Opportunities, Challenges and Alignment to International Standards
According to a report by Google, Temasek, and Bain & Company, the ASEAN digital economy is rapidly expanding, with the market size expected to surpass $300 billion by 2025. The report also forecasts that the digital economy in Southeast Asia could grow twice as fast as the GDP by 2030. In light of this, it is essential to ensure that ASEAN businesses can derive maximum benefits from digitalization as global trade and supply chains inevitably shift from analog to their future state.
Digital trade has emerged as a critical driver of economic growth and development in today’s interconnected world. With the proliferation of digital technologies and platforms, businesses of all sizes can theoretically access global markets and reach customers worldwide. A recent study by the International Chamber of Commerce (ICC) and Google reveals that micro, small, and medium-sized enterprises (MSMEs) in ASEAN can reach customers in markets they would not otherwise be able to access through digital trade. However, as we will explore further in this article, resolving several remaining challenges can amplify the impact of digital trade, especially for SMEs.
The Importance of Aligning to international standards for Digital Trade
Digital trade refers to commerce enabled by electronic means – by telecommunications and/or ICT services – and covers trade in both goods and services. Bigger and broader than e-commerce, digital trade refers not just to the actual transaction between buyers and sellers but also to any part of the transaction lifecycle including delivery, financing, insurance, clearance and so on.
As more businesses turn to digital channels to reach customers, digital trade has become an essential component of global commerce. However, three key enablers can facilitate more SMEs’ participation in the digital economy, remove inefficiencies and reduce barriers to trade – and continuous action in these areas is needed to further drive progress:
- Policy: There has been good progress in the region in driving key policies and plans to enhance trade efficiency and competitiveness.
- Digital Infrastructure: While the region has invested significantly in developing digital infrastructure, there are still gaps in access to technology and connectivity that can limit the potential for digital trade and economic growth. 65% of ASEAN MSMEs surveyed by ICC and Google reported issues with Internet accessibility (patchy service or slow connection) and affordability. As the World Bank reported, there is growing evidence of the positive correlation between improved Internet access, higher productivity of companies, and economic outcomes.
- Capacity Building: There is a wide disparity amongst companies in the region regarding the potential and practical angles of digital transformation. Sometimes this is simply a case of having the will and needing the means. What would be helpful is an accessible and reasonably funded program for reskilling and upskilling the general workforce as well as training on a “digital mindset” for business leaders and changemakers.
How can we close the digital trade gap?
There is an increasing demand to raise awareness, acceptance, and adoption of legal and technical standards in digital trade. The implementation of common standards can simplify trade processes, cut costs, and boost the potential for cross-border trade and investment. Moreover, it would enhance transparency and predictability, making it easier for businesses and government agencies to access real-time information, and strengthen supply chain transparency and resilience. These standards must be met before the trade can become a growth driver toward a more sustainable and inclusive future.
The ICC Digital Standards Initiative: Driving Inclusion and Sustainability
The ICC Digital Standards Initiative (DSI) aims to digitalize global trade by promoting policy reform, aligning approaches, and driving the adoption of digital trade standards and practices for the benefit of businesses, governments, and people everywhere. The end goal is to enable transparency, predictability, and efficiency in trade processes, while also ensuring that digital trade is inclusive and sustainable.
While ASEAN as a region has taken great strides in its digital trade journey, the reality on the ground is businesses must navigate a range of different regulations, standards, and protocols. This can be particularly challenging for SMEs, which often lack the resources and expertise to comply with complex systems and bespoke requirements that differ across supply chain processes and international markets. At a macro level, these challenges can limit the potential for cross-border trade and investment, hindering economic growth and development. Thus, it is important to acknowledge the need for the entire ecosystem to work together to co-create a digital, sustainable, and inclusive global trade ecosystem for everyone.