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Helping ASEAN ride the e-commerce wave
WITH its burgeoning middle class and a new generation of tech-savvy consumers, ASEAN is poised for an e-commerce boom. The regional e-commerce market is expected to balloon to US$88 billion by 2025, from US$10 billion in 2017.
As their tastes grow more cosmopolitan and adventurous, ASEAN's digital natives are looking far beyond their borders for online sprees. Yet there is much untapped potential for ASEAN citizens to shop in their immediate neighbourhood too.
To facilitate cross-border commerce within ASEAN, the ASEAN Agreement on E-Commerce will streamline regional trade rules on e-commerce, promote greater digital connectivity, and lower operating barriers to entry for businesses.
It also aims to foster trust and confidence in e-commerce, and deepen cooperation among member states to make e-commerce a driver of growth and development.
Discussions on the agreement began in June 2017, with the document finalised after nine rounds of negotiations.
Endorsed at the 50th ASEAN Economic Ministers' Meeting in August, the agreement is set to be signed on the sidelines of the 33rd ASEAN Summit and Related Summits this week.
"If ASEAN governments support digital connectivity and our businesses keep pace with digitalisation trends, the pay-offs can be significant especially when coupled with ASEAN's demographics and increasing rate of technology adoption," said Minister-in-charge of Trade Relations and Minister for Communications and Information S. Iswaran at the Digitize ASEAN Conference in June.
He highlighted three areas of opportunity for firms in the region: business-to-consumer e-commerce platforms; supporting services such as payments, insurance, logistics and fulfilment, fraud detection, marketing and customer service; and supporting infrastructure such as fulfilment centres and data centres.
Under the agreement, member states will commit to maintain, or adopt as soon as practicable, a domestic regulatory framework on e-commerce.
Each state will also have to publish, as promptly as possible, all relevant measures affecting e-commerce. Such transparency will increase certainty for businesses, boosting confidence.
"We know this is a field which is rapidly disrupting business models across ASEAN," said Minister for Foreign Affairs Vivian Balakrishnan at the IBM Think ASEAN event in May.
"In fact, because of the sheer diversity of ASEAN, what we want by having an Agreement on E-commerce is to lower trade barriers and enhance access to the markets; to shorten and to disintermediate the supply chain from the farmer, or the hawker, or the handicraft maker, to the consumer within the ASEAN market itself."
The agreement will make it easier for aspiring entrepreneurs, startups and small and medium-sized enterprises (SMEs) - including micro SMEs - to market their products and services regionally, as well as send and receive electronic payments.
"This is important for SMEs who can now access a much larger market outside traditional physical reach, without physically having to build a presence overseas," said Senior Minister of State for Trade and Industry Koh Poh Koon at the Global E-Trade Plenary in July.
In a poll of more than 2,300 small businesses in ASEAN, consultancy Bain & Co found that retail SMEs saw sales rise 15 per cent on average after turning to e-commerce.
To help firms ride the e-commerce wave, member states are encouraged to cooperate on policies regarding information and communication technology infrastructure; education and technology competency; online consumer protection; legal and regulatory frameworks; cyber security; electronic transaction security; electronic payment and settlement; trade facilitation; intellectual property rights; competition; and logistics
For greater efficiency, the agreement encourages paperless transactions between firms and authorities, for instance through electronic customs forms.
It also includes provisions for easier cross-border data flows, so companies will not have to build expensive and redundant data centres in every market they serve.
Other areas covered in the agreement include logistics, with member states affirming the need to lower costs and improve the speed and reliability of supply chains; and consumer protection and privacy, including the need for effective consumer protection measures and alternative dispute resolution methods to bolster consumer confidence.
A commitment to technology neutrality leaves greater room for ASEAN businesses to freely choose the technology that best suits their needs.
And to ensure that the agreement keeps pace with the fast-changing digital world, a review clause lets the member states consider further developments and amend it accordingly.
Complementing the agreement is the ASEAN Digital Integration Framework, also endorsed at the August meeting.
It makes six recommendations to help firms reap the benefits of the digital economy, from enabling seamless electronic payments to ensuring that new digital policies do not impose prohibitive burdens on SMEs.
Also in the works is an ASEAN Innovation Network to strengthen links between innovation ecosystems in the member states and help spark new collaborations and solutions, to address demand from an increasingly sophisticated consumer base.
As Mr Iswaran puts it: "It is essential that ASEAN governments keep pace with digitalisation, and address the issues that constrain our ability to participate in the digital economy."