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A commemorative publication by CARI to celebrate ASEAN’s 50th anniversary All rights reserved. No part of this publication may be reprinted or reproduced or utilised in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying or recording, or in any information storage of retrieval system, without proper acknowledgement of CIMB ASEAN Research Institute.

The views, responsibility for facts and opinions rests exclusively with the authors and their interpretation of not necessarily reflect the views of CIMB ASEAN Research Institute.

ISBN: 978-967-15470

First published: November 2017

Publisher CIMB Southeast Asia Research Sdn Bhd (CARI) 13th Floor, Menara CIMB, Jalan Stesen Sentral 2, Kuala Lumpur Sentral, 50470 Kuala Lumpur

Printer Creative Paradigm Sdn Bhd 32A-3B, Jalan PJU1/3B SunwayMas Commercial Centre 47301 Petaling Jaya, Selangor Malaysia PRODUCED AND EDITED BY CIMB ASEAN RESEARCH INSTITUTE (CARI)

CONTENTS

008 | Foreword by H.E. Le Luong Minh Secretary General, ASEAN

009 | Special Message by Dato’ Sri Nazir Razak Chairman, CIMB Group

012 | Introduction by Tan Sri Dr. Munir Majid Chairman, CIMB ASEAN Research Institute

014 | The Honourable Malcolm Turnbull Prime Minister, Commonwealth of Australia

017 | Yang Amat Berhormat Dato’ Sri Mohd Najib Razak Prime Minister, Malaysia

020 | H.E. Hun Sen Prime Minister, Kingdom of Cambodia

023 | ASEAN In The Digital Age: Quo Vadis? A.T. Kearney

029 | H.E. Sri Mulyani Indrawati Minister of Finance, Indonesia

032 | Yang Berhormat Dato’ Sri Mustapa bin Mohamed Minister of International Trade and Industry, Malaysia

035 | H.E. Tran Tuan Anh Minister of Industry and Trade Viet Nam

038 | The Honourable Pehin Dato Lim Jock Seng Second Minister of Foreign Affairs and Trade, Brunei

041 | H.E. Dr. Lim Hong Hin Deputy Secretary General, ASEAN

044 | Driving Asean’s Talent Transformation Through Technology Accenture

048 | H.E. Ong Keng Yong Executive Deputy Chairman, S. Rajaratnam School of International Studies 051 | Tan Sri Andrew Sheng Distinguished Fellow of Asia Global Institute, The University of Hong Kong

054 | As Sector Partitions Crumble, Asean Companies Must Cross Borders McKinsey & Company

058 | Tan Sri Tony Fernandes CEO, AirAsia Group

061 | George Sartorel Regional CEO, Asia Pacific, Allianz

063 | Steve Turner and LiYu Tseng Digital Cities Lead and Senior Consultant (respectively), Arup

066 | Peter Vile and Mitchell Pham Directors, Augen Software Group and Kiwi Connection Tech Hub

069 | Jaime Augusto Zobel de Ayala Chairman and CEO, Ayala Corporation

071 | Chartsiri Sophonpanich President, Bangkok Bank

074 | Paul de Courtois Managing Director, BMW Asia Group

077 | Martin Hayes President, Bosch Southeast Asia

080 | Manu Bhaskaran Advisor, CIMB ASEAN Research Institute (CARI) & Partner, Centennial Group

083 | Tunku Zain Al-’Abidin Senior Fellow, CIMB ASEAN Research Institute

085 | Donald Kanak Chairman, EU-ASEAN Business Council 088 | Wouter Van Wersch President & CEO, GE ASEAN

092 | Sajith Sivanandan Managing ​ Director,​ Google ​ Malaysia,​ ​ Viet​ Nam, Philippines ​ ​ and ​ New​ ​ Emerging​ ​ Markets​

095 | Kevin Ross Martin Regional Head of Retail Banking and Wealth Management for Asia Pacific, HSBC

098 | Henry Nguyen Managing General Partner, IDG Ventures Vietnam

101 | James Evans Director of Legal and External Affairs, Asia, Linfox International Group

104 | Dr. James Riady Chief Executive Officer, The Lippo Group of Companies

107 | Naotoshi Okada President, Nikkei Inc.

110 | Prof. Dr. Od Phongsavanh President, Phongsavanh Group

112 | Teresita Sy Coson Vice Chairperson, SM Investments Corporation

114 | H.E Dr. Sok Siphana Managing Partner, SokSiphana&associates & Advisor, Royal Government of Cambodia

117 | Ma Huateng Chairman of the Board and Chief Executive Officer, Tencent

119 | Acknowledgements FOREWORD

By H.E. Le Luong Minh, Secretary General of ASEAN

ASEAN, with its predominantly young and tech- an innovative, inclusive and integrated ASEAN savvy population, is projected to benefit immensely Community. from the digital economy. The use of mobile devices and social media in ASEAN is among the ASEAN Member States are also cognizant of other highest in the world. Studies have shown that digital challenges they face in optimizing the potentials technologies in ASEAN could potentially be worth up of the digital economy, including the high costs to US$625 billion by 2030 (representing 8 percent of entering the ASEAN market, limitations in of ASEAN projected GDP for that year), through its infrastructure and overbearing red-tape. ASEAN impact on increasing efficiency, productivity and is responding by investing heavily in improving economic value creation. Furthermore, the ASEAN infrastructure, such as introducing newer Economic Community Blueprint 2025 emphasises broadband technology to ensure faster and more that digital technology is one of its most important seamless connectivity; and also undertaking efforts elements due to its potential to motivate trade and to eliminate the digital divide between Member investment, good governance and further the use States. Micro, small and medium enterprises are of green technology. encouraged to participate in this economy and the generation of more ideas to lead ICT and next- The digital economy is principally a knowledge- generation applications. ASEAN is also working based economy requiring specific skill sets, which with Dialogue Partners to create a conducive ICT currently are still much sought after in many environment by combatting cyber-crime and ASEAN Member States. Yet, at the same time, enhancing human capacity. all sectors of economy are steadily adopting and embedding Information and Communications Information digitalisation, through advances in ICT, Technology (ICT), bringing about surges of growth contributes significantly to ASEAN Community and innovation. In this regard, the ASEAN ICT building. It has the power to promote people-to- Masterplan (2016-2020) is focused on facilitating people connectivity more than any other means, these transformations to propel ASEAN towards which is invaluable in strengthening the ASEAN a digitally-enabled economy, which is secure, Identity. It is not only a reality of today, but is also sustainable, and transformative; and to enable an exciting future for tomorrow.

H.E. Le Luong Minh has been the Secretary-General of ASEAN since January 2013. Mr. Minh has had a long career in Viet Nam’s diplomatic service which began in 1975. Before assuming his post as ASEAN Secretary-General, Mr. Minh was Viet Nam’s Deputy Minister for Foreign Affairs.

H.E. Le Luong Minh studied Diplomacy at the University of Foreign Affairs in Hanoi, then Linguistics and English Literature at Jawaharlal Nehru University, New Delhi.

8 Advancing ASEAN in the Digital Age SPECIAL MESSAGE

By Dato’ Sri Nazir Razak, Chairman, CIMB Group

INTRODUCTION poverty rate, measured by the proportion of the As we celebrate ASEAN’s 50th anniversary, population living on less than US$1.25 purchasing the Fourth Industrial Revolution (4IR) has power parity per day, has reduced substantially, dawned upon us, with technologies fusing the from 47 percent in 1990 to 14 percent in 2015. physical, digital and biological worlds, and changing everything at unprecedented speed. At the heart of how ASEAN operates is the so- For ASEAN to successfully navigate the 4IR, we called ‘ASEAN Way’ of doing things, so this must understand what that means for regional approach has been given much credit for the integration, and the role ASEAN can and should region’s achievements, and deservedly so in play to help its companies and people withstand the diplomatic and strategic domains. Although and exploit the 4IR. there is no official definition of the ‘ASEAN Way’, it would include unanimous decision-making, CIMB is a regional banking group that has allowing opt out or delayed participation in any wholeheartedly embraced regionalisation since initiative, prohibiting countries from intervening 2007, with its tagline “ASEAN For You” and in each other’s affairs, minimum empowerment expansion into all ASEAN markets. We recently of supranational bodies, and denying legal reflected on the challenges of the 4IR, and have enforcement powers for regional initiatives. The transformed our future strategies significantly. ‘ASEAN Way’ is not to force any issue on anyone. Any incumbent large bank or company that does not confront the scary and complex new realities The temptation now must be to persevere with of the 4IR risks joining the long list of corporate the successful ‘ASEAN Way’, but we must not dinosaurs that will emerge. because what got us here will not get us there. The ‘ASEAN Way’ has ensured that economic ASEAN AND THE PARADIGM SHIFT integration progresses very slowly while the ASEAN has been a huge success. It has been ASEAN Economic Community (AEC) is far from the single most important reason for peace the single production base originally promised in and stability in Southeast-Asia - the essential the 2007 ASEAN Charter. The new AEC Blueprint foundation for rapid economic development. targets a diluted version of the single production ASEAN has been a stellar engine of Asia’s base by 2025, but without any proposed changes growth, with gross domestic product (GDP) in approach to implementation, it is unconvincing. expanding exponentially from US$23 billion in Furthermore, we have entered the 4IR - an era 1967 to US$577 billion in 1999 when the current of accelerated change and one that will be full membership of ASEAN-10 was achieved, unforgiving to those who cannot keep pace. to US$2.55 trillion in 2016. Living standards in ASEAN have been transformed, with GDP per ASEAN needs to recognise the limitations capita rising from US$122 in 1967 to US$1,135 of its ‘ASEAN Way’ to face the future. It must in 1999 and US$4,021 in 2016. The region’s re-look at its priorities as well as governance

Advancing ASEAN in the Digital Age 9 SPECIAL MESSAGE

and institutional frameworks for economic anticipating and adapting to the challenges. integration in the context of the shortcomings of Entrepreneurs and small companies can scale the AEC project and the 4IR. up at unprecedented pace, with the right ideas or products, and, of course, support. Most critically, the regional business environment We must proliferate platforms to support our must be harmonised quickly so that ASEAN entrepreneurs with funding, mentoring and companies have the chance of taking advantage domain knowledge, as well as cross-border of the region’s scale economies. ASEAN’s introductions. platform and infrastructure businesses, such as airlines, online marketplaces, logistics providers, Banking is one industry that is being rapidly and even banks, must operate at regional scale. revolutionised by technology and the 4IR as Rationalising laws and regulations among a whole. Over the next 10 years, it is not clear countries, opening up the markets for ASEAN what will happen to incumbent banks, with businesses and encouraging cross-border large legacy infrastructures and costs, facing labour mobility will be critical. If ASEAN does new competitors and alternative platforms not avail regional economies of scale for its for disintermediation. I believe that those that own companies, the ASEAN marketplace will change and embrace technology will survive and be conquered by global players, and ASEAN thrive; those that do not will fade away. companies will be bit players on their own turf. CIMB has set up CIMB Fintech, a new division To move at speed, ASEAN economic integration dedicated to ensuring that we capitalise on the needs the supranational ASEAN secretariat opportunities of the 4IR and make the strategic to lead integration efforts with greater adjustments to brace for expected lower margins empowerment and funding. The secretariat and wider range of competitors. Being a regional has to spearhead a fast, nimble, inclusive and bank has helped our cause tremendously as multi-stakeholder approach to making policies we have the economies of scale to invest in and implementing them, instead of relying on technology and innovation, diversity of clients to unwieldy inter-governmental committees. test our new products and ideas, geographical reach to source fintech and other partners from If ASEAN does not get the 4IR right, it would across ASEAN, and an aspirational brand to be tragic as the demographics are hugely in our attract the best young talents from across the favour. More than half of ASEAN’s population region. of 630 million is below the age of 30 – creative and connected digital citizens who are well- Being an ASEAN universal bank has given CIMB equipped to innovate. The thrilling combination a better chance to withstand and exploit the of the tech-savvy and dynamic young people, 4IR. ASEAN as a regional organisation must the growth of the Internet economy and the encourage and facilitate other entrepreneurs transformative powers of the 4IR have the ability and companies to expand regionally for scale to transmute old-economy businesses and open and diversity, and the best chance to navigate up new ones, which could profoundly enrich the the 4IR. To have a realistic chance of getting this lives of the populations by creating jobs and right, ASEAN needs a new ‘ASEAN Way’. wealth, and further propel progress. ACKNOWLEDGMENT BUSINESSES AND THE OPERATIONAL RE- Congratulations to CIMB ASEAN Research THINK Institute (CARI) for the production of this ASEAN companies cannot wait for governments. timely publication and a practical reference to ASEAN companies must face the 4IR by ASEAN’s digital and 4IR challenge. I would also

10 Advancing ASEAN in the Digital Age SPECIAL MESSAGE

like to thank all contributors – prominent leaders, business captains and policymakers – for sharing their thoughts on this critical subject.

After 15 years as Chief Executive, Dato’ Sri Nazir Razak was appointed Chairman of CIMB Group in 2014. He is also a Director of Khazanah Nasional, a Member of the International Advisory Board of the University of Oxford’s Blavatnik School of Government and Chairman of the World Economic Forum’s ASEAN Regional Strategy Group and ASEAN Regional Business Council. In 2015, he was the recipient of Asia House’s ‘Asian Business Leaders Award’.

Advancing ASEAN in the Digital Age 11 INTRODUCTION

By Tan Sri Dr. Munir Majid, Chairman, CIMB ASEAN Research Institute

“Advancing ASEAN in the Digital Age” brings affected by it, embrace the digital revolution. As to readers the future that is upon us even as noted by some of the contributors to this volume, the regional organization celebrates its 50th the ASEAN Internet economy is expected to reach anniversary. It is a publication that focuses entirely USD200 billion by 2025. A quarter of the ASEAN on digitization and its impact on the ASEAN population are already shopping online. No doubt economy in so many different ways. It is the only digital innovation will shape the next 50 years of book I know of that does this among all that have Asean economic development. been published on ASEAN’s past 50 or next 50 years. Singapore leads the ASEAN field - by a long chalk. Indeed it is so far ahead it is attracting the world’s The CIMB Asean Research Institute (CARI) is leading artificial intelligence (AI) talent that it privileged to draw on contributions from top could very well become a mega hub for start-ups government leaders, leading business executives, involved in the sector. There is strong state backing and public intellectuals, from across the region as for technology research. Alibaba, for instance, well as beyond it. Some of the contributors are has decided to site one of its global AI research from global alpha companies at the forefront of facilities in the island republic. A Singapore-based the digital revolution. company has also announced it would set up an AI hub of its own which would incubate 100 start-ups There is undoubted optimism in ASEAN on the every year. future driven by what is now being called the Fourth Industrial Revolution (4IR). There are The city state’s massive digital strides highlight however some cautionary notes pertaining to a problem in ASEAN integration that could ASEAN’s preparedness in facing some of the be caused by the digital divide in the region, requirements and challenges of the Digital Age. extending the already existing economic divide into the Digital Age. Against the massive, phenomenal disruptions taking place across the globe, ASEAN has not Singapore takes the chair of ASEAN in 2018 when been a laggard. With the world’s third largest it is expected to make the Digital Age the centre population, 70 percent of whom are under 40 years of the regional grouping’s attention. It would be a of age, ASEAN is big and dynamic. It is one of the good time for ASEAN to take stock then not just of fastest growing Internet regions in the world, with the vast opportunities but also some of the serious an expected 480 million users by 2020. Tencent challenges of digitization to individual members counts ASEAN and China as the second largest state economies as well as to regional integration. centre of innovations behind only North America. One of ASEAN’s foundational narratives is that There is no denial. Business leaders, whether its greater economic integration will attract directly operating in the digital space or obviously foreign manufacturing investment based on low

12 Advancing ASEAN in the Digital Age INTRODUCTION

labour cost in such destinations as Myanmar, There is a consensus, especially among business Indonesia, the Philippines or Vietnam. However, leaders, that the current education system even now, the low cost labour argument is gone. across much of ASEAN does not deliver the skills Cheaper, intelligent robotics, particularly robotic requirements for new jobs in the Digital Age, manufacturing, is readily available to displace particularly cognitive skills. Overhaul of education human labour. Re-shoring is already taking place. systems takes time, but must begin. Investment There is the serious issue of ASEAN manufacturing decisions in the 4IR world are based on skilled and employment not taking place in many of its innovative human capital. One contributor warned member states. ASEAN economies not to be caught in a perpetual cycle of playing catch up. The challenge is not limited to manufacturing employment. It cuts across all sectors, including For the benefits of the Digital Age to flow across services. A study in Malaysia puts the probability Asean, policy guidelines and regulations will have factor of computerizable jobs at 0.8 for unskilled to be liberalized. Yet there will be an inclination and semi-skilled jobs. The threat to an individual to be protectionist from the fears aroused by the ASEAN economy therefore could be higher the digital divide. As with protectionism in the real lower down the economic ladder it is. economy arising from the economic divide, this is short-sighted and will only result in ASEAN member It might be useful if ASEAN commissioned baseline states at the back being left further behind. studies of the risk to employment in individual economies from this challenge of the Digital Age. Yes, ASEAN must work together to address the major challenges of the Digital Age, but it Concomitantly, such studies should also examine has also to facilitate it by not constricting its the upskilling needs of the 4IR. Even the U.S. benefits through policies that inhibit cross-border fails on this score. But, again, Singapore has an e-commerce, electronic payments, logistics and effective policy framework to achieve this which data exchange. Thus while ASEAN so readily could be a model for other ASEAN member states. recognizes the massive benefits of the Digital Age, Schemes might have to be put in place for cross- it cannot afford to allow them to be minimized border mentoring and retraining. by the undoubted challenges the 4IR also poses. As always there has to be political leadership to Further, as noted by some of the contributors, the negotiate this dilemma. ASEAN education system must be fit for purpose of the Digital Age. While new jobs may be created, the work force has to become, in the words of one of the contributors “a Think Force” that is “E-Fit.”

