

As for how tech firms like Razer and Grab which are rolling out their own payment systems, Ms Petterd said: "At some point, various governments are going to say, 'This is crazy - we've got all these parties doing all these private agreements for interoperability'.

"We should set requirements that everyone can follow and everyone who wants to and who can meet the relevant standards and requirements can participate in."

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