With the aim of ensuring that the economic and social dividends of technology can reach everyone, a new World Bank report, “The Digital Economy in Southeast Asia – Strengthening the Foundations for Future Growth”, analyses the opportunities and challenges facing the region to scale up digital development.
“Southeast Asian countries have made significant headway in the digital sector,” said Boutheina Guermazi, the World Bank’s director for digital development. “But even though the population has embraced digital services, adoption by businesses and governments has generally been slower.”
Guermazi in particular points to the regulatory bottlenecks and the lack of trust in electronic transactions that is stifling the growth of digital systems.
“This groundbreaking research can help Asean countries overcome these challenges to create strong, inclusive digital economies.”
The report identifies six main areas of focus for digital development in Southeast Asia, starting with the expansion of connectivity, the backbone of the digital economy.
Although half of the region’s population uses the internet – on par with the global average – this can continue to be expanded with policies and actions that will significantly lower prices, increase speeds and bring reliable broadband internet to underserved areas.
In the region’s middle-income countries only 2 out of 5 people have access to high speed (4G) mobile internet – and in lower income countries it’s only 1 out of 5. Active collaboration between the public and private sectors and proactive regulatory approaches will be critical to unlocking the needed investments in digital infrastructure and fostering greater competition across the telecommunications sector.
With digital technology transforming almost all sectors of the economy, the skills of the region’s workforce need to keep pace, the report said. Education systems will have a key role to play in developing the technical knowledge and soft skills that are required to compete in the global digital economy. Given the rate of technological change, adaptability and lifelong learning will be more important than ever, as well as more effective collaboration between the public and private sectors.
Digital payments are another essential underpinning of the digital economy, but the report finds that they remain underdeveloped in Southeast Asia compared to other parts of the world. In most countries in Southeast Asia, payments are currently overwhelmingly cash based.
The World Bank’s global financial inclusion (findex) data shows that only 19 per cent of financial account holders in the region access their accounts via the internet. Implementing robust regulations and modern digital identification systems can help create the enabling environment for digital finance. At the same time, the digitisation of government payments – for pensions, cash transfers, and other social programmes – can incentive more change and generate momentum.
The report stresses however that Southeast Asia’s digital development cannot rely solely on virtual foundations. A well-functioning logistics sector is crucial to the growth of the digital economy, especially e-commerce. In the region, a modernised regulatory framework for logistics could increase competition, reduce logistics costs and improve the quality of services. In particular, streamlining customs procedures could make shipping faster, cheaper, more predictable, and give e-commerce a major boost.
Likewise, regional integration, including harmonising regulations and facilitating transactions between Asean countries, could create an integrated digital market benefiting both businesses and consumers, the report found.
Finally, to address the risks and vulnerabilities that come with digital transformation, the report suggests prioritising effective standards and regulations for electronic transactions, cross-border data flows, cybersecurity, data privacy and consumer protection. Solid measures in these areas are essential to build trust in online platforms and create secure, sustainable digital economies.