Tan Sri Dr. Munir is Chairman of CIMB ASEAN Research Institute, and also of Bank Muamalat Malaysia Berhad, of the Financial Services Professional Board, of ASEAN Business Advisory Council, Malaysia, as well as President of the ASEAN Business Club. He sits on the board of the Institute of Strategic and International Studies (ISIS) Malaysia and on the Financial Services Talent Council of Bank Negara Malaysia.

Advancing ASEAN in the Digital Age 13 ASEAN and Australia - strategic partners in a dynamic region

Prime Minister of Australia, the Honourable Malcolm Turnbull MP

We live in a time when the pace and scale of complex challenges, ASEAN has been a bulwark change are unprecedented in human history. The of stability and constancy for 50 years. In 2017, last two decades have been characterised by ASEAN is an institution that has stood the test of disruption and change, much of it driven by the time as the region’s strategic convener, shaping a technology of the internet. more prosperous and secure environment for all of us. Nowhere in the world has this pace of change been more apparent than in Southeast Asia. In less than And in 2017, Australia’s partnership with ASEAN two decades, ASEAN’s combined GDP has more has come of age. In 1974, when Australia became than quadrupled, accompanied by rapid growth ASEAN’s first dialogue partner, development in consumer spending, urbanisation and internet assistance in the form of economic cooperation was penetration. Between 2012 and 2020, the ASEAN the mainstay of our engagement. Contact between middle class will more than double, from 190 million our peoples was limited. Trade was restricted by to 400 million people. The the protectionist policies cities of Southeast Asia are and economic conditions booming, with more than ASEAN is an institution that of the day. And we did 90 million people expected has stood the test of time not yet have habits of to move to urban areas by as the region’s strategic cooperation on political 2030. convener, shaping a more and security issues. prosperous and secure With 40 cities in ASEAN How different the outlook hosting populations of one environment for all of us. is today. Taken as a group, million or more, and intra- ASEAN now represents ASEAN travelers making more than 100 million around 15 percent of Australia’s total trade and trips each year, countries in the region are more is our third largest trading partner, after China urbanised and connected to each other and the and the European Union. In the last Australian world beyond than ever before. census, 896,000 people claimed heritage from ASEAN nations. Behind those numbers is a story While the rapid integration of the region has of constant and meaningful people-to-people brought about new economic growth and contact. Australia welcomes more than 1.3 million opportunities, it also demands greater practical visits from ASEAN countries each year, and in cooperation on increasingly complex challenges 2016 Australians made almost three million trips – from the scourge of terrorism and violent to ASEAN countries. extremism, to the urgent need to develop common standards to safeguard the future of digital trade. Incrementally over the decades, from the harrowing events of the 1970s – the Indochina Against this backdrop of rapid change and refugee crisis and the Cambodian conflict –

14 Advancing ASEAN in the Digital Age The Honourable Malcolm Turnbull MP

through to the end of the Cold War and beyond, International Terrorism, to ensure that we continue we have developed a mature political dialogue. to respond effectively and deepen cooperation This was recognised by the elevation of our across the region. It is essential that we sustain relationship to a strategic partnership in 2014, this. and by the agreement to hold biennial Leaders’ Summits, the first of which was held in Vientiane As terrorists adapt, so must we as a region to in 2016. Today, our partnership is embedded in a defeat them. The scale and links between terrorist strong network of regional institutions, including groups mean that we must work together even the East Asia Summit, ASEAN Regional Forum more closely, sharing information and lessons and ASEAN Defence Ministers Meeting Plus. learned, and cooperating to keep our citizens safe.

The ASEAN-Australia Special Summit in March At the ASEAN-Australia Special Summit senior 2018 will mark a major step forward in our officials will convene to discuss how we can work partnership. It will build on our deep legacy of together more effectively to combat this shared economic cooperation, political dialogue, and the and rapidly evolving threat, including through natural interweaving of our people to establish a policy and law enforcement responses. contemporary, outward-looking partnership for the rapidly changing world we live in. Opening new markets and opportunities for businesses in ASEAN and Australia has long been As the first Australian Prime Minister to host all our shared ambition. The 2015 Declaration of the ASEAN Leaders in Australia, I see the potential ASEAN Economic Community sent a decisive of the ASEAN-Australia relationship to grow message to the world that ASEAN is for open further still. The Special Summit will highlight markets and against protectionism. The ASEAN- three major opportunities: to strengthen our joint Australia-New Zealand FTA, still ASEAN’s most contribution to regional security and prosperity, to comprehensive trade agreement, was part of combat terrorism and violent extremism, and to the inspiration for the Regional Comprehensive secure greater opportunities for our people and Economic Partnership (RCEP) – which also brings businesses. in China, Korea, Japan and India.

When Australia looks to safeguard its interests At the Special Summit, I want to bring business in a peaceful, secure and prosperous region, we into the push for new growth in the trade and naturally and increasingly look to ASEAN as an investment relationship. The objective of the indispensable partner. Like ASEAN, Australia has CEO Forum that will precede the Special Summit stood for a region where might is not right and is to drive better understanding of the business where inclusiveness is the norm. And, like ASEAN, opportunities in our markets, and the steps we need Australia has worked to convene and strengthen to take collectively to secure those opportunities. I organisations such as the East Asia Summit to help hope this will lead to more and better interaction manage strategic risks. The Special Summit will and collaboration between our business leaders on open a new chapter in our dialogue, committing such vital issues as digital transformation, the future us to address challenges of common concern, of energy, and infrastructure. like people-smuggling and human trafficking, maritime security and cyber security. Also preceding the Special Summit, a conference for Australian small and medium exporters will raise The rising threat of terrorism is a shared, awareness of the opportunities for them within transnational challenge our region must tackle ASEAN; a reflection of my personal commitment head-on together. In September 2016, at the last to encouraging Australian businesses to seize the ASEAN-Australia Summit in Vientiane, we agreed ASEAN opportunity. on a Joint Declaration for Cooperation to Combat

Advancing ASEAN in the Digital Age 15 The Honourable Malcolm Turnbull MP

I congratulate ASEAN on its 50th anniversary. Building on the enduring legacy of our partnership, Australia will continue to support ASEAN to shape a secure and prosperous region.

Malcolm Turnbull is the 29th Prime Minister of Australia.

He was born in Sydney on the 24th of October 1954 and was educated at Vaucluse Public School and Sydney Grammar School.

Following his graduation from Sydney University with a Bachelor of Arts/Laws he won a Rhodes Scholarship and completed a Bachelor of Civil Laws at Oxford.

He has worked as a journalist and a barrister before moving into investment banking and establishing Turnbull & Partners before moving to become managing director of Goldman Sachs Australia.

Elected on 9 October 2004 as the Member for Wentworth he has served as Parliamentary Secretary to the Prime Minister, Minister for the Environment and Water, Minister for Communications as well as Shadow Treasurer and Leader of the Opposition.

He was elected the leader of the Liberal Party and Prime Minister on 14 September 2015 and was re-elected as Prime Minister of Australia at the Federal Election on 2 July 2016.

Malcolm and Lucy continue to live in the eastern suburbs of Sydney, they have two children, Alex and Daisy, and three grandchildren, Jack, Isla and Alice.

16 Advancing ASEAN in the Digital Age ADVANCING ASEAN IN THE DIGITAL AGE

Yang Amat Berhormat Dato’ Sri Mohd Najib Razak, Prime Minister, Malaysia

The advent of mobile apps and e-commerce border transactions. platforms have disrupted traditional business models and transformed consumer preferences. Driven mostly by a growing base in the Modern consumers are turning more and more to e-commerce market, online media and online online shopping over conventional retail outlets. travel, the Internet economy in ASEAN is Given that this trend coincides with a high digital projected to grow up to US$200 billion by 2025. penetration in Southeast Asia and the need ASEAN’s transformation into a digital economy for fast and easy transactions, it is no surprise powerhouse will boost economic growth and that demand from consumers for technological propel the region towards becoming the fourth- services and apps is growing. largest economy in the world by – according to some estimates – as early as 2030. ASEAN is no exception to this trend. It is estimated that one quarter of the ASEAN population is Currently, there are several ASEAN initiatives already shopping online to promote the digital today. According to This Government is very economy, such as the a report published by ASEAN Strategic Action Google in May 2016, aware not just of the potential Plan for SME Development Southeast Asia is already from the digital economy but 2016-2025; the ASEAN the world’s fastest- of the necessity to do all we ICT Masterplan 2020; growing Internet region can to prepare ourselves and the 2025 Master Plan on with a user base expected to be leaders, not followers, ASEAN Connectivity; to grow from 260 million in the Fourth Industrial and the ASEAN Strategic today to 480 million by Action Plan on Consumer 2020. Revolution. Protection 2025. They include efforts to promote ASEAN’s youthful population and expanding digital trade and the use of electronic payments, middle class are contributing to the growth to simplify customs procedures, improve of e-commerce in the region. With strong and Internet access, develop ICT infrastructure, vibrant economies, favourable demographics, ICT enable transport connectivity, and harmonise investments and ongoing economic integration, e-commerce laws. ASEAN has the potential to become a global leader in the digital economy with the right planning and As e-commerce and other initiatives relating to approaches and the necessary coordination. the digital economy have been identified as a potential key priority for ASEAN next year, one Increasing Internet penetration and increasingly outcome we can look forward to is the signing digitally-empowered consumers - with computers, of an ASEAN Agreement which is expected to tablets and smartphones - present unprecedented harmonise measures such as facilitating cross- opportunities for ASEAN businesses to serve border e-commerce, electronic payments, customers globally, while online shopping creates logistics and transfer of information. new opportunities for ASEAN SMEs in cross-

Advancing ASEAN in the Digital Age 17 Yang Amat Berhormat Dato’ Sri Mohd Najib Razak

Nonetheless, the existing initiatives are not about the opportunities the DFTZ will afford once enough for ASEAN to leapfrog into the ranks of it starts to be implemented. the global digital elite economies. According to a study undertaken by A.T. Kearney, there remains To kick-start the pilot phase of DFTZ at KLIA a significant digital divide within ASEAN, while Aeropolis, Malaysia is collaborating with countries in the region also face challenges in e-commerce giant Alibaba. Leveraging Alibaba’s building out broadband, in regulations inhibiting Electronic World Trade Platform (eWTP) that innovation in mobile financial services and helps SMEs overcome complex regulations, e-commerce, in low consumer awareness and processes and barriers, DFTZ is the first regional trust, in the fact there is no single digital market, eLogistics hub in Southeast Asia, and it is expected and in the limited supply of local content being that by 2018 the eCommerce ecosystem will be produced by a weak local digital ecosystem. attracting increasing numbers of local and global players who will want to be a part of DFTZ. It is important to note that the growth of e-Commerce is reflective of a broader trend, In other areas, the Malaysia Digital Economy with new opportunities being created by the Corporation (MDEC) is working on creating technological advances and innovation that and supporting new digital hubs, and there are constitute the Fourth Industrial Revolution. This already three MSC Malaysia Cybercities that meet will affect all aspects of the global business the standards of international hi-tech investors, ecosystem, from how supply chains are managed including Cyberjaya, Mid Valley and Bangsar to people-to-people interaction. South.

In order for Malaysia to remain relevant and To ensure our efforts to promote the digital competitive in this digital era, we need to make economy are truly inclusive, the eRezeki and sure that our human capital is well trained and eUsahawan initiatives were launched in 2015. The ready to embrace and adapt to new technology eRezeki programme is aimed at B40 households, and employment. The Fourth Industrial Revolution helping them to find new ways to earn income, should provide Malaysian manufacturing industry while the eUsahawan programme aims to develop the opportunity to move up the value chain, a generation that embraces the Digital Economy from the “middle development” stage to a more by incorporating digital entrepreneurship skills productive, value-added and knowledge-intensive into the curriculum of Technical and Vocational stage. Education and Training (TVET) institutions.

Malaysia established the National e-commerce MDEC launched #mydigitalmaker movement, Council (NeCC) in December 2015 to accelerate an initiative in partnership with the Ministry the growth and development of e-commerce in of Education (MoE) to aid the integration of the country. The Council acts as the platform to Computational Thinking and Computer Science guide the governance and implementation of the into the formal school curriculum; as well as National eCommerce Strategic Roadmap (NeSR) facilitating industry and universities to help involving 25 key Ministries and agencies. nurture and groom talented young digital makers through extra-curricular activities. Meanwhile, the implementation of the Digital Free Trade Zone (DFTZ) – the world’s first - beginning MDEC is also collaborating with Human Resources in October 2017 will provide a highly conducive Development Fund (HRDF) Malaysia for the environment for companies anchored in the development of programmes on critical ICT internet economy to carry out business and export skills. This is part of the Digital Talent Strategic their products and services. There has been very Intervention Roadmap, which is to designed to positive interest and much excitement among create a sustainable industry-led development both local and international e-commerce players model.

18 Advancing ASEAN in the Digital Age Yang Amat Berhormat Dato’ Sri Mohd Najib Razak

All of the above should help us reach the target ASEAN also needs to embrace and adapt to new under the 11th Malaysia Plan (2016-2020) for technology and innovation under the Fourth the digital economy to contribute 20 percent of Industrial Revolution in order to remain relevant GDP by 2020, while our E-commerce Strategic and competitive as an attractive investment Roadmap also aims to double e-commerce growth destination. from 10.8 percent to 20.8 percent by 2020. If ASEAN is to reap the full benefits of the rise of This Government is very aware not just of the digital technology, the association must see this potential from the digital economy but of the as an opportunity to adapt, evolve, reform and necessity to do all we can to prepare ourselves innovate. Together we can make use of digital and to be leaders, not followers, in the Fourth technology to empower the ASEAN Economic Industrial Revolution, which is why in late 2016 I Community – and for us collectively to move closer also called for the cost of fixed broadband to be to the overarching vision of a more integrated, halved, the internet connection speed doubled, prosperous and competitive ASEAN by 2025, for and for 2017 to be our “year of the internet”. the benefit of all.

In conclusion, with more than 630 million people living in ASEAN and with more than half of the population under the age of 30, there is massive potential for ASEAN. ASEAN therefore needs to continue developing its internet infrastructure in order to enable the full participation of businesses in cross-border markets at regional and global levels. It is imperative that ASEAN reaches out to companies in the region, particularly SMEs, to stress the importance of embracing digitalisation.

Dato’ Sri Najib Tun Razak is the Prime Minister of Malaysia.

As the son of Tun Abdul Razak Hussein, Malaysia’s second Prime Minister, and nephew of Tun Hussein Onn, Malaysia’s third Prime Minister, Dato’ Sri Najib was born into a family of political pedigree.

Having initially pursued a career in business, he only entered public service upon his father’s death. After an outpouring of public support, at the age of 22 he became the youngest MP in Malaysia’s history. Despite the absence of his father to help him, by 25 he was a Deputy Cabinet Minister, by 29 the Chief Minister of a state, and by 33 a full Cabinet Minister. Having successfully led most key ministries, including Education, Defence and Finance. Aged 55 on 3 April 2009 he became Prime Minister.

