‘Game changer’ agreement to unlock Asean’s potential US$2 trillion digital economy
Zhao Yifan
THE Association of Southeast Asian Nations (Asean) has officially launched the negotiations for a new Digital Economy Framework Agreement (Defa).
Touted as the “world’s first major regionwide digital economy agreement”, Defa was described by Indonesia Coordinating Minister for Economic Affairs Airlangga Hartarto this week as a “game changer” that will address everything from artificial intelligence (AI), blockchain and technology advancements in the coming years.
With Asean’s digital economy having the potential to grow to as much as US$2 trillion by 2030, the digital economy is one of the many topics that are being discussed at this week’s Asean Summit meetings in Jakarta.
Here is what you need to know about the wide-ranging agreement:
What is the Asean Defa?
The Defa – a major milestone in Asean’s digital integration journey – is a treaty aimed at aligning digital trade regulations and establishing cooperation related to the digital economy among Asean member states.
It will facilitate more seamless cross-border digital trade, and make it easier to do business within the region by improving digital rules in key areas such as digital trade facilitation, payments, standards and data. It also aims to address emerging trends and developments, such as AI.
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The agreement will provide an ambitious vision of harmonious digital opportunities for the region, surpassing existing bilateral or multilateral digital economy agreements (DEAs). Examples of such agreements include the Singapore-Australia DEA, which came into force in December 2020, and the UK-Singapore DEA, which took effect in June 2022.
What sort of impact can the Defa have?
The Defa, once signed, will serve as the foundation for a secure and interconnected Asean digital economy. This will position Asean as a leading digital community and economic bloc, in line with the goals envisaged in the Asean Digital Masterplan 2025.
According to a model developed by the Boston Consulting Group, Asean’s digital economy is projected to triple to nearly US$1 trillion by 2030, from the current US$300 billion. Progressive rules in a “high-quality” Defa could double this to US$2 trillion by that same year.
What is the timeline for negotiations?
The negotiations will identify the key elements to be captured within the framework, and consider the implementation across different member states beyond the signing of the agreement.
The first meeting of the Asean Defa’s negotiating committee is expected to take place by end-2023, with the aim of wrapping up the talks by 2025.
The committee is chaired by Thailand and includes lead negotiators from all 10 Asean member states.
What are the challenges?
The disparities in technology advancement and adoption between member states will present various challenges for digital economy integration.
Singapore, which is seen as being the most prepared when it comes to digital economy integration, already has DEAs with Chile and New Zealand, Australia, the UK and South Korea.
Other Asean member states – Indonesia, Malaysia, the Philippines, Thailand, and Vietnam – are regarded as better prepared than Brunei, Cambodia, Laos and Myanmar in some pillars of digital development.
Member states’ data regulation regimes have also become increasingly divergent. The absence of certain laws and regulations, such as the lack of personal data protection legislation in some countries, could slow down the integration process.
How does the Defa stack up against other Asean initiatives?
Digital economy integration supported by the Asean Defa should not be regarded as an entirely new venture, but rather this should be viewed together with other regional initiatives that are already in place.
For example, the Asean Single Window, first agreed upon in 2003, has contributed to regional economic integration and connectivity through the digitisation of trade-related documents.
Regional frameworks such as the Agreement on Electronic Commerce, the Asean Economic Community Blueprint 2025, the Master Plan on Asean Connectivity 2025, and the Asean Digital Masterplan 2025 have all guided the region’s transition to a digital economy.
“Signing the Defa may not necessarily mean creating a new work plan, but rather continuing existing initiatives to avoid duplication,” said independent consultant Mima Sefrina in an article published by the Research Institute for Asean and East Asia.
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