Developing the Digital Economy in ASEAN

Lurong Chen, Fukunari Kimura, Lurong Chen, Fukunari Kimura

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9781138586062
• eBook ISBN:
  9780429998140
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

This book advances the international debate on the development of e-commerce with focus on emerging ASEAN economies. It provides readers insights on Asia's needs and efforts to improve the regional legal and economic conditions to support e-commerce. This book looks at the rules and regulations on e-commerce, and e-commerce for inclusiveness growth. It provides insights from several ASEAN member states and discovers the requirements for Asian countries to better grasp the new juncture of growth associated with economic digitalization, which also have deep implications on continuous regional integration and community-building.

Part I

Understanding e-commerce

Introduction

ASEAN development in the digital economy

Lurong Chen and Fukunari Kimura

1. Background

Digitalisation is delivering an unprecedented set of tools to bolster growth and productivity. Economic activities that depend on the Internet or new information and communications technology (ICT) to purchase goods or services or to do business online are rapidly expanding. Electronic commerce (e-commerce) has been increasingly important in the international economy. It typically involves fewer intermediate links between sellers and buyers, but has higher demand on services, especially information, payment, and logistics. Cross-border business-to-business (B2B) e-commerce has been steadily growing since the 1990s. The growth has accelerated with the spread and deepening of global value chains in the 21st century. Since around 2014–2015, the radical growth of business-to-consumer (B2C) and customer-to-customer (C2C) markets has attracted increasing public attention to global e-commerce. Various factors have laid a solid foundation for the boom in cross-border e-commerce, such as the use of smartphones, high-speed Internet, the maturity of online payment systems, the changes in consumer behaviours, services sector liberalisation, and so on.

This has introduced new dynamics to international trade with global retail e-commerce sales growing faster than traditional retail sales. Global revenue from cross-border e-commerce was estimated to be more than US$600 billion in 2018, twice as much as that in 2012. E-commerce in many Asian markets will see double-digit growth in the next 5–10 years. India, Indonesia, and Malaysia are among the world fastest-expanding retail e-commerce markets, growing at a rate of over 20 percent per year. From 2015–2021, the region’s total market revenue from e-commerce will increase from around US$320 billion to over US$900 billion. The Chinese market will contribute over 90 percent of this growth. China’s share in the world e-commerce market will increase from about 30 percent in 2015 to nearly 40 percent in 2021, while India and the 10 member states of the Association of Southeast Asian Nations (ASEAN) will increase their combined share in the global market from 2.5 percent to 4 percent (Statista, 2016).

Globally, the share of e-commerce in total retail sales increased by 12 percentage points between 2015 and 2016. By mid-2016, the scale of online shoppers in China had reached 448 million, and the online shopping usage rate had reached 63 percent (CNNIC, 2016). Singapore (60 percent), Malaysia (52 percent), and Thailand (51 percent) are among the world’s top markets with the highest online shopping penetration rates. In the next five years, an increasing share of the increment in private consumption will come from global e-commerce growth. Sustained growth of online shoppers provides a solid base for e-commerce consumption. Overall, the scale of the digital economy in ASEAN is projected to increase by 5.5 times by 2025 (Think with Google, 2017). With growth like this, Asia is likely to be the global epicentre of e-commerce in the next decade.

However, the radical growth of e-commerce could be a double-edged sword. On one side, economic digitalisation tends to facilitate international trade since consumers and producers can obtain information from a wide range of geographical locations at low cost within a short time. This injects new dynamics into the global market. With new entrants, new products, new services, and new business models, as well as changes in innovation and technology diffusion processes, the price level is lowered, the variety of supply increases, and market competition intensifies.

On the other side, the region needs to face more intensive competition, either within or outside the region. Technological progress may widen development gaps among countries, if those latecomers cannot manage to grasp the opportunities to accelerate the growth. Equally, there is no guarantee that front runners in the past will still be able to perform well in the future. In the digital world, one should continuously adjust in response to technology and market changes to remain competitive. In this regard, Asia will have to maximise the e-commerce-related benefits but minimise or eliminate the associated risks to turn the region’s potential into a real engine of growth.

2. ASEAN’s potentials: adaptiveness, market gravitation, and readiness

To promote e-commerce development, ASEAN needs to increase efforts and make progress in areas such as connectivity, services, rules and regulations, and human capital development. Above all, one should have more comprehensive and in-depth understanding about the region’s potentials, needs, and actions in developing its digital economy.

More precisely, strategic plans and policy prescriptions will draw considerations from three layers. First, adaptiveness: economic digitalisation is a worldwide phenomenon. From the economic aspect, the information revolution is associated with the emergence of new market conditions and dynamics in the global business environment. This requires the regional economy in Asia, both the public and private sectors, to respond to these changes quickly. Second, market gravitation: despite those new features of the digital economy, the development of e-commerce also depends on some ‘classic’ conditions for economic development such as market size, trade facilitation, and investment freedom. Third, readiness: e-commerce development needs support from technology, market, and policy. Countries’ preparation and readiness to develop the digital economy will determine the performance of their business in e-commerce.

2.1. Adaptiveness

The information revolution is associated with the emergence of new market conditions and dynamics in a global business environment. Simply put, the region’s adaptiveness to global economic digitalisation comes from its capacity in at least two aspects: (i) technology adoption and (ii) incremental innovation. First, deep involvement in global value chains (GVCs) opens new windows for ASEAN member states (AMS) to access the latest technologies and also facilitates their learning. Second, the countries’ capacity in incremental innovation allows them to benefit from second-mover advantages to grow faster and even leap forward to the front of the market – the popular use of e-payments in China and the success of the Alibaba Group are typical examples.

In ASEAN, facilitation of the growth of e-commerce is one of the six main areas covered by the e-ASEAN Framework Agreement, whilst at the national level, developing a digital economy and e-commerce have already been part of most Asian countries’ national strategies and action plans. AMS have put great effort into accelerating their learning processes and adopting new technologies. According to the World Economic Forum (2017), businesses in ASEAN have managed to adopt the last ICTs to link with the global market. In comparison, the speed of firm-level technology adoption in the region is higher than the world average. When the same report asked companies to rank the use of ICT in business transactions, both B2B and B2C, the results show that most AMS get higher scores than the world average level. Considering the region’s overall stage of development, it is evident that the business sector in ASEAN has been catching up quickly with the new dynamics of the global economy and actively promoting digitalisation. Government efforts in promoting digitalisation, measured by the index of e-participation, are also worth noting. In 2016, the scores of most AMS’ e-participation of government were higher than the world average. The scores of Cambodia, Lao PDR, and Myan...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Acknowledgements
• List of contributors
• Part I Understanding e-commerce
• Part II Rules and regulations
• Part III Inclusive growth
• Part IV Conclusion
• Index