Advancing ASEAN in the Digital Age 19 ADVANCING ASEAN IN THE DIGITAL AGE

Prime Minister of Kingdom of Cambodia, H.E. Hun Sen

This year marks one of the greatest milestones in services. Industry 4.0 and the emergence of the history of the Association of Southeast Asian innovative technologies offer a huge potential for Nations (ASEAN) — the 50th commemorative ASEAN to further integrate into the global value anniversary of its establishment. For the past chains (GCV) and production networks. It would five decades of its existence, ASEAN has help re-structure economic, trade and industry by endured, strived, navigated through various reducing costs and boosting productivity. ASEAN turbulences, and in fact recognized as one of could be at the forefront of change – among all the world’s dynamic, successful and resilient means - by leapfrogging or moving ahead with the regions, considering its robust economic growth, adoption of latest technologies. By 2030, ASEAN, solid political-security stability, improved living based on research by McKinsey Global Institute, standards, peace, and harmony. For next 50 years, could generate huge potential economic impact we will witness the transformation of ASEAN in all from technologies, estimated to be US$625 areas: social, economic and political, in scope and billion, equivalent to 4 to 12 percent of ASEAN’s scale that we have never experienced before, and GDP at that year. Recognizing its significance in a new context that will be tremendously shaped for the growth and development endeavors of by a rapid pace of technological advancement. Cambodia and the region, Cambodia is keen on one particular component of this revolution, the We all now know the world is indeed entering digital economy and its current trends. the new era of revolution, so-called the Fourth Industrial Revolution (Industry 4.0) that is The Internet of Things (IoT), a technological affecting how governments run, businesses accelerator in the Industry 4.0, is set to become operate and people live. And we are feeling a megatrend. The unstoppable progress of the it now since technology has empowered and Internet, for instance, promises potential for touched many aspects of people’s lives, societies, online businesses and other means of e-commerce businesses, and governments in a way the world development for Micro Small Medium Enterprises has never seen before, from self-driving cars and (MSMEs) in ASEAN, which currently account for 99 drones, to virtual travel arrangements, to 3-D percent of all enterprises and between 50 percent printing, to Artificial Intelligence, and to other and 90 percent of employment. ASEAN’s internet cloud-based innovations. penetration, based on a Temasek & Google’s recent report, was also remarkable, reaching 260 The rapid progress would also provide million in 2016, equivalent to over 40 percent of opportunities to address critical challenges in the total population, and is expected to be 480 other areas as well, including but not limited million in 2020, which means 4 million new users to, education, public health, food security, and coming online every month. climate change. The FinTech can be, for example, a key to transforming the entire financial sector The importance of the Internet is in no way different by reducing transaction cost and information for Cambodia in comparison to the other ASEAN asymmetry. On the economic front, forces member states since Cambodia is positioned to of technologies in Industry 4.0 is a potential become a key player in production and movement game-changer for more efficient, productive, of goods and services around ASEAN as well cost-competitive and customized products and as becoming a regional hub for investors and

20 Advancing ASEAN in the Digital Age H.E. HUN SEN

entrepreneurs. This could lead to a promising rich enhancing data management among the ASEAN and diverse economy that provides new jobs, member states. increases financial inclusion, as well as contributes to improving the livelihood of the people in Yet to realize the full potential of technological Cambodia and the region. In this connection, advancement, ASEAN needs both hard and soft Cambodians are rapidly adopting e-commerce infrastructure to support the digital economy in various forms including as consumers and ecosystem. In addition to building hard merchants, fuelled by rapidly growing internet infrastructure including broadband connections users from 1.7 million users in 2011 to 7.16 million and mobile networks, aiming to expand and users in 20161. E-Commerce and online shopping provide universal and low-cost internet access, have been increasing significantly in recent years; ASEAN needs to further place an emphasis on soft and with 60 percent of Cambodia’s population infrastructure, which focuses on capacity building below the age of 25, it represents a huge potential and skills development through platforms, not just for local but regional and international business networking, and other ICT spaces to share markets. Many cashless and electronic payments international best practices, and on harmonization platforms, which are vital to the facilitation of of regulations and rules across ASEAN member e-commerce activities, have been introduced to states. Any efforts by the government to manage the Cambodian consumers and merchants with or mitigate risks from privacy invasion and other considerable success. Moreover, the Cambodia’s cyber activities, however, must be done by putting government is in the process of having the law the people first to maximize inclusion and digital on e-commerce, which covers e-commerce transformation for all members of the society, provisions, such as, e-signature, online consumer including the poor, minorities, youths and women, protection, and personal information protection, as well as the economy as a whole. e-government, e-payment, and e-evidence. Although such development is still in progress, To thrive in the dynamic social, economic and this will pave the way for Cambodia’s economy to political architecture, ASEAN must constantly further integrate into the regional economy. adapt to new conditions and retain an open and flexible attitude. This is because technological Taking ASEAN into consideration as a regional progress has come with a set of disruptions to actor, countries will not be able to single-handedly the region, particularly as the level of readiness, work towards advancing their economies. This application, access, and absorption of new demands the need for cooperation both at the technologies among the ASEAN member national and the regional levels. The digital states vary considerably. The Industrial 4.0 can economy, as well as, the Industrial 4.0 have disrupt the labor markets in the form of worker become some of the most important topics that displacement and job losses, affect current value have been discussed among the ASEAN member chains with increasing volatility, shorter production states and its partners. More importantly, ASEAN life cycles and high product complexity, and has adopted ASEAN ICT Master Plan 2020 and expose the people to cyber risks. ASEAN, thus, Connectivity Master Plan 2016-2025 recognizing must prepare their younger generations with the digital innovation as one of the five elements as ICT digital literacy and skills to prepare for the well as setting it as an integral part of all three future jobs that might not exist yet, to catch up pillars (Physical, Institutional, and People-To- fast with more developed ASEAN fellow members People Connectivity) of ASEAN Connectivity2. and encourage technological innovation through It is starting from supporting and promoting the promotion of STI-driven projects and R&D. MSMEs and other financial access through digital Together, the ASEAN member states can prevent technologies to improving open data use and a notion of monopoly, which leads to a scenario

1 UNTAD: Cambodia Rapid eTrade Readiness Assessment 2017 2 ASEAN Master Plan on ASEAN Connectivity 2025

Advancing ASEAN in the Digital Age 21 H.E. HUN SEN

– winner takes all or winner takes most – in the digital economy as this could widen inequality.

Given the astonishing progress, advancing ASEAN’s digital age is not an option, but a must that would require a whole-of-government as a holistic approach, matched by bold actions with the vision to change and explore new ideas. Thus, member states need to catch up fast through building a forward-looking, simplified and harmonized policies and regulations. The interface of digitalization, e-commerce, and pro-business environment requires the member states to change from working in silos to enhance synergies with other sub-regional and interregional frameworks through both existing and new initiatives to improve physical, institutional or people-to- people connectivity. With the continued national development of infrastructure to integrate into the regional digital economy, I firmly believe Cambodia and ASEAN as a whole would exploit the full benefits of the digital age as a part of our shared future.

Samdech Akka Moha Sena Padei Techo Hun Sen was in Peam Koh Sna Commune, Stoeung Trang District of Kampong Cham Province. In 1977, he led a movement that liberated Cambodia and its people in 1979 from the genocidal Pol Pot regime. His political career started in 1979 as Foreign Minister, then Deputy Prime Minister and Foreign Minister (1981–1991), and finally as Prime Minister (1985) until the present. His political career was marked by significant achievements, which laid the basis for the attainment of peace, national reconciliation, and the development of the country. He likewise proved to be an indispensable architect of the Paris Peace Agreement on Cambodia. Under his leadership, Cambodia became the 10th member of the Association of Southeast Asian Nations (ASEAN).

22 Advancing ASEAN in the Digital Age KNOWLEDGE PARTNER

ASEAN in the Digital Age: Quo Vadis?

Technological advancement, the power of both technology population is under 30 years enabled by our emerging and people, ASEAN could see of age6, most with internet digital behaviours and the new US$1 trillion added to its GDP access. This young population business models that deliver over the next decade, a 20-30 is likely to drive the digital economic value, has brought percent increment to its overall push in three ways: digital us to the cusp of the digital output by 2025.2 innovation, growth in digital age, impacting all aspects of spending and the economy, and human life. The Tailwinds: accelerating digital adoption in Ten-nation ASEAN has a the workplace. Developments are accelerating population of more than 630 in four key areas: (i) Connectivity million and a robust economy, In 2015, the AEC mapped out & Computing power, (ii) Data, currently valued at US$2.55 a clear charter for the next Analytics & Intelligence, (iii) trillion with projected annual 10 years with a clear focus on Human-Machine Interface and growth of more than five innovation and technology (iv) Physical-Digital collision. percent over the next decade.3 adoption, and the development This rapid evolution has created If it was a country, the bloc of micro, small and medium a significant opportunity for would be ranked #3 globally in enterprises (MSMEs)7. This is emerging ASEAN to jump to the population and #7 in GDP.4 especially critical in ASEAN forefront of the technology wave.1 as MSMEs contribute 30-60 Over 90 percent of ASEAN’s percent of the overall economy With a proper digital agenda population is literate5 and across markets (for example: and a strategy that harnesses more than 50 percent of the in Malaysia it is 35 percent,

Figure 1: A cyber-physical collision is being driven by four key technology clusters

Computing Power Analytics & Intelligence Human-Machine interface Digital – Physical transformation

Internet of Things Machine Learning Wearables Advanced Robotics 3D Printing Connecting the Coming of age Digitizing the workforce Emerging from the cage Shaping the future one unconnected layer at a time $32 bn $700 mn market, $38 bn market Global Market $8 bn projected to grow to $16 bn $5 bn by 2020 250,000 units sold in 2015 85% – projected to grow to 2016 2025 400,000 units by 2020 Of production assets today are still unconnected 70% of captured production data goes unused – $5 bn AI can change that 2016 2020 70 bn Handles 10% of 17 bn production tasks Recent surge in metal 70% 10% today Most industries still in early capabilities stages of adoption 2016 2025 Rising to 45% by 2030

Source: A.T. Kearney

1 Technology and Innovation for the Future of Production: Accelerating Value Creation; World Economic Forum in col- laboration with A.T. Kearney: 2 The ASEAN Digital Revolution; collaboration between A.T. Kearney and Axiata 3 International Monetary Fund Databases 4 ASEAN Economic Community 2015: Progress and Key Achievements Jakarta: ASEAN Secretariat, November 2015 5 ASEAN Statistical Yearbook 2015 6 ASEAN Economic Community at a Glance 2007-2015 Jakarta: ASEAN Secretariat, August 2016 7 ASEAN Economic Community Blueprint 2025 Jakarta: ASEAN Secretariat, November 2015

Advancing ASEAN in the Digital Age 23 A.T. Kearney

Figure 2: A digital revolution will transform ASEAN by 2025 Most ASEAN countries have articulated various visions for e goe aily lif s dig . D ital their digital economies, such as A

detailed eCommerce roadmaps B . L that integrate SME sellers o s Cashless c e a l into the digital economy. For iv t c a h example, the Malaysia Digital n a

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t .0 a n 4 infrastructure and strategic d Seamless y cross- border r public services t e s environment for digital adoption ffi u c d ie In that will spur economic growth nt g p cin ub ra among the economies. lic mb services C. E The Headwinds: Source: A.T. Kearney However, digital growth and its attendant benefits are not a given. There are three key Indonesia 60 percent8), but reach, nationally and globally. challenges that need to be have low ICT adoption rates There is also a plan to take 8 addressed: (for example, only 30 percent Million SMEs online through the of SMEs in Malaysia using Go Digital Vision 2020 program. 1. Weak rural infrastructure eCommerce and epayments9). development This twin focus on innovation Substantial digital and physical 2. Limited workforce readiness and MSMEs could spur wide infrastructure investments for the digital age spread digital adoption across have also been underway. 3. Privacy & security concerns – the region. Countries are already Over 2011-2015, almost US$50 that need to be addressed. taking concrete steps to bring billion10 was invested in building SMEs online – KOMINFO in communication infrastructure Weak rural infrastructure: Rural Indonesia organized programs across ASEAN. For example, parts of most ASEAN countries with employee training and Malaysia has taken the lead by remain largely unconnected. provided domain IDs and free setting up the first Digital Free In addition, more than half of hosting services in order to Trade Zone in the region to adults in many ASEAN markets bring 100,000 SMEs online and facilitate SME integration with do not have a bank account.11 help them expand their market the digital economy. Where banking penetration

8 Asian Development Bank (ADB) 2015; Asia SME Finance Monitor. Manila; Office of Small and Medium Enterprise Pro- motion (OSMEP). 2015. White Paper on Small and Medium Enterprises in Thailand 2015. Government of Thailand; SME Corporation Malaysia. 2015. Annual Report 2014–2015 9 SME Corporation Malaysia Annual Report 2015-2016 10 ASEAN Investment Report 2016 Jakarta: ASEAN Secretariat, September 2016 11 World Bank Global Findex 2014

24 Advancing ASEAN in the Digital Age A.T. Kearney

is substantial, such as in ASEAN countries - for example, Advancing ASEAN through four Malaysia (81 percent), cash still Indonesia produces ~750 Digital Sub-revolutions: dominates with 7 times as many STEM graduates per 1 million Carpe Diem ATM withdrawals as debit card population, far below China For ASEAN to sail smoothly transactions.12 While cash on (~1,000), and India (~1,800).13 through the digital revolution, delivery is being explored as Despite this, most ASEAN we will need focus in four areas: a solution, digital payments countries do not have a skills will be key to creating a step roadmap for the workforce. The 1. Continue accelerated digital jump in online transactions, absence of a coherent plan will and connectivity infrastructure which involves shifting a large hamper workforce development investments proportion of unconnected and for the digital age. Continued investment in digital unbanked people online. and physical infrastructure is Privacy & Security concerns: In a must. This will range from Limited work force readiness a recent digital transformation increasing broadband internet for the digital age: The digital survey with business leaders access and digital services, to revolution could see the end of in the region, cyber-security enabling the creation of smart employment as we know it. Our ranked as the top concern. platforms and cities. assessment broadly indicates Among consumers, there are three types of impact on increasing concerns around Broadband penetration: employment across sectors: job the security of personal data, The focus should be on improving losses, job augmentation and financial and transactional high-speed broadband job enhancement. data. Over the past few years penetration, as studies have many ASEAN countries have shown that increased broadband Science, Technology, Engineering, strengthened personal data internet access drives higher Mathematics (STEM) graduates and cybersecurity laws. But this GDP growth. Ensuring healthy typically play a key role in driving will need to be continuously operator economics is critical digital innovation and can take strengthened to enhance to sustained broadband up many of the ‘enhanced’ jobs. people’s trust. infrastructure investments. However, STEM graduates are ASEAN mobile operators have under-represented in many high capex intensity compared

Figure 3: The collision of cyber-physical worlds has nuanced implications on the workforce

Jobs likely to be Jobs that are likely Jobs that are likely replaced to be augmented to be enhanced

• Loan Officers • Maintenance Engineers • R&D • Bank Tellers • Teachers / Daycare • Medical Researchers • Financial Advisors • Chefs • Pharma Engineers • Desk / Admins • Nurses • Computer Scientists • Legal Assistants • Therapists/Counselors • Law Enforcement • Drivers/Chauffeurs • Civil Engineers • Healthcare Support • Software Developers • Surgeons

Source: A.T. Kearney

12 Financial Stability and Payment Systems Report 2016, Bank Negara Malaysia 13 UNESCO Institute of Statistics 2014 or latest available

Advancing ASEAN in the Digital Age 25 A.T. Kearney

to global operators (for example, Payments platforms and mobile Smart City programs show how Indonesian operators invest 15- financial services: you can build digital into growing 30 percent of sales on capex A single framework that infrastructure. By 2025 ASEAN annually compared to developed enables countries to harmonise is primed to have 35 cities with market averages of less than regulations on payments and more than 1 million residents and 15 percent). Mobile operator mobile financial services will generating approximately 80 economics could be improved greatly bolster digital usage. percent of the Bloc’s GDP. These through two sets of actions: Policy makers must encourage cities will need to be “smart” to standardised digital payments solve the problems associated • Increased spectrum platforms – first in-country, then with rapid urbanisation. availability, especially of a across ASEAN. Systems such Policy makers should design a lower band such as 700 MHz, as NETS in Singapore or mobile common strategy to nurture so that operators can expand wallets will lower the cost of city standards and economies of broadband coverage cost- transactions and encourage scale as these cities develop.14 effectively. daily micro-payments. Further, • Ensuring that there are significant acceleration is needed 2. Foster innovation and build no more than four mobile towards setting up and running local champions operators per country, so Internet-only and payments For ASEAN to fully benefit from that operators can earn banks. These limited service the digital revolution, its people sufficient returns to re-invest institutions are significantly faster will need to be not just digital in infrastructure. and cheaper than traditional consumers, but also digital brick and mortar banks, enabling producers and innovators. Countries could consider the deeper financial penetration and rollout of a national broadband ensuring the mass of transactions Local champions: network to increase penetration are digitalized. Lazada, Grab and Go-Jek are of fixed-line networks and some anchors in their respective provide enhanced mobile quality. Physical-digital infrastructure: markets that have shown how

Figure 4: A Plan for ASEAN smart cities

35 smart cities across 10 countries ... deploying IoT and green technology across key dimensions Myanmar Vietnam • Yangon • Hanoi Smart • Smart grid • Mandalay Laos • Ho Chi Minh City energy • Energy storage • Nay Pyitaw • Vietianne • Bien Hao • Smart meters • Can Tho Philippines • Danang • Manila Smart • Renewable energy • Cebu City Cambodia environ- • Water and wastewater management • Davao Thailand • Phnom Penh ment • Sanitation • Bangkok • Zamboanga • Samut Prakan Smart • Technologies to reduce traffic congestion Malaysia transport • Green transport: electric and hybrid Indonesia • Railways: metro and monorails • Kuala Lumpur • Jakarta Brunei • Johor Bahru • Bandar Lampung • Bandar Seri Begawan • Cloud computing and analytics • Batam Smart • Security and surveillance • Bogor IT • Disaster management • Denpasar • Pekan Baru • Makassar • Samarinda • Malang • Semarang Smart • Intelligent building management systems • Padang • Surabaya buildings to save water and electricity • Palembang • Tasik Malaya • Smart waste management

Smart • Remote patient monitoring 10 million residents 5-10 million residents 1-5 million residents healthcare • E-health and m-health systems Source: A.T. Kearney

