Digitalisation and sustainability – a two-pronged approach to recovery in ASEAN
ASEAN’s three strategic priorities in 2021 – recovery, digitalisation, and sustainability – are symbiotic. In the wake of rapid technological advances, rising global inequality and a changing climate, it has become progressively clear that the present-day approach to recovery for any economy, especially in Southeast Asia, needs to harness digitalisation effectively and be executed sustainably.
It falls equally upon the public and private sector to propel countries towards achieving their growth targets. Governments set the agenda, outlining policies that define broader expansion goals, while corporates drive the adoption of strategies that incorporate digital technologies and sustainable practices.
Of course, none of this can happen without investment. Fortunately, ASEAN’s growing middle class, abundant natural resources, and strong manufacturing capabilities, coupled with its potential for high returns, have made it an attractive investment environment. The region’s share of global foreign direct investment (FDI) rose to 13.7 per cent in 2020 from 11.9 per cent in 2019, while investment within ASEAN climbed five per cent to US$23 billion.1
“Southeast Asia is emerging as a destination of choice for investments and trade,” Rino Donosepoetro, Vice Chairman for ASEAN at Standard Chartered Bank, said at a panel discussion at the ASEAN Business and Investment Summit 2021. “Everyone increasingly wants a piece of ASEAN.”
Navigating ASEAN’s path to digitalisation
As the world’s fastest growing internet market,2 digital transformation is crucial to ASEAN’s economic growth in the coming years. Digitalisation in ASEAN already surged in 20203 as lockdowns during the pandemic upended normal life, forcing individuals, institutions, and businesses to rely on technology to stay connected and function as seamlessly as possible.
Government policy is playing an increasingly pivotal role in driving a more comprehensive digital adoption and ASEAN’s current efforts to facilitate business travel and tourism illustrate how recovery and digital are set to intersect in the coming months. For instance, the planned ASEAN Travel Corridor Arrangement Framework aims to initially allow essential business travel among member states while prioritising public health and safety, and eventually open the door to tourism. The scheme aims to leverage technology to establish swift testing systems at airports and a digital vaccine passport for inoculated individuals.
Digitalisation is also key to fostering trade within ASEAN and with the rest of the world. Initiatives such as the ASEAN Single Window4 seek to enable the electronic exchange of border trade-related documents to accelerate cargo clearance and reduce trade transaction costs.
In the private sector, digitalisation efforts are being led by corporates and supported by financial institutions. The extensive adoption and deployment of digital technologies across industries from automotive manufacturing to real estate to the new economy sector is set to spur an even, smart, and resilient rebound across the economy.
“ASEAN needs significant investments in digital infrastructure, especially at a time when there is an enhanced focus on new technologies such as 5G,” Standard Chartered’s Donosepoetro said. “High digital adoption will drive growth of e-commerce and digital platform services, which can lead to a trickle-down effect into the real sector economy, while also attracting foreign direct investment into these technology firms.”
There are still risks to an all-encompassing digital adoption push however, with one of the biggest challenges being the potential for a widening digital divide among firms, resulting in an uneven recovery.
For instance, while the adoption of online platforms amid widespread pandemic-related store closures helped many firms stay afloat,5 expensive implementation, fragmented access to stable broadband connections, and weak payment systems raised the odds of worsening inequity among smaller businesses.
Still, there are opportunities to harness technology in a way that helps combat inequality. For example, a government push for financial inclusion and literacy through digital financial services, especially in ASEAN where about 44 per cent of adults do not have bank accounts,6 is likely to be beneficial in the long term for the broader economy.
Resilient and sustainable – greening growth in ASEAN
Sustainability is undoubtedly a growing priority for ASEAN, with member states supporting the development of an ASEAN taxonomy of sustainable finance,7 accelerating efforts to tackle marine debris8 while also surpassing their 2020 target to reduce energy intensity by 20 per cent.9
“We are going to do more on renewable energy, but we need some transition period to address all the elements and we need to work together with all relevant partners towards capacity building and technology transfer,” said Dato Lim Jock Hoi, Secretary-General of ASEAN.
However, as the world grapples with a changing climate and as more frequent extreme weather events expose numerous vulnerabilities across industries, it has become increasingly clear that sustainability goes beyond having the right government policies and commitments, and demands a supportive, sustainable infrastructure that can facilitate these initiatives.
“The focus in the next few years will shift towards sustainable investments in the emerging markets, and ASEAN is at the forefront of this,” Donosepoetro added. “Trillions of dollars need to come into emerging markets like ASEAN. We are the most vulnerable to climate change, and we need the most funding.”
1 https://unctad.org/webflyer/asean-investment-report-2021
2 https://www.weforum.org/projects/digital-asean
3 https://www.bain.com/insights/e-conomy-sea-2020/
6 https://asean.org/wp-content/uploads/2021/09/ASEAN-Comprehensive-Recovery-Framework_Pub_2020_1.pdf
7 https://www.cariasean.org/pdf/Greening-ASEAN-1.pdf
9 From the webinar