Policy-driven Asean-China digital economy cooperation

By Dr Khoong Tai Wai.

THE digital economy in South-East Asia is expected to hit US$330bil (RM1.54 trillion) by 2025, and subsequently US$1 trillion (RM4.67 trillion) by 2030.

The Covid-19 pandemic affected the adoption of digitalisation, forcing proactive strategies that led to burgeoning ecommerce activity in the past three years.

The rapid development of digital economy cooperation between Asean and China is influenced by factors such as the huge digital economy market in the region, high digital economic development demand, the rollout of multiple preferential digital economic policies, and joint efforts to boost regional and global digital governance.

First, the Internet has more than 440 million users in the region, 60 million of whom signed on within the last three years.

The majority of the new subscribers - 80% - do their shopping online and this attracted China's conglomerates to the region, bringing capital investment, technology and human resources.

For example, Tencent investing in Singapore's Sea Limited, Alibaba taking over Lazada, China Mobile Ltd investing in Thailand's True Corporation, and China Telecom investing in the Philippines' Mislatel consortium.

With their extensive experience, digital economy enablers from China could play leading roles in implementing digital technologies, capital investment and operations, as South-East Asian countries were interested in achieving win-win situations from such collaborations.

In addition, China's cultural familiarity and strategic geographic location complement Asean's efforts in facilitating trade and establishing supply chains.

This kind of partnership can be observed through Huawei's technological infrastructure projects in Papua, Indonesia's 4G network infrastructure development.

Third, among the policies adopted to strengthen Asean-China digital economy cooperation is the Asean-China Strategic Partnership Vision 2030, introduced in 2020; and the Asean-China Joint Statement on Strengthening Common and Sustainable Development.

Fourth, even though South-East Asia is still adopting digitalisation, its member nations have successfully combined both eastern and western business models to develop appropriate local identities.

This approach has fostered an inclusive regional digital order, and led to innovation in taking digital governance to the next level.

This was highlighted during the 17th G20 Summit in the United Nations General Assembly in 2021, whereby China's President Xi Jinping called on all countries to promote connectivity in the digital age and enhance effectiveness in promoting digital literacy skills.

In its Consolidated Fourth Industrial Revolution Strategic Framework for a Digital Asean Community, the grouping set out to implement the deliverables under its digital economy cooperation with China through smart manufacturing and green industrialisation, joint exploration of economic corridors, and by establishing showcase zones for international industrial cooperation.

It also welcomed members to participate in the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity New International Land-Sea Trade Corridor, which subsequently enhances regional supply chain connectivity.

Based on the theme of modern interconnection and a modern service economy, this third international cooperation between Asean and China covers four aspects: financial services, the aviation industry, transportation logistics, and information and communication.

Through a Qualified Domestic Limited Partners (QDLP) programme, domestic institutions convert yuan into foreign currencies within an approved limit for overseas equity funds investment.

Furthermore, procedures such as eligibility review, limit approval and regulatory supervision were also embedded.

Setting up the QDLP facilitates capital outflow for global investments and the inflow of foreign capital.

To assist in capital flow, the Development Bank of Singapore (DBS), Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) have established branches in Chongqing, China.

DBS provided financial support to cross-border ecommerce sellers in the supply chain, increasing trade volumes and the efficiency of capital utilisation while addressing cash flow and funding support issues.

In addition, the ASEAN-China Year of Digital Economy Cooperation in 2020 enhanced collaboration to develop ecommerce and digital activities and promote women’s entrepreneurship.

This includes cooperation in ecommerce; smart city development; artificial intelligence research; micro, small and medium enterprises (MSMEs) development; human capital development in digital technology and applications; digital transformation; and cyber security.

Therefore, it is apparent that the collaboration between Asean and China goes beyond success in the near and medium terms, but extends to the long term and promotes sustainable development.

Asean member governments also took proactive roles in promoting digitalisation in relevant sectors.

For example, Malaysia rolled out the Malaysia Digital Economy Blueprint (MDEB) 2021-2030 and Singapore introduced the Digital Economy Partnership Agreement (DEPA).

One of MDEB's thrusts is to boost economic competitiveness through digitalisation; the country aims to establish digital economy arrangements and cooperation to support the productivity and competitiveness of its businesses, particularly MSMEs, in regional and global markets.

To achieve this, policies on trade arrangements and cooperation frameworks in strategic areas of the digital economy were introduced at bilateral and regional levels.

The policies facilitated bilateral cooperation, removed certain trade barriers and restrictions, and demonstrated improved direction between Asean and China.

Nevertheless, given the dynamic nature of South-East Asia's digital economy, periodic review of such policies is still necessary.

Dr Khoong Tai Wai is a Programme Leader at Tunku Abdul Rahman University of Management and Technology. The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the South-East Asia Research Centre for Humanities (SEARCH) and the Centre of Business and Policy Research, and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.