14 The ASEAN Digital Revolution; in collaboration with A.T. Kearney and Axiata

26 Advancing ASEAN in the Digital Age A.T. Kearney

local success stories encourage follower’ strategy, are paramount data transfers. ASEAN should digital entrepreneurship. Observing to digital innovation success. consider creating a world-leading and learning from such local Studies globally have found agency to fight cybercrimes, success stories plays a key that strengthening intellectual like J-CAT of Europol. However, role in accelerating digital property rights increases the regulations need to be balanced entrepreneurship. propensity to innovate and file and proportional to avoid patents. Positive regulation to deterring businesses from Innovation ecosystem: encourage innovation zones as developing electronic and mobile True innovation requires all well as ‘short period moratoriums’ commerce platforms. stakeholders from policymakers from regulation for new to companies to schools to play technology such as M2M and IoT 4. Ready the workforce for the a leadership role. Local incubator can encourage development of Digital Age programs and industry-university new technologies and solutions. For ASEAN to take full advantage collaborations can turbocharge of the Digital Age, its workforce innovation through creating a Encourage digitally led R&D: need to be imbued with the right nurturing environment through ASEAN could take a similar skill-sets. research programs, hackathons, approach to advanced R&D and internships/education markets such as the US and Upskill the workforce: credits for industry work. Silicon Japan to make extensive use Countries should lay out a Valley provides a great template of R&D tax incentives to help comprehensive roadmap for for creating such an environment innovative enterprises get off the talent development and training. of universities, companies, and ground. Such concessions must Reskilling and retraining should investors and demonstrating its be non-discriminatory, applying focus on enabling employees positive flywheel impact. Some to startups in all industry sectors. to use technology effectively, national initiatives focused fostering curiosity, creativity on creating a comprehensive 3. Enhance trust and security and collaboration to prepare ecosystem for innovation are For digital adoption to be for a world of continuous already in action through the widespread, trust and security disruption. Tighter coordination SPRINGS SEEDS Capital and is paramount. Most ASEAN between Government, Industry Startup SG Equity programs in countries have compulsory and Educational institutions is Singapore and MaGIC (Malaysian National IDs to access certain necessary, with a focus on the Global Innovation & Creativity government services, but they practice aspects of digital, and Centre) in Malaysia. In Indonesia, should now implement a national the latest tools and technologies. the Ministry of Communication e-ID system as a first step. With The Thailand 4.0 model is an and Information Technology has national IDs in place, ASEAN example of Government action set up the ‘1000 Startup Digital can then strive toward cross- in this space. The government National Movement’, aimed border identification, resembling is promoting lifelong learning at creating 1,000 technology the European Economic Area’s through 3,600 community digital startups with total valuation adoption of national ID cards centers and is Nurturing Citizens US$10 billion by 2020. entitling people to free movement. 4.0 by setting up a Strategic Talent Center where they Establish rules that protect As everyday services move match specialized science and innovation: online, the risk of a breach is technology skills with private Regulations and enforcement to high. A resilient regional-wide sector needs. protect developers from those cybersecurity regime is needed who seek to produce inferior to drive public confidence in Invest in “21st-century skills” imitations, adopting the “fast e-commerce and cross-border education:

Advancing ASEAN in the Digital Age 27 A.T. Kearney

ASEAN schools continue to with the new technologies and 1. Set up an independent board use curriculums that are no rapidly evolving workplaces — the ASEAN Digital Economy longer future-ready. Some have of tomorrow. Based on our Promotion Board to provide added new courses such as study, we also see tremendous strategic direction and guidance entrepreneurship and computer potential to leverage on to the AEC and its member studies, others have begun technology (e.g. Google Apps, governments - with country to incorporate technology in Skype), innovation (e.g. One representatives, industry experts its curriculum, but this is not Laptop per Child – a nonprofit and key opinion leaders. enough. According to the providing low-cost computers to International Computer and millions of schoolchildren), and 2. Set up a Digital Index like the Information Literacy Study (ICIL) new private-public partnerships European Union’s Digital Economy by the International Association to re-invent the way we teach and Society Index (DESI) that for the Evaluation of Educational the next generation.15 collates relevant indicators on Achievement covering 50,000 digital performance and tracks eighth-graders in more than Overseas nationals represent an the evolution of member states’ 3,300 schools from 21 education immediate opportunity to boost digital competitiveness. systems, only 2 percent of the existing local talent pool. students use their critical Governments should be doing Rome was not built in a day and thinking and that teachers lack all they can – from financial neither is a digital economy. The confidence in teaching essential inducements, to preferential headwinds outlined must be computer skills. Governments taxes, or other incentives - to addressed with all stakeholders need to radically transform the attract highly-skilled overseas working together, pushing for an current education system to workers to return home to integrated roadmap that will turn ensure children are prepared ASEAN. the US$1 trillion opportunity into for the digital economy. ASEAN’s reality. Skills such as critical thinking, Conclusion problem solving, creativity, The digital age is coming and digital literacy, and more holistic ASEAN urgently needs to do two social and emotional skills will things: be vital for youngsters to cope

A.T. Kearney is a leading global management consulting firm with offices in 40 countries. Since 1926, we have been trusted advisors to the world’s foremost organizations, working with more than two-thirds of the Fortune Global 500. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues.

About the authors Soon Ghee Chua is a partner with A.T. Kearney heading the South East Asian operations. He has almost 20 years of consulting and industry experience during which he has advised Business and Government leaders across the region on digital and transformation related topics. He has also co- authored a book on ‘Asian Mergers & Acquisitions’.

Hari Venkataramani is a principal with A.T. Kearney based in Singapore. He has extensive experience advising organizations across Asia-Pacific on digital and transformation related topics.

15 Rethinking K-20 Education: Transformation for a New Age; collaboration between A.T. Kearney and Ashoka

28 Advancing ASEAN in the Digital Age ASEAN in the Digital Era: Opportunities and Challenges H.E. Sri Mulyani Indrawati, Minister of Finance, Ministry of Finance, Indonesia

It is humbling to realize that work on increasing its ASEAN has just commemorated competitive advantages. its 50th anniversary. This half- ASEAN should capitalize on its century-long journey has advantage of being an attractive reflected the dynamics of the destination for investment and cooperation among member trade, to facilitate the creation states and the transformation and emergence of innovative For an economist process in the region. This businesses that incorporate like myself, I am cooperation has made ASEAN digital technology. certain that the one of the most promising players on the global stage as The Benefits of the Digital digital economy the region remains stable with Economy will contribute huge growth potential. As home to more than 630 significantly to million people - the world’s economic growth ASEAN is now the world’s third largest population - over with increased sixth-largest economy with 50 percent of which is under economic efficiency a combined GDP of US$2.55 the age of 30 and is tech-savvy, trillion, and is expected to ASEAN is the fastest growing and higher continue growing at a sustained internet market in the world. In productivity growth rate of 5 percent, the fact, around 3.8 million new users through the greater average, over the past few come online every month in the utilization of decades. It is not surprising to region. In addition, ASEAN’s assets, innovation, see that in five years, ASEAN will internet economy – which business enter the exclusive group of the includes travel, e-commerce, and five largest global economies. the media sector1– is expected to networking, reach US$200 billion by 20252. knowledge ASEAN will need to tirelessly This provides ASEAN with the transfer and

improved GROWTH OF INTERNET USERS IN ASEAN connectivity in value chains. ASEAN IS THE FASTEST GROWING INTERNET MARKET IN THE WORLD

3.8 MILLION NEW USERS MONTHLY

1 E-commerce sector includes online spend on first-hand electronics, apparel/clothing, household goods, food/grocery; travel sector includes online spend on hotels, airlines, and ride hailing; while media sector includes online spend on ads and gaming. 2 The study by Google and TEMASEK (2016).

Advancing ASEAN in the Digital Age 29 H.E. SRI MULYANI INDRAWATI

potential to boost its economy challenges related to the impact well addressed. Therefore, there beyond the traditional sectors of of the digital age - also known as is a strong need for ASEAN to investments and trade towards the Fourth Industrial Revolution - encourage intensive knowledge achieving the second phase of to governments, businesses and sharing and capacity building integration for the region as communities. Digital innovations programs among member outlined in the ASEAN Economic have revolutionized the way states to deepen understanding Community Blueprint 2025. This in which businesses and the about the digital economy, its new global megatrend of the economy operate. This has big potential role in the region, as digital age is a good momentum implications for jobs as workers well as to collectively formulate for ASEAN to strengthen economic are finding themselves with strategic action plans in line performance as well as people’s outdated skills and struggle to with the ASEAN ICT Masterplan prosperity within the region. match the demands of these 2020. In addition, the creation changing business models. of an integrated digital economy For an economist like myself, I am Low-skilled workers are being should also include enhancement certain that the digital economy replaced by machines – often of digital connectivity. An will contribute significantly called “automisation” – leading example is the optimization of to economic growth with to political pressures. The the fiscal space by enabling increased economic efficiency digital economy raises the risk investment via broadband and and higher productivity through of inequality, especially if it is digital devices. Consultations the greater utilization of assets, not accompanied by increased and targeted measures to innovation, business networking, digital connectivity. relevant stakeholders such as knowledge transfer and improved businesses, including micro, connectivity in value chains. This In line with the new roadmap of small and medium enterprises, has also promoted an expansion ASEAN 2025 “Forging Ahead and the community would be of investment opportunities, Together”, ASEAN must be able vital to bridge the digital gap as created more trade, and greater to embrace new opportunities they are often at the forefront access to products and services. from digital technology but at of these trends. Examples of In a more individual sphere, it the same time prepare measures key measures related to these also opens up opportunities for to navigate risks it may bring with stakeholders include expansion people to get involved in the it to prevent anyone from being of financial access, promotion economy as digital technologies left behind. All Sectoral Working of cost-reducing technologies, allow people, especially women, Groups will need to further and the development of financial to operate their businesses from leverage on digital trends, and services and intermediary facilities home. People in ASEAN can also integrate them into the various such as digital payment services. benefit from jobs created by strategic action plans and future young tech-savvy millennials. work programs with the aim Furthermore, government investment Regionally, it encourages economic to utilize digital technology in education has to go beyond activity to be further integrated for economic development supporting traditional education as cross border data flows surge, and regional integration and to allocating budgets that connecting more countries, cooperation. include training on specific business and people. technology-related skills. In Different stages of development the formal education system, The Challenges and Policy among member nations including governments should focus Options to Promote the Digital in the area of digital technologies on science, technology, Economy are realities in the region. The engineering, and math (STEM) – Nevertheless, like all countries challenge to ASEAN is to ensure as acknowledged by American, and regions, ASEAN also faces that this “development gap” is Australian and European

30 Advancing ASEAN in the Digital Age H.E. Sri mulyani indrawati

governments – to improve on the development of their E-commerce Road Map for the compatibility of human capital digital economies, governments Year of 2017-2019. The roadmap with the digital era. Furthermore, are primarily obliged to ensure covers the following agenda: research and development fiscal prudence. The strategy (1) encourage the expansion of (R&D) is also a crucial part then should be optimize revenues digital economic activities; (2) of technology development. from the digital economy. Our promote innovation; (3) provide ASEAN governments have global taxation systems are ease of doing business in the to start increasing their R&D facing challenges to address use of e-commerce; (4) develop budgets to support research the development of the digital MSMEs and start-ups; (5) improve in their respective areas, economy. Consultation and skills of human resources involved considering the possibilities cooperation with the digital in e-commerce; as well as (6) of innovation-led growth from intermediaries is needed to build a desirable, integrated and successful R&D. While doing so, strengthen government capabilities safe digital environment. ASEAN governments need to to track and record digital continually conduct intensive transactions and further formulate In conclusion, I suggest ASEAN knowledge sharing on strategies credible tax policies for the digital as well as individual member implemented to train human economy. Another challenge states to be well prepared in capital and to conduct R&D. would be how to encourage and fulfilling the requirements needed further incentivize better tax for the digital era. These include ASEAN governments are compliance for digital economy relevant government policies in also expected to support a businesses and suppliers. One facilitating the emergence of the vast growing population of way is to create systems that digital economy as one of main technopreneurs and e-commerce make it difficult for people to sources of the region’s growth. businesses. An example of such avoid paying their taxes – known In the public policy spectrum, companies includes Indonesia’s as the digitalization of tax systems the requirements are, inter alia, start-up Go-Jek. Founded in – while building taxpayers’ trust. creation of an environment which 2010 as digital intermediaries This should also be supported puts forward the principle of fair for the ubiquitous motorcycle by modernizing revenue competitive business, promotes taxi in Indonesian cities, Go- administration and enhancing investment in digital infrastructure Jek has expanded its operation tax collectors’ performance by and digital education, and into various services such as equipping them with the best IT develops a supporting regulatory transportation, logistics, food tools, and enhancing safeguard framework related to digital and beverage, delivery, cleaning, measures against threats of technology developments in beauty, and even financial digital fraud. order to establish an innovative, services. Currently, it operates inclusive, secured and integrated in 50 cities in Indonesia, with Indonesia is fully supportive of the digitally-connected region. around 250,000 drivers having digital economy. The Government joined the business. recently launched economic policy package and issuance of While deciding to spend more

Sri Mulyani Indrawati is an Indonesian economist, who is serving as the Minister of Finance of Republic of Indonesia. She returned to this position after serving as the World Bank’s Managing Director and Chief Operating Officer. Sri Mulyani earned a Ph.D. and M.S. in economics from the University of Illinois, Urbana-Champaign, U.S.A.

Advancing ASEAN in the Digital Age 31 ADVANCING ASEAN IN THE DIGITAL AGE Yang Berhormat Dato’ Sri Mustapa bin Mohamed, Minister of International Trade and Industry, Ministry of International Trade and Industry, Malaysia

ASEAN turns fifty this year. middle-class currently at around This is something all Southeast 100 million, making ASEAN a Asians can be proud of. Besides very lucrative consumer market. the peace and stability the Our total trade posted nearly a regional grouping has provided, six-fold rise since the beginning the progress we have made of the ASEAN Free Trade through economic integration Agreement - from US$430 Within ASEAN, as well as political, security and billion in 1993 to US$2.55 trillion Malaysia is socio-cultural cooperation is in 2016. Intra-ASEAN trade also set to be at the considerable. surged by more than six-fold in the same period from US$82 forefront of the Today, half a century on, ASEAN billion to US$521.7 billion. digital economy is the 6th largest economy in and disruptive the world with a combined GDP While these achievements are technologies of US$2.55 trillion. Since 1993, commendable, we must not lose with our effort our average growth rate has sight of the challenges ahead to establish the been 4.7 percent with some – including coping with the ASEAN countries posting rates digital age. This agenda cannot Digital Free Trade exceeding 6 percent. With a simply be at the periphery of the Zone (DFTZ) – population of over 630 million ASEAN Economic Community the first of its people (65 percent of whom are (AEC) framework, as it would kind to promote below the age of 35), ASEAN is leave potential unfulfilled. cross border projected to rank as the fourth- The digital economy could ecommerce. largest economy in the world contribute towards making the by the year 2050. regional economic integration, bigger, better and closer. It has created a strong, growing

INTERNET USERS AND MOBILE SUBSCRIBERS IN ASEAN

3 ASEAN 10.2% 4 ASEAN 7.6%

CHINA 3 1 INDIA ASEAN 2 1 2 3

GLOBAL MOBILE SUBSCRIBERS ASEAN RANKED 4TH- BEHIND CHINA, INDIA AND THE UNITED STATES.

32 Advancing ASEAN in the Digital Age Yang Berhormat Dato’ Sri Mustapa bin Mohamed

ASEAN has a strong potential trade. It can only continue must be quicker, easier and to successfully embrace the to thrive if there is seamless cheaper. Automation is definitely digital age and ride on the wave data flows. Currently, there is a must. of technology. As a grouping, a trust deficit due to concerns ASEAN is ranked 3rd and has surrounding data privacy and It is important therefore for 10.2 percent global mobile security, not only in ASEAN but policy makers to come up with subscribers, behind China and also elsewhere. regulations and incentives India. Meanwhile, 7.6 percent that would encourage SMEs of global internet users are also A regional solution therefore to be part of this new reality. from ASEAN, behind China, is required to deal with this Disruptive technologies will India and the United States. problem, as barriers to such pose a challenge to SMEs data flows, be they within or primarily since they will alter The fact is clear – Southeast between countries, will only the way of doing business. Asia is the world’s fastest hinder the adoption of the However, if they are being growing internet region. digital economy in ASEAN. managed properly, disruptive According to Google, four An effective cooperation technologies could significantly million new users are expected framework on this matter will lower costs for SMEs, which in to come online every month certainly help boost the use of turn will increase their profit over the next three years, which online payments options and levels. could result in a user base of drive the growth of online sales. 480 million by 2020. It is not The growing consumer base in Within ASEAN, Malaysia is set only large and growing, but it is ASEAN will definitely provide to be at the forefront of the also predominantly young (70 numerous opportunities for digital economy and disruptive percent are below the age of Small and Medium Enterprises technologies with our effort to 40) and increasing middle class. (SMEs) in the areas of digital establish the Digital Free Trade economy. It is not rocket Zone (DFTZ) – the first of its This speaks volumes about the science that digitalisation will kind to promote cross border potential of internet consumers bring far-reaching impact on ecommerce. market, which could also SMEs – it will allow them to contribute to boosting trade access global markets for both A total of 1,500 local SMEs within the region. customers and suppliers. will be identified to be trained including through the Alibaba Such potential can only be We want to ensure the platform as we prepare them unlocked if we have necessary benefits of regional economic for this game-changer initiative. instruments in place, including integration will be inclusive, The establishment of DFTZ the online transaction and thus SMEs will play an is testament of Malaysia’s mechanism. We cannot turn a important role in ensuring that commitment to embrace the blind eye to the low penetration these benefits will trickle down digital economy. By 2025, we of payment mechanism – about to many. foresee US$65 billion worth of 150 million adults under the age goods will be moved through of 25 in ASEAN still do not have As such, it is imperative for DFTZ. It will double the growth a bank account. SMEs to continue developing rate of exports among SMEs their capabilities in transitioning and create 60,000 jobs by the E-commerce must be the way themselves into the digital age. same year. forward and it is set to be This will require an increased among the key drivers that will level of efficiency in their As we focus on the potential reshape the landscape of global operations – cross-border trade of digital economy consumers

Advancing ASEAN in the Digital Age 33 Yang Berhormat Dato’ Sri Mustapa bin Mohamed

within the region, we must not lose this is in line with the Malaysia economic gravity shifts towards sight on the need to create digital Education Blueprint which calls our side of the world. economy producers as well. for the encouraging of cognitive and higher order thinking, ASEAN is now a reality, Our workforce needs to be as well as embedding IT as a having evolved from a loose ready to adapt to this changing teaching and learning tool. organisation to a permanent landscape. They must be and stronger regional grouping. equipped with necessary skills Indeed, the road ahead for It has and will continue to deliver not only to survive, but thrive in ASEAN, including its embrace of peace, stability and progress, the digital age. the digital economy, will be long as well as inclusive growth for and arduous. Reforms—whether everyone in the region. There is a consensus that coding economic or administrative— will be the language of the future. are never easy. Moreover, we ASEAN countries therefore are faced with the challenge need to ensure that these skills of evening out development, are being taught from the early reducing inequality and forging age. We must prepare them for consensus on difficult issues the jobs of the future, some of across our diverse region. And which may not even exist yet at we need to continue pushing this stage! our envelope as we forge ahead into the era of digital age. For Malaysia, we take cognisant of this new reality and therefore But I am confident that with we will be introducing coding closer cooperation, as well as to the syllabuses of national mutual trust and respect, all schools. The preparation for challenges can be met even this is currently underway and as global geopolitical and

Dato’ Sri Mustapa Mohamed is the Minister of International Trade and Industry. He was the first Malaysian to hold two Ministerial portfolios at the same time, in Entrepreneur Development and Finance. He has also served as the Minister of Higher Education and Agriculture and Agro-Based Industry.

