Asean’s march into the digital economy

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Asean’s march into the digital economy

 

THOSE of us who witnessed the founding of Asean in August 1967 could not have imagined how much would be achieved in 50 years. 
 

Asean was born out of the ashes of colonialism and the Vietnam War. It started as a security pact, but gradually evolved into an economic and financial community that is not yet a cultural common, mainly because of its celebrated diversity.

 

Today, Asean comprises 10 countries, covering a land area of 4.4 million square kilometres, 3 per cent of the global total, with over 625 million people or just under 9 per cent of the world population. 

 

Its combined nominal GDP is already over US$2.8 trillion (Bt93 trillion) and if counted as a single entity, it would rank sixth in the world, behind the United States, China, Japan, India and Germany.

 

The region is geographically blessed, located within the fastest growth zone in the world, with natural maritime access to India (growing over 7 per cent), China (6.5 per cent) and other markets as a hub of the global supply chain. 

 

Within Asean, the younger countries (Cambodia, Myanmar, Laos) are growing at more than 7 per cent per annum, whereas the members with populations of over 100 million (Indonesia, Philippines and Vietnam) are growing at 5-6 per cent.

 

The Asean+3 (China plus Hong Kong, Japan and South Korea) grouping is expected to grow around 5 per cent in 2017-8, buoyed by domestic consumption, despite some protectionist headwinds. This is almost double that of the advanced countries and emerging markets in Latin America, Africa and the Middle East. 

 

Despite regional tensions and rivalries, Asean remains the pivot to maintain balance, cool heads and a zone of peace and stability.

 

Today, Asean plus China’s share of global trade already exceeds that of the US, as more and more Asean members accelerate their trade linkages. Asean+3’s participation rate in the global supply chain is over half of exports, higher than the US (40 per cent) and Euro-area (just over half).

 

The region is home to some of the world’s oldest and richest biodiverse resources, including tropical forests, maritime reefs and nearly 13 million square kilometres of sea.

 

What is holding back the region’s growth rate is the lack of infrastructure development. The Asian Development Bank has estimated that Asean countries need to invest over US$60 billion a year in infrastructure until 2020 to maintain their growth, but current infrastructure spending is around 3-4 per cent of GDP compared with the desired rate of 5-8 per cent.

 

The infrastructure is needed not only to improve domestic and regional connectivity, but also to deal with basic needs such as water, electricity, health and climate change amelioration investments. 

 

Most studies show that there is no shortage of long-term savings to fund infrastructure investments, but there are still serious gaps and barriers to match the demand and supply for funds.

 

The game changer may arrive in the area of technology and innovation. A 2016 study by Temasek and Google suggests that just six Asean economies (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) will become the fastest growing Internet region in the world, with over 480 million users by 2020. 

 

This group’s Internet economy (mostly e-commerce) will grow by a roughly 14 per cent compound annual growth rate (CAGR) to US$200 billion by 2025.

 

The reasons for the fast growth are because the region has a burgeoning young population – 70 per cent under the age of 40 – with rapidly growing spending power.

 

Asean e-commerce adoption is also occurring faster because the region lacks advanced-country retail distribution systems and is ripe for technological disruption.

 

My own gut feeling is that Asean’s digital transformation will be faster than just e-commerce adoption. The reason is that digital transformation will not only change our consumption patterns, but also our production through the Internet of Things (IoT – interconnected device(, and even governance models. 

 

A 2015 Frost and Sullivan report for the Singapore Exchange estimated that by 2020, the IoT market will have a market size of US$79.3 billion growing at a 26.8 per cent compound annual growth rate.

 

Asean is well positioned to advance IoT, because its middle-income market has both IT skills due to good basic education and innate adaptability to new technology. 

 

Out of the top 20 global Internet countries, 11 are in Asia, of which four (Indonesia, Philippines, Vietnam and Thailand) are in Asean. 

 

Outside the US and India, Facebook’s user base is huge in Southeast Asia, of which 126 million are in Indonesia. Malaysians have 50 per cent more chance of using Facebook for business reasons than the world average.

 

For another example, Philippines earned US$25 billion in revenue from business process outsourcing (BPO) in 2016, providing over 1.3 million jobs. 

 

The World Bank has estimated that BPO revenues could soar to over $50 billion and create 1.3 million jobs by 2020. Thailand, already a major auto-components manufacturer and processed food producer, has the Thailand 4.0 strategy to upgrade its digital capacity in manufacturing and services, much in line with China’s Internet+ and Made in China 2025 strategy, and Europe’s Industry 4.0. 

 

A Malaysian start-up called Grab is already successfully challenging Uber within Asean as a vehicle-hailing platform.

 

In addition to e-Commerce and IoT, the next wave of productivity will come from innovations in social technology. McKinsey Global Institute has estimated that improvements in digital social technology could increase the productivity of workers by 20 to 25 per cent. 

 

The young in Asean are discovering that social media technology can help mobilise social action quickly, with the result that coordinating large-scale and complex projects through the use of smart technology and artificial intelligence is only just beginning.

 

Asean countries can therefore utilise digitisation and Internet technology to improve on energy and resource usage, reduce pollution and increase their overall productive capacity. 

 

Nowhere is this more important that in upgrading the quality of our food and agriculture production, as well as increasing the productivity of our congested cities. For example, Go-Jek, a mobile phone app, has more than 250,000 drivers in Indonesia, helping to reduce traffic congestion, delivery times and convenience in traffic-clogged cities such as Jakarta.

 

The ability of social media to improve coordination within bureaucracies and facilitate Big Data analysis and artificial intelligence in making smarter decisions, is only beginning, and Asean is leading the world in piloting many experiments in this field. This is mainly because of its diversity in culture and stages of development, which provide a natural competitive gene pool of innovation.

 

Critics of Asean have complained that it has succeeded by muddling through.

 

Muddling through is not muddle-headed. It is a practical, perhaps somewhat messy way forward, preferring pragmatism and reality over theoretical elegance.

 

It is precisely because Asean evolves through consensus and cultural mixing that slowly but surely forms its own adaptive model of survival with resilience.

 

Onward, Asean, for the next 50 years!

 

The writer, an honorary advisor with the CIMB Asean Research Institute and a distinguished fellow with the Asia Global Institute of the University of Hong Kong

 

Full story: http://www.nationmultimedia.com/detail/opinion/30325048

 

-- © Copyright The Nation 2017-08-28

 

[Krataiboy]

Yeah, but. . . 

 

This hubris-ridden piece of ASEAN tub-thumping conveniently omits any mention of the likely economic impact of the coming cashless society or the robotics revolution.

 

A recent attempt by India drastically to reduce the amount of real money in circulation has sent the formerly high-flying Asian giant's economy into a sudden tailspin, while accelerating automation is forecast to wipe out up to 75 per cent of jobs across the board within a few decades.

 

It is difficult to equate the author's rosy vision of future growth across ASEAN with the reality that by 2050 a majority of its citizens may well be redundant and totally reliant on a new-style state handout called Universal Basic Income (UBI) for the basic essentials of life.

 

With Bill Gates leading the chorus of corporate praise for the liberating virtues of UBI, how can it possibly fail?