34 Advancing ASEAN in the Digital Age Digital Revolution: A MomeNtum for Asean Economic Cooperation and InternatiOnal Integration in the Forthcoming Years H.E. Minister Tran Tuan Anh, Minister of Industry and Trade, Ministry of Industry and Trade, Viet Nam

ASEAN has achieved of the ASEAN Trade in Goods remarkable success in economic Agreement (ATIGA). As a result, cooperation and international by the end of 2016, ASEAN integration since the 1990s. In eliminated import duties for fact, ASEAN has become an 96.01 percent of total tariff lines. important part of the world with Regarding the liberalization its own global competitiveness. of trade in services, within the ...it is high The fast integration and ASEAN Framework Agreement time ASEAN economic cooperation of on Services (AFAS), ASEAN has Governments ASEAN nowadays calls for been working on the signing, a digital revolution, though ratifying and implementing embark on re- the region is still facing 10 commitment packages on education and several challenges in terms of trade in services, 8 commitment capacity-building infrastructure, human resource packages on financial services, policies for and technology. and 10 commitment packages the workforce on air transport services under to acquire the Achievements in economic AFAS. cooperation and international knowledge and integration As regards international skills needed in a Consisting of 10 member states, integration, ASEAN signed Free digital age. with 50 years of development, Trade Agreements (FTA) with 6 ASEAN is now the 6th largest partners, namely China, Japan, economy in the world with a the Republic of Korea, India, combined GDP of more than US$ Australia and New Zealand. In 2.55 trillion in 2016. With steady addition, ASEAN has recently growth momentum, ASEAN is concluded the negotiations for expected to become the 4th the ASEAN-Hong Kong, China largest economy in the world FTA (AHKFTA) and is now in the by 2050. The establishment of process of negotiating Regional ASEAN Economic Community Comprehensive Economic (AEC) in 2015 has proven Partnership Agreement (RCEP). the synergy and the strong determination to foster regional Active integration into the economic integration of the international economy has member states. opened up great opportunities for business communities to Concerning regional integration, access and expand their markets, efforts have been made to improve domestic productivity promote liberalization of and increase the competitiveness trade in goods, on the basis of goods and services.

Advancing ASEAN in the Digital Age 35 H.E. TRAN TUAN ANH

With deepening economic comparison with other peers into consideration all these cooperation and integration, it is in the world. Entering the aforementioned challenges, we believed that the implementation digital age, the region will have need to work towards several of a comprehensive digital agenda to face threats from cyber- solutions. could possibly add US$1 trillion to attacks and have to ensure the region’s GDP over the next 10 data security, especially when Firstly, it is high time ASEAN years. Digital revolution will also data becomes common data, Governments embark on re- help build a stronger, faster and and the broadband network education and capacity-building more integrated economy. coverage is much wider. policies for the workforce to acquire the knowledge and ASEAN into digital age Moreover, the Industry 4.0 is skills needed in a digital age. ASEAN has its own strengths about a revolution in substance and opportunities to move or depth, not about an Secondly, ASEAN needs to forward to the digital age. expansion of scale or volume. strengthen local and regional ASEAN is the 3rd most Key to open the 4th generation digital economy as there are populous economy in the world door are technologies and now only a few countries in the with a population of 630 million innovations, the factors that region that have developed people, and more than half of are not part of current ASEAN’s digital economy. In order to be them are Internet users. There advantages. Mostly they must successful in building digital is no doubt that the digital be imported from the west. economy, we need to develop sector is drumming up a lot of This dependency leads to a collaborative innovations so interest across the region. requirement, and also a vast as to meet the expectations of difficulty, in a timely manner, digitally empowered customers. The advantages of ASEAN lie for the region to adjust its not only in population but also living practice and consuming Thirdly, in order to truly step in its several well-developed custom of the people, into a digital revolution, ASEAN IT clusters being in place especially in countryside areas. should foster e-commerce across the region. Attracting On the demand side, the ability as well as financial services. innovation and investment in to adapt with and to afford new We should invest more in ICT new technology, the clusters highly technological facilities infrastructure to make these have leveled up worker and utilities will determine the services more appealing to productivity and brought in actual need for 4.0 industry ASEAN citizens. Only then new digital industries. modernization. On the supply could we increase the usage of side, if a worker wants to join those services in both public Moreover, in the next few years, the 4th generation, he needs to and private sectors. the region is expected to have upgrade his skills, so as to meet embraced “Industry 4.0”, which the new standards of the wave. Finally, we need to ensure data will help enhance efficiency, level This is never an easy task for security and cyber security, up flexibility and actualize great any individual, not to mention a not only on national scale but customization in production. nation as a member of a group. also across the region through There is hardly any shortcut for introducing privacy laws in some Nevertheless, there remains an economy to move fast on member states and setting up a a number of challenges for this front. regional organization that fights ASEAN member states. By and against cybercrimes. large, ASEAN is still at lower A call for action levels of technology, capital For the region to be propelled Actions of Viet Nam and high-quality workforce in into the digital age, taking In preparation for the digital

36 Advancing ASEAN in the Digital Age H.E. TRAN TUAN ANH

age, Viet Nam has started to There is still a long journey embrace “Industry 4.0”. In May ahead for ASEAN to actually 2017, Vietnamese Prime Minister prove its important role in Nguyen Xuan Phuc issued Order the digital age. In order to No 16/CT-TTg on strengthening successfully acquire the digital access to the 4th Industrial advantages, the region should Revolution. Thereby he directed build a comprehensive agenda the nation to concentrate on ICT and officially start the digital infrastructure development and revolution. The outcomes of encouraged start-ups with digital revolution will propel the innovative technology. region’s economic cooperation and international integration to Viet Nam has also been a higher level of development. developing “smart cities” across This can only be done by the country. In particular, many concerted ASEAN’s efforts and large cities and provinces are synergy building, like what the moving forward with plans to region has been doing for 50 build smart cities, such as Ha years now. Noi, Can Tho, Da Nang and Binh Duong. In May 2017, Viet Nam installed its first smart city communication platform in Ho Chi Minh City. The city is expected to become the “Silicon Valley of the Pacific”.

***

H.E. Mr. Tran Tuan Anh was born in 1964 in Quang Ngai, Viet Nam. He holds a Ph.D in Economics. He is now Minister of Industry and Trade of Viet Nam, Member of the Central Committee of the Communist Party (12th tenure) and Deputy to the National Assembly (14th tenure).

Advancing ASEAN in the Digital Age 37 Opportunities arising from the Fourth Industrial Revolution The Honourable Pehin Dato Lim Jock Seng, Second Minister of Foreign Affairs and Trade, Ministry of Foreign Affairs and Trade, Brunei

Following the establishment on STEM disciplines (Science, of the ASEAN Economic Technology, Engineering and Community at the end of 2015, Mathematics) should be placed ASEAN is now embarking on a within school curriculums. new 10-year Vision under the In addition, investment in ASEAN Economic Community human capital development and (AEC) Blueprint 2025, where reskilling, to ensure digital-literacy ASEAN should the emphasis is very much and technology competency, is also continue to on making our economies also important for the region to actively engage more innovative, dynamic and continuously be able to adapt. competitive, in order to move its partners, and higher up the global value chain. Aside from addressing skill sets strengthen With the world economy now of our labour market, ASEAN’s cooperation in undergoing a transformational success in the digital age will the development phase brought about by rapid also depend on the ability of of innovation and technological and scientific its entrepreneurs, particularly technology. In advancements, this new AEC the Micro, Small and Medium 2025 Vision could not have Enterprises (MSMEs), in reaping this respect, the come at a more crucial time. the opportunities from 4IR. support from The rise of megatrends and As such, strategies must be in its Dialogue new technologies, in the era of place to ensure an environment Partners who are the Fourth Industrial Revolution conducive for the growth of steps ahead in (4IR), necessitates a regional MSMEs, such as by promoting digital-readiness, and collective response. competition, flexible labour policies, support for upskilling is very much With over 50 percent of its and access to affordable and valued. population under the age of quality infrastructure. 30 years old, ASEAN has the potential to leap ASEAN has already laid the frog into the digital age, but foundations in preparing for it needs to focus its strategies the necessary environment that towards increasing the region’s supports technological progress connectivity, competitiveness including the 4IR. This is and productivity. Here, illustrated in the AEC Blueprint addressing the skills needs of 2025 and its strategic measures, the digital economy for ASEAN where in the context of creating is first and foremost, one of a connected, competitive, the fundamental requirements innovative and dynamic ASEAN, towards ensuring that our among others, by: region is digital-ready. Emphasis

38 Advancing ASEAN in the Digital Age The Honourable Pehin Dato Lim Jock Seng

• Ensuring Productivity- Leaders in November 2000, with that other regional groupings Driven Growth, innovation, a view to develop an ASEAN whose members include ASEAN research and development, and Agreement on E-Commerce Member States, have also put technology commercialization: to facilitate cross-border this at the forefront of their through promotion of strategic E-Commerce transactions in agenda. partnerships among the ASEAN. academia, research institutions For example, the Asia Pacific and the private sector towards As ASEAN pursues its economic Economic Cooperation (APEC) developing capabilities and integration agenda, it is crucial is developing a Roadmap on the creating an effective channel that we continue to deepen Internet and the Digital for technology transfer and our understanding of the Economy that is targeted for commercialisation; strengthening challenges and implications completion in November 2017. the competitiveness of Micro, arising from these transformative This Roadmap is expected to Small and Medium Enterprises and potentially disruptive be a work program that brings (MSMEs) through the application technologies, so that we can together the different cross- of Science and Technology tools, fully harness the opportunities cutting APEC initiatives which and placing greater emphasis on of the digital economy. promote economic growth entrepreneurship and development through the Internet and Digital of incubator programmes; In this respect, at the 30th Economy. This Roadmap is ASEAN Summit that was held also expected to encourage • Strengthening Intellectual this year on 29 April 2017 cooperation across APEC fora Property (IP) Rights Cooperation: in Manila, ASEAN Leaders and sub-fora, and will build through strengthened IP offices recognized the need for ASEAN an open and cooperative and enhancement of regional to be well prepared and able environment. mechanisms to promote asset to maximize the opportunities creation and commercialisation, from 4IR, so as to foster the Similarly, in the Asia-Europe including the development of region’s economic growth, and Meeting (ASEM), the 7th supporting schemes for MSMEs promote inclusive and equitable Economic Ministers Meeting and creative industry sectors; economic development. At that was held on 21st – 22nd the 49th ASEAN Economic September 2017, agreed to • Developing Information and Ministers Meeting that was the “Seoul Initiative on the Communication Technology (ICT): held on 7th September 2017, Fourth Industrial Revolution”, through further utilisation and Ministers agreed to task the which essentially recognizes coordination of ICT for economic ASEAN Secretariat to conduct the importance of ASEM-wide development and promoting this study to assess ASEAN’s cooperation in order to fully digital trade in ASEAN, and preparedness. understand the implications of support for ICT innovations and the 4IR, and to realize maximum entrepreneurship as well as new At the same time, ASEAN should mutual benefits and to achieve technological developments also continue to actively engage sustainable and inclusive such as Smart City, and Big Data its partners, and strengthen prosperity. An ASEM Conference and Analytics; cooperation in the development to discuss the economic impact of innovation and technology. In of 4IR to ASEM Economies will • E-Commerce: this respect, the support from its thus be held in Seoul in 2018. through intensified cooperation Dialogue Partners who are steps on E-Commerce, building ahead in digital-readiness, is As such, these efforts will on the e-ASEAN Framework very much valued. At the same also complement the work Agreement adopted by ASEAN time, it is also worth noting being pursued in ASEAN, and

Advancing ASEAN in the Digital Age 39 The Honourable Pehin Dato Lim Jock Seng

hopefully contribute towards greater consensus-building on policy responses from each ASEAN Member State, that are necessary towards the creation of an environment in the ASEAN Economic Community which will be conducive for the development of the digital economy.

The Honourable Pehin Dato Lim Jock Seng was appointed as the Second Minister of Foreign Affairs and Trade in May 2005. Since 2015, he is also a Minister at the Prime Minister’s Office. He studied Sociology/Social Anthropology at the University of Swansea and has a Master of Philosophy in Social Anthropology from the London School of Economics.

40 Advancing ASEAN in the Digital Age Towards a Digitally-Enabled, Innovative, Inclusive and Integrated ASEAN Community H.E. Dr. Lim Hong Hin, Deputy Secretary-General of ASEAN

The ASEAN Community has healthcare are delivered to how come to face with the reality of workers learn and get affected the digital age. Business models by new production processes. and ways of lives the world ASEAN’s resilience depends on over are being altered by the its agility in dealing with such transformative and expansive changes. Critical to this is the power of digital technologies. awareness of leaders, including The right policy The widening reach of digital policymakers and thought mix would lead technologies has overcome the leaders, of how the digital age to an open, constraints of physical distance, is changing the way we live, opening markets for businesses shaping our future. secure, and as well as expanding the choices enabling digital of product and services for Electronic commerce (e-Commerce) environment, consumers. is often the first thing that which would springs to mind when we discuss meet the fast To stay ahead of the game, the digital age. Conversations changing need of ASEAN must embrace the often quickly go into how to digital age and the era of ensure market actors, big and the community technologies. To an extent, such small, benefit from this new and keep in step recognition has been reflected commercial platform, at the with international in the AEC Blueprint 2025. As same time ensuring that the developments. ASEAN strives to transcend from interests of buyers, sellers and a production-driven economy regulators are safeguarded. to a productivity-driven Digitisation itself goes beyond economy, dedicated forward- e-Commerce, as it enables looking elements on electronic new approaches to deliver commerce and technology non-commercial services and commercialisation can be found organise production activities side by side in the Blueprint that would ultimately determine with the softer infrastructures a country’s competitiveness in for development, from good the global economy. regulatory practice to sustainable economic development and In practice, similar to previous global megatrends. industrial revolutions, the digital age brings about both positive The impact of digitisation will economic transformation as go beyond economics, affecting well as polarising effects. Slower different aspects of our lives technological catch-up by the from government to governance, less developed economies from how education and will result in the digital divide

Advancing ASEAN in the Digital Age 41 H.E. DR. LIM HONG HIN

among economies, further 2025, which was adopted by and use of electronic facilities exacerbating the income and the ASEAN Economic Ministers such as e-payment among development gap. This is where in September 2017. The Work businesses including MSMEs, as the even-hand of informed Programme recognises the well as educational and training and responsive policymaking need for a holistic approach to strategies on ‘smart use’ of finds its relevance. The digital e-Commerce in the region and technology for consumers. transformation will leave few covers multi-sectoral initiatives ASEAN recognises that beyond policy areas untouched and in the areas of infrastructure, delivering efficiency gains, the a holistic approach is needed education and technology digital economy should be to anticipate the effects of competency, consumer protection, harnessed to promote inclusive one policy area (or its lack of) modernisation of the legal growth towards a people- on another, whether or not framework, security of electronic centered and people-oriented intended. transactions, payment systems, ASEAN. To this end, the region trade facilitation, competition, would benefit from appropriate ASEAN, with a combined GDP logistics, and e-commerce policy support. of US$2.55 trillion and a total framework. population of 630 million in Achieving digital-ready policies 2016, is a fertile ground for a Beyond the specific ASEAN work requires closing the gap digital coming of age, albeit on e-Commerce, other relevant between “Industry 4.0” or unevenly across membership. work is also being undertaken the 4th industrial revolution, Nestled in the Asia-Pacific in parallel. For example, digital which combines the physical, region – the world’s largest retail innovation is included as one digital, and biological worlds e-commerce market— ASEAN of the strategies under Master through technologies, and is well-positioned to cultivate Plan on Connectivity 2025, traditional policy making. the opportunities presented which covers key initiatives The ‘right’ policy mix should by the digital economy. It is from enhancing the micro, aim at creating an enabling forecasted that by 2030 digital small, and medium enterprises environment for innovators, technologies could potentially (MSMEs) technology platform start-ups, researchers, and boost the region’s economy by to establishing an ASEAN businesses to incubate, develop, US$220 billion to US$625 billion open data network. Similarly, and commercialise their annually. The question is how in the area of competition, products and services in the to realise this potential as we work has been undertaken to digital age as well as manage a work towards a digitally-ready build awareness and foster new dimension of digital risks. ASEAN. greater understanding of the The scale of transformation competition and regulatory can be tremendous given The recent establishment challenges arising from the differing and interrelated of the ASEAN Coordinating e-Commerce. policy areas affected by digital Committee on Electronic transformation, from intellectual Commerce will help promote, To address the key challenge property rights, cross-border coordinate and enhance of digital divide in the region, a data transfer, consumer efforts by various ASEAN series of strategic measures has protection, customs regulations, sectoral bodies to promote been incorporated in the ASEAN to taxation. the growth e-Commerce in ICT Masterplan 2020, including ASEAN. It will also give impetus enhancing internet broadband The right policy mix would lead to the implementation of the penetration and affordability to an open, secure, and enabling ASEAN Work Programme on in ASEAN, raising awareness digital environment, which Electronic Commerce 2017- and the uptake of digital trade would meet the fast changing

42 Advancing ASEAN in the Digital Age H.E. DR. LIM HONG HIN

need of the community and footing as it rides the currents keep in step with international of the digital age well into its developments. In the process, future as a deeply integrated collaboration and coordination economic region. Ultimately it is between relevant agencies and in ASEAN’s interest to embrace stakeholders are key. Given digital economy for the well- the fast changing nature of the being of its people as well as digital environment, policymakers the resilience and continued need to engage with those at relevance of the region. the fore of the phenomenon including the private sector, industry experts and consumer or user communities. Regional platform should also be utilised for greater exchange of ideas, best practices and experiences, and be leveraged on to further deepen cooperation including through appropriate regulatory cooperation.

The digital transformation is here to stay. While the region will not transform itself over night, gradual steps to embrace the digital era need to be put in motion. A digital-ready ASEAN would therefore need to stay agile and be forward looking with its policies and processes to maintain an even

Lim Hong Hin is currently serving his second term as the Deputy Secretary-General of ASEAN for ASEAN Economic Community to support ASEAN Member States’ effort to create a deeply integrated and highly cohesive ASEAN economy which will engender a more sustainable and inclusive economic growth for its people.

Advancing ASEAN in the Digital Age 43 KNOWLEDGE PARTNER

Driving ASEAN’s talent transformation through technology

The digital revolution has skills relevance looms large. the region, but also businesses touched every part of our lives According to the International themselves – a growing number - economic, personal as well as Labour Organisation1 (ILO), of new jobs created by the social. But while exponential in Cambodia, where garment same technological revolution technologies can create production dominates the in industries such as healthcare, unprecedented economic manufacturing sector, half banking, finance, and insurance, opportunities, it is people, skilled a million sewing machine remain unfilled for the lack of and capable of participating operators are at risk of having skills needed. While this is not a in this revolution, who will their jobs automated. A problem unique to ASEAN – the convert these opportunities into million shop sales assistants World Economic Forum reports economic reality. in Thailand, 1.7 million office that more than 40 percent clerks in Indonesia and a million of employers globally report How will ASEAN businesses call-centre operators in the talent shortages3 – it is one that and policy makers position Philippines are also at risk of businesses and policy makers the regional workforce to being replaced by machines2. need to address urgently. harness the power of advanced technologies in the long term? The ILO estimates that 56 The new match: Human and percent of all employment in machine The prospects of ASEAN’s Cambodia, Indonesia, Thailand, The great technological workforce – and by extension, Vietnam and the Philippines is breakthroughs of the past economic growth in the region at risk of displacement due to — electricity, railways and – are under threat. Even as technology over the next decade IT — boosted productivity new technologies, notably or two. These countries account significantly, but did not create automation and Artificial for 80 percent of the region’s entirely new workforces. By Intelligence (AI), propel workforce and having more than contrast, advanced technologies innovation in businesses and half at risk of job displacement such as AI are redefining the the broader economy, they would be a significant blow to relationship between humans are increasingly replacing low economic growth. and machines — and it is one and middle-skilled jobs in the that can lead to net employment region’s traditional industries. The challenges of job losses gain and meaningful, more For the existing – and future and shifts are evident not only productive jobs. AI has the power – workforce, the question of in the employment market in to transform the workforce of

1 Jae-Hee Chang and Phu Huynh, Asean in Transformation, The future of jobs at risk of automation, International Labour Organisation, July 2016, http://www.ilo.org/public/english/dialogue/actemp/downloads/publications/2016/asean_in_ transf_2016_r2_future.pdf 2 The end of the line, The Economist, Feb 2016, https://www.economist.com/news/international/21690041-call-cen- tres-have-created-millions-good-jobs-emerging-world-technology-threatens 3 Unlocking US$100 Trillion for Business and Society from Digital Transformation, World Economic Forum, Jan 2017: https:// www.accenture.com/t20170411T120304Z__w__/us-en/_acnmedia/Accenture/Conversion-Assets/WEF/PDF/Accenture-DTI- executive-summary.pdf

44 Advancing ASEAN in the Digital Age ACCENTURE

the future, not simply replace and agriculture precision these senior employees pass on today’s jobs. Accenture’s system, the drones transmit this valuable institutional knowledge research reveals that AI could data to mobile devices, where to new talent rising through the increase Singapore’s labour it is analysed by intelligent ranks. productivity by 41 percent decision support systems so by 2035, the highest among interventions by workers are However, Accenture’s Digital developed economies, and faster and more precise. Performance Index analysis nearly double its annual in Malaysia found that just 30 economic growth rate over the Jobs freed up by automation percent of companies have same period, underlining the are not lost. Employees shift made the effort to improve their combined strength of human to fill new roles created by employees’ digital skills through and machine4. technology. At Accenture, formal training9. This lack of employees freed-up by the action is preventing companies Across ASEAN, companies are automation of 17,000 back office from unlocking the economic already taking advantage of new jobs were reskilled and now potential that can be brought technologies to complement fill much-needed higher-value about by new technologies. and enhance the skills and roles within data and analytics7. ability of existing workforces. They also supervise machines In Malaysia, for example, Sime that perform simpler tasks. AI Agile workforce champions Darby Plantation supports helped us streamline processes According to the World field employees with the Sime while offering our employees Economic Forum (WEF), four Darby Digital Supervision the opportunity to take up more in five executives agree that (SDDS) system5, which makes complex, satisfying work. the future workforce will be use of GPS-enabled handheld structured in project groups devices to allow real time, The reality is that businesses rather than by job function. online reporting from the field. need to invest not only in new This calls for a different kind This technology improves the technologies but also in helping of employee – one that is transparency of field harvesting workers transition successfully adaptable, tech-savvy, functions activities and removes barriers to new jobs by equipping effectively in teams, and learns to communication between them with new, relevant skills. on the go. Innovative companies estate managers, assistants and Notably, today’s business that become agile workforce supervisors, helping them make leaders must be mindful of champions will be better better and faster decisions. the need to reskill at the top positioned to unlock greater of their organisations as well. economic potential in the future. In Indonesia6, meanwhile, drones Several companies in Malaysia at a paper and pulp plantation are experimenting with ‘reverse Eighty percent of 3,100 IT and record information on the mentoring’, roping in younger business executives we surveyed ground, previously painstakingly employees to mentor senior globally believe that these flexible collected by human workers. leadership, including CEOs, on and fluid workers will be their Part of a connected forestry digital trends8. At the same time, most valuable employees in the

4 http://www.nationmultimedia.com/detail/Startup_and_IT/30321389 5 Innovating for the future, Sime Darby Annual Report 2016, P27 and 78, http://www.simedarby.com/clients/simedar- by_group/assets/contentMS/img/template/editor/Sime%20Darby%20Annual%20Report%202016.pdf 6 Joy Tang, “RGE April Group benefits from connected forestry and agriculture system,” TechTrade Asia, April 2016, http://www.techtradeasia.info/2016/04/rge-april-group-benefits-from-connected.html 7 Nicky Cappella, “Accenture automates 17,000 jobs without layoffs,” The Stack, January 2017, https://thestack.com/big- data/2017/01/19/accenture-automates-17000-jobs-without-layoffs/ 8 “Learning from young mentors,” New Straits Times, October 2015, https://www.nst.com.my/news/2015/10/learning- young-mentors 9 Lim Yin Sern et al., “Malaysia’s Digital Performance Index: Faster Than Ever” https://www.accenture.com/MalaysiaDPI

Advancing ASEAN in the Digital Age 45 ACCENTURE

digital age. Leading employers exactly what the engineers were generation of tech-savvy talent, today are prioritising breadth seeing, and to guide them through prizes flexibility, eschew hierarchy, of skills and ability to ‘quickly the job. and are keen to shape their own learn’ and ‘shift gears’ over ‘deep career paths. They plug into expertise for the specialised task Accenture Connected Learning12 technology platforms to secure at hand’10. combines classroom training with short-term gigs on a part-time, a digital learning environment that freelance or ad hoc basis. Our Given the rapid pace of innovation, connects a company’s employees research13 shows that this freelance the skills needed by such a with relevant professional content trend is strongest in emerging workforce are a moving target. and experts from both inside and markets where 86 percent said The key to turning your workforce outside Accenture. Companies they were interested in freelancing into an agile one is continuous can develop highly specialised compared to 59 percent in upskilling. One study showed that skills at scale and respond to developed countries. On-demand companies that invest US$1,500 changing business requirements labour platforms are where gig annually in each employee would almost as quickly as they workers meet businesses. Flexing see profit margins that are 24 occur. Employees enrich their It links over 1,600 organizations in percent higher on average than professional capabilities, develop ASEAN and India, and has curated those that don’t. What can the critical skills needed to stay over 50,000 professionals for its companies do to become agile relevant, and enhance their own corporate clients. Thai platform workforce champions? career opportunities. Fastwork14, meanwhile, matches 4,000 freelancers from 50 Provide opportunities for Adopt a broader definition of different specialisations to their continuous learning: Connected workforce: The definition of clients. learning provides employers workforce must be broadened to with readily available, relatively include a combination of internal Shape the talent pipeline at its inexpensive, up-to-date tools, and and external talent – full-timers, source: To secure tomorrow’s provides employees with anytime, freelancers and contractors – talent, business and policy leaders anywhere learning. A wide range of assembled into project teams must reach back to the source of digital tools from MOOCs (massive and disbanded as needed. For the talent pipeline: the primary and open online courses) to wearable businesses, a more flexible secondary schools, specialised technologies can be paired to suit workforce model means being vocational institutions, and different preferences and learning able to match demand and universities that are incubating styles. Companies in the region supply of skills to meet needs as the next generation of employees. are already experimenting with they arise, plug gaps, and speed National curricula should produce this. During a four-month trial, products to market. students with skills relevant ten Singapore Power11 engineers to the digital age, but who are conducted video conferences with Companies also need to rethink also capable of critical thinking, their supervisors via wearables how they access talent in the problem solving and creativity that allowed supervisors to see digital economy. Millennials, a – the ‘human skills’ that cannot

10 Adrian Lim, Allan Oung, Kwan Chee Kin and Fong Siew Keng, “People First: the Primacy of People in a Digital Age, Malaysian Perspective,” Accenture, p. 30, 2016, https://www.accenture.com/t20161123T040806Z__w__/sg-en/_acn- media/PDF-37/Accenture-TechVision-2016-Malaysian-Perspective.pdf 11 http://www.straitstimes.com/singapore/singapore-power-turns-to-wearable-technology-to-boost-productivity 12 Stacey Jones and Sam Hyland, “Accenture Invests More than US$840 Million in Employee Learning and Professional Development,” Business Wire, January 2016, http://www.businesswire.com/news/home/20160113005143/en/Accen- ture-Invests-US840-Million-Employee-Learning-Professional 13 Ellyn Shook and Mark Knickrehm, “Harnessing Revolution: Creating the Future Workforce,” Accenture, 2017, https:// www.accenture.com/us-en/insight-future-workforce-today 14 Christina Morales, “How This Freelancing Platform is Changing the Way Thai People Work,” Inc. Southeast Asia, May 2017, http://inc-asean.com/editor-picks/freelancing-platform-changinhg-way-thai-people-work/

46 Advancing ASEAN in the Digital Age ACCENTURE

be automated or codified. By makers need to put their people constant disruption. And they 2020, WEF anticipates a growing first, at the centre of change, and must accelerate action, while demand for cognitive abilities ensure that they are relevant, opportunities of the digital age (52 percent), systems skills (42 adaptable and able to rise to the remain within reach, or risk percent) and complex problem- challenge of the digital revolution. rendering workers - and their solving skills (40 percent) as part businesses - redundant. of core skill sets of jobs15. To do this, business will need to become digital on the inside, and ASEAN is in the enviable position In summary, agile workforce they will need to do this rapidly as of building on a large and young champions are those companies human and machine interaction workforce that is already highly that focus on creating a new, dramatically alters so many engaged with digital technologies. modern workforce — specialized, aspects of work. This will mean What is needed is for the region’s flexible, augmented and adaptive, upskilling internal employees business leaders and policy makers the kind of workforce required to and creating opportunities for to move together, with renewed gain a competitive advantage in greater collaboration. It will mean purpose and focus, and quickly existing and new markets16. combining internal employees and decisively equip workplaces with external talent to form highly and workforces for the digital Put people first targeted and effective project age. If they are successful, the There is little doubt that digital teams. And it will mean taking region will have a valuable pool technology has the potential an active hand in developing of talent that will not only flourish to improve productivity, and tomorrow’s talent. in a future augmented by new unlock new and immense value technologies, but do so in a way for the region’s businesses and Taking these steps is critical that drives economic prosperity economies. But it is people who to developing an organisation for the region as a whole. will be key to harnessing this that is agile, able to change potential. Businesses and policy course, and that will thrive amid

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 425,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

About the authors Alison Kennedy is a managing director for Accenture Strategy in ASEAN, where she works with executive teams to drive strategy initiatives that transform their organizations. Ms. Kennedy has specific functional experience and specialization in merger and acquisitions (both pre- and post-merger activities), geographic expansion, growth and innovation, and business and organizational design.

Azwan Baharuddin is the country managing director for Accenture in Malaysia. He is passionate to help Malaysia achieve its digital aspirations and has focused the company to be innovation-led in building a future-ready nation. With an economics background and a personal passion in technology, Azwan has spent over 20 years implementing and managing IT projects around the world.

15 Ellyn Shook and Mark Knickrehm, “Harnessing Revolution: Creating the Future Workforce,” Accenture, 2017, https:// www.accenture.com/us-en/insight-future-workforce-today 16 https://www.accenture.com/t20170928T072130Z__w__/us-en/_acnmedia/PDF-62/Accenture-Leading-in-the-New- POV.pdf#zoom=50

Advancing ASEAN in the Digital Age 47 Harnessing ASEAN’s Potential in Digital Revolution H.E. Ong Keng Yong, Advisor, CIMB ASEAN Research Institute and Executive Deputy Chairman, S. Rajaratnam School of International Studies

The ASEAN Economic more important is that ASEAN is Community (AEC) envisioned predicted to have the potential a deeply integrated and highly to become one of the top five cohesive regional economy, digital economies in the world which involves strengthening by 2025. the overall competitiveness of ASEAN by means of fostering ASEAN’s strong and vibrant Government regional inclusive growth economy is one of the support is also and development. Part of fundamentals that puts the important for the integration process is to region in the trajectory to recognise Information and become a global digital digital content Communication Technology leader. It is projected that firms to thrive. (ICT) as a key driver of ASEAN economy will grow six This could be ASEAN’s economic and social percent annually over the next in the form of transformation. decade which is an indicator of providing tax rising income level and more breaks and To survive the global competition, disposable cash. This economic ASEAN needs to promote trend will open avenues for a subsidies for digital economy in the region. strong consumption of digital start-ups that are This goal is supported by the services by a large and youthful engaged in the current ASEAN ICT Masterplan population in the region. digital content (AIM) 2020, which focuses on Favourable demographics industry. the adoption of sustainable and is also ASEAN’s sweet spot environmentally friendly ICT. for the growth of its digital However, promoting digital economy. It is estimated that innovation in ASEAN requires 94 percent of its population are policy approaches that are literate and over 50 percent designed to reap the benefits are under the age of 30 years and address the challenges of old. This group of people are digital economy in the region. technologically savvy who participate actively for the Currently, the ASEAN digital growth of digital economy by economy generates approximately means of using the Internet. US$150 billion in revenues per year. According to an ASEAN ICT investment American global consulting firm, amounted to US$100 billion connectivity and online services in 2014, which is presently account for around 40 percent growing at more than 15 percent of overall revenues in ASEAN annually. The growth of ICT digital economy. What is even investment could be attributed

48 Advancing ASEAN in the Digital Age H.E. ONG KENG YONG

to the continuous efforts of online purchase compared to to conduct market analysis and governments across the region the global average. monitor the progress of digital to build ICT infrastructure. innovation in the region. Furthermore, the ongoing Appropriate policy measures implementation of AEC could should be implemented to E-commerce plays a key role in further boost the growth of harness the full benefits of the facilitating both cross-border digital economy in the region, digital economy in ASEAN. trade and foreign investment. especially when its policy goals These policies must be geared ASEAN countries are gearing are centred towards becoming towards assisting ASEAN up to this trend, as seen by the a single market with free flow member countries to collectively rise of regional e-commerce of goods, services, labour, benefit from the movement of platforms such as Lazada and and capital, in which digital this technology wave. One of Alibaba’s trade platform across technology has an important the policy measures that should Malaysia, Thailand and role to play. be implemented is to promote Indonesia. Such facilities can digital literacy that could be enable ASEAN to deliver on the However, ASEAN’s path to done through improving the potential of global e-commerce. being an inclusive digital educational curriculum. This economy is not without its should provide the students In terms of legal protection of challenges. Limited broadband with working knowledge of intellectual property, ASEAN still access in rural areas is a major computers that equip them has a long way to go. According challenge. A large segment with the right tools to perform to the 2015 International of the population, especially the functions of Internet. There Intellectual Property or IP Index, in countries like Indonesia, should also be ICT training to Singapore is ranked at 25.38 out Thailand, the Philippines and help increase the productivity of of 30, due to the strict IP laws it Viet Nam, live in rural areas the workforce. has in place as well as effective where Internet connectivity enforcement of IP rights, remains relatively poor. It is also necessary to support including action against online digital innovation that will piracy and prevention of A large number of consumers help to move up the economic copyright infringement. in the region still lack access to value chain of ASEAN. For proper banking facilities, limiting example, integrating technology Malaysia scored an average 14.62 their ability to make payments sensors and devices into in the IP Index. While Malaysia online and hinders the growth equipment and machinery will has increased its enforcement of the sector. According to the ramp up the productivity of activities to curb online piracy World Bank’s 2014 Global Findex the manufacturing sector by and amended its copyright law database, only 36 percent of the increase of value-added to include penalties for unlawful adults in Indonesia have bank activities in the production Web hosting, streaming and accounts. Even among those process. Government support is linking, incidence of piracy is high. who have access to banking also important for digital content services such as credit and firms to thrive. This could be Indonesia scored 8.61 on the IP debit cards, there is a reluctance in the form of providing tax Index, mainly due to software to conduct transactions and breaks and subsidies for start- piracy levels and lack of stiff share their financial details ups that are engaged in the penalties for infringement. online. Except for Singaporeans, digital content industry. Some Thailand and Viet Nam were ASEAN citizens are 10-30 experts have mooted the idea placed below Indonesia because percent more reluctant to share of a Digital Economy Promotion of various reasons, principally their financial information for an Board in ASEAN, which is tasked weak protection of IPs.

Advancing ASEAN in the Digital Age 49 H.E. ONG KENG YONG

Until policy makers in ASEAN come together and put out a comprehensive plan to tap into the digital economy, the various challenges are likely to go unaddressed. ASEAN has a winning ticket in digital development and member states should rally to cash the benefits. An updated ASEAN legal framework is the first step.

Ong Keng Yong is Executive Deputy Chairman of the S. Rajaratnam School of International Studies and ASEAN Secretary-General (2003-2007). During his term as ASEAN Secretary-General, he campaigned for ASEAN’s increased regional integration. He led the ASEAN Secretariat to facilitate the early adoption of the blueprint for ASEAN economic integration which laid the foundation for the establishment of the ASEAN Economic Community in 2015. Ambassador Ong is concurrently Ambassador-at-Large at the Singapore Ministry of Foreign Affairs, non-resident High Commissioner to Pakistan and non-resident Ambassador to Iran.

50 Advancing ASEAN in the Digital Age muddling through is not muddle-headed: asean’s march into the digital economy

Tan Sri Andrew Sheng, Honorary Advisor, CIMB ASEAN Research Institute and Distinguished Fellow of Asia Global Institute, The University of Hong Kong

Those of us who witnessed the the younger countries (Cambodia, founding of the Association Myanmar, Laos) are growing over of South East Asian Nations 7 percent per annum, whereas the (ASEAN) in August 1967 could members with over 100 million not have imagined how much population (Indonesia, Philippines was achieved in the last 50 and Viet Nam) are all growing 5-6 years. ASEAN was born literally percent. out of the ashes of colonialism and the Viet Nam War. It started The ASEAN+3 (China plus Digital as a security pact, but gradually Hong Kong, Japan and South transformation evolved into an economic and Korea) grouping is expected will not only financial community that is to grow around 5 percent per change our not yet a cultural common, annum in 2017-8, buoyed by consumption mainly because of its celebrated domestic consumption, despite patterns, but also diversity. some protectionist headwinds. This is almost double that of our production Today, ASEAN comprises 10 the advanced countries and through the countries, covering a land area emerging markets in Latin Internet of of 4.4 million square kilometres, America, Africa and Middle East. Things (IoT), and 3 percent of global total, with Despite regional tensions and even governance over 630 million population rivalries, ASEAN remains the models. or just under 9 percent of the pivot to maintain balance, cool world population. Its combined heads and a zone of peace and nominal GDP is already over stability. US$2.55 trillion and if counted as a single entity, it would rank Today, ASEAN plus China’s 6th in the world, behind the share of global trade already USA, China, Japan, India and exceeds that of the United Germany. States, as more and more ASEAN members accelerate The region is geographically blessed, their trade linkages. ASEAN+3’s located within the fastest growth participation rate in the global zone in the world, with natural supply chain is over half of maritime access to India (growing exports, higher than the US (40 over 7 percent), China (6.5 percent) percent) and Euro-area (just and global markets as a hub of the over half)1. global supply chain. Within ASEAN,

1 ASEAN+3 Regional Economic Outlook 2017, Figure 2.7, pg. 51, ASEAN+3 Macroeconomic Research Office, March 2017.

Advancing ASEAN in the Digital Age 51 TAN SRI ANDREW SHENG

The region is home to some of TOP ASEAN INTERNET COUNTRIES the world’s oldest and richest biodiverse resources, including tropical forests, maritime reefs and nearly 13 million square 4/20 ASEAN COUNTRIES kilometres of sea.

What is holding back the TOP 20 region’s growth rate is the lack GLOBAL INTERNET of infrastructure development. COUNTRIES 11/20 The Asian Development Bank ASIAN COUNTRIES has estimated that ASEAN countries need to invest over US$60 billion a year in infrastructure until 2020 to over 480 million users by 2020. for SGX estimated that by 2020, maintain their growth, but This group’s Internet economy the IoT market (interconnected current infrastructure spending (mostly e-commerce) will grow devices) will have a market is around 3-4 percent of GDP by roughly 14 percent compound size of US$79.3 billion by 2020, compared with the desired rate annual growth rate (CAGR) to growing at a 26.8 percent CAGR. of 5-8 percent of GDP2. US$200 billion by 2025. ASEAN is well positioned to The infrastructure is needed not The reasons for the fast growth advance IoT, because its middle only to improve domestic and are because the region has a income market has both IT skills regional connectivity, but also burgeoning young population due to good basic education to deal with basic needs such with 70 percent under the age and innate adaptability to new as water, electricity, health and of 40, with rapidly growing technology. Out of the top 20 climate change amelioration spending power. ASEAN global Internet countries, 11 are investments. Most studies show e-commerce adoption also in Asia, of which 4 (Indonesia, that there is no shortage of occurs faster because the region Philippines, Viet Nam and long-term savings to fund lacks advanced country retail Thailand) are in ASEAN. Outside infrastructure investments, but distribution systems and is ripe the US and India, Facebook’s there are still serious gaps and for technological disruption. user base is huge in Southeast barriers to match the demand Asia, of which 126 million are in and supply for funds. My own gut feel is that ASEAN’s Indonesia. Malaysians have 50 digital transformation will be percent more chance of using The game changer may arrive faster than just e-commerce Facebook for business reasons in the area of technology and adoption. The reason is than the world average. innovation. A 2016 study by that digital transformation Temasek and Google suggested will not only change our For example, Philippines earned that just six ASEAN economies consumption patterns, but also US$25 billion in revenue from (Indonesia, Malaysia, Philippines, our production through the business process outsourcing Singapore, Thailand and Viet Nam) Internet of Things (IoT), and (BPO) in 2016, providing over 1.3 will become the fastest growing even governance models. A million jobs. The World Bank has internet region in the world, with 2015 Frost and Sullivan report estimated that BPO revenues

2 ASEAN Lifting the Barriers Report: Infrastructure, CARI (CIMB Asean Research Institute), 2015

52 Advancing ASEAN in the Digital Age TAN SRI ANDREW SHENG

could soar to over US$50 billion ASEAN countries can therefore succeeded by muddling through. and creating another 1.3 million utilize digitization and internet Muddling through is not muddle- jobs by 2020. Thailand, already technology to improve on headed. It is a practical, perhaps a major auto-components energy and resource usage, somewhat messy way forward, manufacturer and processed reduce pollution and increase preferring pragmatism and food producer, is aiming for their overall productive capacity. reality over theoretical elegance. Thailand 4.0 to upgrade her Nowhere is this more important It is precisely because ASEAN digital capacity in manufacturing that in upgrading the quality evolves through consensus and and services, much in line of our food and agriculture cultural mixing that slowly but with China’s Internet+ and production, as well as increasing surely forms its own adaptive Made in China 2025 strategy the productivity of our model of survival with resilience. and Europe’s Industry 4.0. A congested cities. For example, Malaysian startup called Grab is Go-Jek, a mobile phone app, Onward, ASEAN for the next 50 already successfully challenging has more than 250,000 drivers years! Uber within ASEAN in vehicle in Indonesia, helping to reduce hailing platforms. traffic congestion, delivery times and convenience to traffic- In addition to e-Commerce and clogged cities like Jakarta. IoT, the next wave of productivity will come from innovations in The ability of social media to social technology. McKinsey improve coordination within Global Institute has estimated bureaucracies, facilitate Big that improvements in digital Data analysis and artificial social technology can increase intelligence in making smarter the productivity of workers by decisions, is only beginning and 20 to 25 percent (McKinsey ASEAN is leading the world in 2012). The young in ASEAN are piloting many experimentations discovering that social media in this field, mainly because of its technology can help mobilize diversity in culture and stages of social action fast, with the result development, that provides a that coordinating large scale natural competitive gene pool and complex projects through of innovation. the use of smart technology and artificial intelligence is only just Critics of ASEAN have beginning. complained that ASEAN

Andrew Sheng is Distinguished Fellow of Asia Global Institute, The University of Hong Kong. He is Chief Advisor to China Banking Regulatory Commission, a Board Member of Khazanah Nasional Berhad and a member of the international advisory councils of China Investment Corporation, China Development Bank, China Securities Regulatory Commission, Securities and Exchange Board of India and Bank Indonesia Institute.

Advancing ASEAN in the Digital Age 53 KNOWLEDGE PARTNER

As sector partitions crumble, ASEAN companies must cross borders

Markets and industries have valuable coming online every month in always evolved as businesses Companies around the world ASEAN, making the bloc the strived to create new are facing these challenges to world’s fastest growing Internet conveniences and value for traditional configurations, and market. Between 2015 and their customers while at the in ASEAN, where so many have 2025, e-commerce receipts in same time capturing increased only recently awakened to the ASEAN are predicted to grow revenues and profits. Historically idea of transnational markets, from about US$5.5 billion to for many industries, this has understanding this evolution is almost US$100 billion, a 17-fold meant that quaint specialty both urgent and valuable. As a increase. shops have been slowly trade bloc, ASEAN makes up the displaced larger and larger world’s fifth largest economy, Beyond the impetus offered by stores that offer greater variety trailing only the United States, an expanding consumer class, and one-stop convenience and the European Union (EU), China, ASEAN also has the economic have come to define complete and Japan. In 2016, its economic muscle to propel accelerated sectors. In a similar vein, today’s output totaled about US$2.6 growth. Just a few figures familiar sectors are being trillion, a production level that is illustrate the region’s potential. usurped by online ecosystems, expected to more than double For example, between 2012 and digital consumer marketplaces by 2030. 2016, foreign direct investment that defy traditional sector totaled US$90 billion, and in 2015 boundaries. This dynamic region is being trade flows with markets outside pushed by a many strong factors. the bloc came to US$1.7 trillion. Banking and telecommunications, Internally, the consuming class Also underscoring the region’s for example, have experienced within the bloc is not only getting potential, manufacturing labor a portentous evolution. The bigger, but also getting richer. productivity rose on average by products and services of In 2013, ASEAN held about 83 7 percent a year between 2007 individual traders or subsectors, million consuming households and 2012. like foreign exchange and – those with enough income to lending, were absorbed into make significant discretionary Borders between sectors bigger entities, forming today’s purchases – and by 2030 their vanishing modern topography of industrial number is expected to increase Yet even with these strong sectors. And now, with the rise of to more than 160 million. And fundamentals companies in digital technology, the partitions the share of those households ASEAN and indeed the trade between these modern sectors making more than US$20,000 bloc itself will find it difficult are crumbling. Borders are annually is expected to double to reach their growth potential becoming less relevant, and one over the period. without a clear understanding day economists might be looking of how new technologies are back at “quaint” sectors such as Just as importantly, this growing tearing down borders, real banking, telecommunications, community of consumers is ones that once stood between and utilities. embracing the digital economy markets and metaphorical ones with gusto. By one estimate, between industries. ASEAN challenge urgent, about 3.8 million new users are

54 Advancing ASEAN in the Digital Age MCKINSEY & COMPANY

The disappearance of barriers release the innovative energy Internet era, reach for profits between national markets is needed to match the change in wherever the opportunity arises. perhaps the easier to grasp. market realities. The speeds at which the walls ASEAN has a long history of between sectors are crumbling working to reduce trade barriers The challenge is only acerbated vary, and some sectors – heavy among member countries, and when the collapse of borders industry, for example – may be global references such as the between sectors are considered. immune, at least for the moment. EU and multinational trade In Japan, for example, Rakuten But digital technologies have pacts serve as useful examples. Ichiba spans a range of greatly reduced the costs of In essence, in Southeast Asia offerings – retail, banking, travel, attacking the walls that separate the distinction between a investment, communications, many sectors. “local” company and a global and others – that, as a whole, one is fading. Banking and defy industry classification. Advances of big data analytics, telecommunications companies Amazon in the United States mobile interfaces, and artificial were the first to recognize the and Tencent in China have also intelligence or machine learning, change and have worked hard blurred industry lines, providing in particular, have prompted to innovate around broader customers with a sultry mix of companies everywhere that consumer needs. But critical products and services. are not digital natives to try industries, including real estate, to understand the benefits retail, and consumer products, These and other digital natives, and risks presented by these are finding it harder to let go companies with no legacy changes. A recent McKinsey of their local orientation and business models predating the study showed that among 300

New ecosystems are likely to emerge in place of many traditional industries by 2025 Ecosystem illustration, estimated total sales in 2025,1 US$trillion

Housing Digital Education 5.0 content 0.6 Mobility 3.3 Health 2.0 Travel and 6.0 hospitality 3.6 Public services 4.4

Retail Wealth B2C and marketplace protection 8.3 Institutional 1.1

Global corporate services 2.9 B2B B2B marketplace services 9.4 9.6

Source: IHS World Industry Service; Panorama by McKinsey; McKinsey analysis

1 Circle sizes show approximate revenue pool sizes. Additional ecosystems are expected to emerge in addition to the those depicted; not all industries or subcategories are show.

Advancing ASEAN in the Digital Age 55 MCKINSEY & COMPANY

CEOs interviewed globally Different sectors come into play at every stage across 37 sectors about a third of the mobility ecosystem was focused on cross-sector opportunities and threats. Many Finance Government Retail marketplace Service marketplace Insurance Information marketplace were especially concerned about whether new tech-savvy Search Acquire competitors understood their

customers’ needs better than Search and Purchase receive Research Obtain Obtain insurance or lease finance vehicles financing vehicle they did. terms

Banking is a well-known Calculate registration Calculate Purchase Search Test drive fee and example of how this evolution dealers at dealer and service register pay taxes terms has proceeded, as digital vehicle companies from outside the traditional sector have rushed Maintain Use to provide financial services Adjust Adjust Adjust ranging from ride sharing insurance Purchase finance terms insurance Use dynamically accessories dynamically dynamically mapping players providing payments based on and auto based on based on or GPS vehicle parts market driving services to telecommunications condition history companies offering insurance. Schedule Gain or use Purchase inspections Perhaps more surprising are the rewards and update points gas blurred boundaries surrounding registration the utilities industry. Tesla, an Purchase Automatically or schedule track vehicle electric car maker, also offers Purchase car washing and component maintenance (pick up car condition, to energy solutions; Google offers services and deliver schedule it cleaned) service smart thermostats and other

connected home appliances; Collaborate Sell and US start-up Innovari provides integrated demand List car for sale Purchase Adjust Benefit Transition on platforms accessories licensing if from new insurance that connect management services based on and auto using car as purchaser’s coverage potential parts rideshare ability to to next buyers and advanced analytics, to cite just a driver finance vehicle sellers few encroachers. Research car Use app to Use app to value (based participate monetize Sell car Register on condition, in car vehicle (eg, sale mileage, model, Understanding ecosystems to sharing ridesharing) geography, similar cars) meet challenge At the nexus of these changes in Source: Panorama by McKinsey sector topography is the digital ecosystem. Companies that want to thrive in the new environment must understand these systems, that they can access from they might emerge. They must which orbit around the singular whichever device they chose. also build capabilities in big data idea of customer needs. These analytics to develop insights into ecosystems coalesce around To succeed in these ecosystems, customer needs and behavior consumer market places that companies must adopt a that stretch beyond a company’s provide customers with a mindset that reaches beyond current portfolio of products familiar environment across a their traditional sectors and and services. In addition, they range of products and services explores opportunities wherever must redefine their approach to

56 Advancing ASEAN in the Digital Age MCKINSEY & COMPANY

partnerships to form the wide looking for immediate access new value for customers, and for range of alliances needed to across channels and clear product development, eagerly deliver value in these complex customization. The want brands embracing relevant opportunities systems. that are socially responsible and as they are identified. prices that are affordable and And finally – the very essence predictable. The continued integration of these market changes – of ASEAN member-state companies must develop To meet these demands, ASEAN economies offers a bountiful close, emotional relations with companies will have to innovate landscape for companies willing their customers or risk being constantly around product to reach for profits and growth relegated to low-value suppliers design and delivery. While there across crumbling sector and to those that do. This requires a is no playbook that prescribes geographic boundaries and sharp understanding of elevated a guaranteed regimen leading to create modern businesses customer expectations. In to such innovation, the critical focused on consumer needs. products, for instance, customers starting point must be customer But those that rigidly cling to want greater choice, control, insights. For talent, this means traditional industry definitions reliability, and convenience, hiring and promoting people will be blind to this rich potential. and in services they are who are ready and able to create

McKinsey & Company is a global management consulting firm, deeply committed to helping institutions in the private, public and social sectors achieve lasting success. For 90 years, our primary objective has been to serve as our clients’ most trusted external advisor. With consultants in over 110 locations in over 60 countries, across industries and functions, we bring unparalleled expertise to clients anywhere in the world. We work closely with teams at all levels of an organization to shape winning strategies, mobilize for change, build capabilities and drive successful execution.

About the authors Oliver Tonby is the Managing Partner of McKinsey & Company in Southeast Asia. He oversees the firm’s offices in Malaysia, Indonesia, Vietnam, Thailand, the Philippines and Singapore, where he is based. Oliver has served clients across Europe, the United States and Asia and has worked across multiple industries, including energy and materials, industrials, private equity and technology.

Diaan-Yi is the Managing partner of McKinsey & Company in Singapore and a leader in our Public Sector, Private Equity, and Capital Projects & Infrastructure Practices in Asia. She also helps direct work with sovereign wealth funds in the region and has worked extensively with government entities and government-linked companies in Asia, particularly on the design and implementation of large-scale programs to drive performance transformation and economic development.

Ferry Grijpink is a Senior Partner in McKinsey & Company Singapore office and leads the Telecommunications, Media and Entertainment, and High Tech Practices in Southeast Asia. He focuses on advising telecommunication companies on strategy, marketing, and operations, including mobile operators that are launching adjacent businesses in areas such as mobile health and money services. He also co-leads McKinsey’s research on deploying and commercializing next-generation infrastructures such as fiber and mobile broadband.

Advancing ASEAN in the Digital Age 57 The Future of Asean Is Digital Tan Sri Tony Fernandes, CEO, AirAsia Group

The future is digital. Nowhere is some of the highest in the this more obvious than Asia, a world. A young population that region that has wholeheartedly came of age during the digital embraced the Fourth Industrial revolution means a tech-savvy Revolution, allowing entire generation that is comfortable countries to leapfrog redundant with interacting and transacting technologies right into the via mobile apps. Governments digital era. hold the key to This is important for ASEAN - a ensuring Asean Pensioners in China pay for diverse region of more than 630 vegetables at the wet market million people and countries maintains its with QR codes, unbanked Indian at every stage of economic trajectory and workers receive wages on development - because digital develops a robust their mobile phones, Filipinos technology is the great equaliser digital economy. with no credit cards purchase that lowers barriers of entry to flights via text message. What’s take part in the digital economy. most impressive is the speed at Many small e-commerce which these changes are taking retailers are nothing more than place. It took Sweden decades a mobile phone, maybe a desk to transition to a practically and a computer. Starting your cashless society1. We now see own business now just takes the same thing happening in a few swipes and clicks, and China’s big cities in the span of minimal capital. about 10 years. Because of this rapid growth Everywhere in Asia, people in e-commerce, the number of are rapidly adopting digital online consumers in ASEAN technologies and adapting has surged 50 percent over the them to the local context. This last year to 200 million and the is particularly true for ASEAN, region’s digital economy has which is an exciting piece of grown to more than US$50 Asia’s digital landscape puzzle. billion2 - about the size of Cheap mobile devices and Cambodia’s GDP. affordable data plans mean more people connect to the internet ASEAN also is home to some using their phones. ASEAN’s of the world’s fastest-growing mobile penetration rates are economies. Of the top 10 fastest-

1 Cash transactions made up less than 2 percent of the value of all payments made in Sweden, according to central bank Riksbank. 2 Digital Acceleration in Southeast Asia: Navigating Tectonic Shifts, Bain & Company (2017)

58 Advancing ASEAN in the Digital Age TAN SRI TONY FERNANDES

ASEAN’S DIGITAL ECONOMY AND ONLINE CONSUMERS

ONLINE CONSUMERS IN ASEAN ASEAN DIGITAL ECONOMY THIS YEAR 200 million  50% GROWN TO MORE THAN US$50 BILLION LAST YEAR 133.5 million ≈ SIZE OF CAMBODIA’S GDP

growing economies in 2017 as year, with a focus on promoting kiosks so guests can check in or forecasted by World Bank, four innovation, digital connectivity print their boarding passes with are in ASEAN - Laos, Cambodia, and e-commerce flows that will ease. Myanmar and the Philippines3. benefit businesses, especially small-to-medium enterprises More recently, we have pursued ASEAN’s affinity for digitalisation, (SMEs). Singapore also intends even greater automation at coupled with its rapid growth, to expedite customs clearance the airport counter, from home means the region is home to via a regional electronic platform bag tags to self bag drop. some of the most competitive that will help ASEAN businesses Eventually, AirAsia guests will digital economies. Singapore lower the administrative costs of be able to go through the entire leads the pack, followed closely trade. check-in process from start to by Malaysia, Indonesia, the finish at their own convenience. Philippines and Vietnam. In fact, It’s not just SMEs that stand to We are working with technology Malaysia is seen as an exemplar benefit. Going digital also has the partners, airports and regulators of how Asia is “the most exciting potential to supercharge large to develop the airport of the region in the world” when it businesses, including AirAsia. future offering a seamless comes to the digital revolution, That’s why we are investing in experience based on facial right alongside the powerhouse heavily in data and digitalisation recognition. that is China4. as we move towards becoming a truly digital airline. Existing businesses aside, The biggest drivers for future ASEAN has also emerged as growth in the digital space will AirAsia has always been ahead an excellent breeding ground be travel and e-commerce. of the curve. We debuted SMS for new startups. The region Travel accounts for 44 percent bookings in 2003 before apps benefits from a highly educated of the ASEAN digital economy were a thing, we put our lowest workforce, entrepreneurial spirit (US$22 billion), followed by fares on airasia.com back when and gaps in service that attract e-commerce (US$15 billion)5. airlines still sold seats through innovative solutions. Grab, Go- travel agents, we introduced Jek and Garena are some of Recognising this, Singapore has our AskAirAsia page with search the examples of local unicorns declared the digital economy box to answer frequently asked that not only add convenience a key focus area when it takes questions and, of course, we and improve quality of life, but over the ASEAN chair next rolled out our ubiquitous airport also create jobs and attract

3 Global Economic Prospects, World Bank (2017) 4 Digital Evolution Index 2017, Harvard Business Review (2017) 5 Digital Acceleration in Southeast Asia: Navigating Tectonic Shifts, Bain & Company (2017)

Advancing ASEAN in the Digital Age 59 TAN SRI TONY FERNANDES

significant foreign investment. With big neighbours like China and India who have Governments hold the key to invested heavily in the digital ensuring ASEAN maintains its infrastructure and technologies, trajectory and develops a robust who possess access to deep digital economy. Investments capital markets and boast huge in infrastructure and education, populations, the onus is on harmonising standards, facilitating ASEAN to do all it can to ensure investments by improving access sustainable development of an to funding, providing technological indigenous digital economy that and business mentorship and can compete on equal footing. responding quickly to change by crafting laws and regulations that support disruptive but beneficial businesses can mean all the difference.

Crucially, the digital economy has potential to catalyse infrastructure developments over the long term. Digital integration allows businesses to move to the front of the pack and connect ASEAN member nations with regional supply chains in production and distribution. This in turn stimulates physical infrastructure development, fostering more inclusive growth, setting in motion a virtuous cycle of development.

Tan Sri Tony Fernandes is the co-founder of AirAsia, Asia’s largest low-cost carrier by passengers. He studied at the London School of Economics and is a qualified chartered accountant. Fernandes has received numerous honours, including the Honour of the Commander of the Order of the British Empire and Commander of the Legion d’Honneur for his contributions to aviation.

60 Advancing ASEAN in the Digital Age Financial Inclusion for ASEAN’s Emerging Consumers George Sartorel, Regional CEO, Asia Pacific Allianz

Over the last 50 years ASEAN Accelerated data speeds has made huge strides in on mobile networks and the economic and social progress. proliferation of devices at Today ASEAN is an economic historically affordable prices is force to be reckoned with, driving a paradigm shift in the boasting a GDP of US$2.55 dissemination and consumption trillion. The 630 million citizens of information and services. As we enter a of ASEAN are a young and Technology has emerged as a fourth industrial growing population by global means to accelerating financial revolution in standards. Its labour force is the inclusion, increasing commerce third largest in the world. As the and bringing about a digital Southeast Asia, working population continues to dividend that could drive the technology grow, it promises to boost GDP next 50 years of ASEAN’s provides the and individual wealth. growth. means of alleviating this However, not everyone is Nearly half of Asia’s population inequity, and feeling the benefit of this reside in rural areas lacking the economic momentum. Despite services infrastructure common unlocking the the economic success of the in urban centres. Reaching potential to past half-century, there are and serving these emerging provide financial still an estimated 264 million customers require enterprises awareness and adults in Southeast Asia who to revisit the way they operate, access to the are unbanked, ie, lacking access distribute and localize. region’s masses. to basic financial services like a deposit account. For this In June 2016, Allianz partnered population outside of the reach with Indonesia’s largest ride- of financial access, savings hailing company Go-Jek to offer tend to be kept at bedside and health insurance to its 250,000 borrowings come from shadow drivers and their families. With sources at high costs. The Go-Jek drivers typically taking social and economic toll of this home about a third of Jakarta’s inequity is significant. average income per capita, Allianz designed an affordable As we enter a fourth industrial health solution offering medical, revolution in Southeast Asia, hospitalization and inpatient technology provides the means benefits, with premiums of alleviating this inequity, deducted digitally from the and unlocking the potential to drivers’ e-wallets, eliminating provide financial awareness and the need for cash transactions. access to the region’s masses. Backed by a synergistic

Advancing ASEAN in the Digital Age 61 George Sartorel

understanding and partnership and dreams of having his own our expectation is there will be with Go-Jek, this customer- equipment in order to expand more opportunities for private centric and digital approach his inventory. Under TNF, Agung enterprises, digital players and has meant Allianz is able to receives cashless loans from policymakers to work together reach, and cater to these new Allianz via digital transfers, with in closing the region’s protection 250,000 families in Indonesia, repayments suspended for an gap, and to prioritize financial going some way towards close agreed period until his business inclusion in ASEAN’s economic the protection gap in ASEAN’s takes off. In addition, the shariah- agenda. emerging consumer class. compliant programme also provides micro-entrepreneurs Investing in ASEAN’s Future like Agung with value-adding Growth financial education and business Small businesses and micro- mentoring. By bringing new entrepreneurs are the backbone solutions to old development of many ASEAN economies, issues, Allianz has been able contributing substantially to to play a bigger role in driving income, output and employment, sustainable micro-enterprise and playing an under-recognized growth and job creation to role in lifting rural communities support ASEAN’s emerging out of poverty. Yet, their communities. potential and prospects are often hampered by the lack of access The next 50 years to financial capital for take-off With ASEAN poised to welcome and expansion. millions of people into the middle class within the next To overcome this challenge, decade, it rests on enterprises Allianz in 2016 pioneered the and policymakers to ensure last- Trust Network Finance (“TNF”) mile financial access is within programme, an open-source reach of this new segment of micro-equity project to reach emerging consumers. the unbanked communities in Indonesia. The road to financial inclusion is neither short nor easy. But it is Agung Nugrohob is one of them. an important one. As we mark An owner of a chicken stall in 50 years of ASEAN and look Bogor, Agung is tired of renting ahead to the next half-century,

As Regional CEO of Allianz in Asia Pacific, George is responsible for the core growth region of Allianz Group. Under his leadership, Allianz has accelerated its growth strategy in Asia Pacific, while also leading the industry in embracing digital innovations to drive stronger engagement with its 18 million customers in the region.

62 Advancing ASEAN in the Digital Age Digital Asia has the power TO transform lives

Steve Turner, Digital Cities Lead and LiYu Tseng, Senior Consultant, Arup

Around the globe, digital issues such as cyber security, advances are permeating privacy, the effective utilisation almost every aspect of our lives. of vast new stores of data and Digitalisation is influencing all even how we think about tax areas of society, but the trend collection. is particularly prevalent in urban environments as towns and One thing we have learnt is that One thing we cities in Asia and elsewhere if cities are to harness the full have learnt is begin to see the transformative benefits of the opportunities that if cities are power of digital technology in available, then they need to action. develop a far more integrated to harness the and holistic approach to the full benefits of The rise of digitalisation is digital world. In practice, this the opportunities influencing everything from how means investing time and available, then we plan our cities and the way resources in soft infrastructure they need to we shop to shifting the way we such as land use planning, develop a far more travel around, communicate and skills, training and developing organise our leisure time. coherent business and integrated and procurement policies, as well holistic approach Transformation at this pace and as tackling the hard issues of to the digital scale fundamentally challenges connectivity, embedding data world. how we think about the future. If hubs, cables and digital tools. harnessed effectively, the digital transformation has the potential Today, cities around the globe to make cities more liveable are making decisions that will and competitive. For example, influence their development for technology is already improving decades to come. For example, outcomes for citizens and many authorities have embraced businesses, delivering services the large city operating model at lower cost; increasing to address systems at scale productivity and boosting jobs such as transport and water. and growth; and connecting Others have focussed more citizens in new ways that allow on innovation, for example, communities a far greater voice investing in engagement tools in shaping their environment. that place the citizen at the heart of the urban design On the flip side, the digital process. And more recently, we revolution has also brought have seen the emergence of with it a host of new challenges new business models such Uber in terms of how we deal with and Airbnb, which are using the

Advancing ASEAN in the Digital Age 63 STEVE TURNER & LIYU TSENG

city as a ‘platform’. their own smart plans to deliver required a multi-disciplinary the national programme. approach with expertise around In reality, of course, there is a whole series of infrastructure no perfect answer and a ‘one With over 80 percent of assets, including Transport, size fits all’ approach does Singaporeans living in Housing Sustainability, Lighting, Security, not work. To make a success Development Board (HDB) homes, Civil Engineering and Smart City of this exciting new phase of representing approximately 3.5 consulting. innovation, Asian cities must million people, a new masterplan have a strong digital vision for was devised as a unique The Woodlands vision describes the future that is intrinsically opportunity for digital technology the development as ‘the tied to the overarching aims to transform the living environment gateway to Singapore’ due of the city as a whole. This of many Singaporeans. Arup to the major transport hub strategic vision must then be worked with the Singapore HDB that connects the site to tied to robust governance to define a Smart Urban Habitat Malaysia. The masterplan for and leadership aligned to a Masterplan in the first phase of the project focuses on key clear strategy for delivery and the project. digital initiatives for the site, implementation. which will attract innovative As with experience from across businesses, shape user There are a number of Europe and North America, experience, and improve the emerging examples and case the team sought to establish operation of the development. studies of where the ASEAN a coherent vision and a set The masterplan also details region is making particularly of goals that could be used the core ICT infrastructure rapid progress in this agenda. to guide HDB’s use of digital requirements for the site to Arguably, this has been most technology. The next stage of demonstrate the future of prevalent in the masterplanning this work will be to implement estate operations, as well as of large redevelopment schemes. a selection of initiatives in two the options for delivering the Singapore, in particular, has carefully selected HDB towns. shortlisted digital initiatives. been at the vanguard of this The lessons and insights gained work in Asia, just as Amsterdam from this implementation will be As a global multi-disciplinary and Barcelona were at the fed back into HDB’s masterplan practice Arup has been shaping forefront of similar activity in to shape future developments. and supporting both national Europe. governments and city authorities At the same time, one of on their digital agendas for a In 2014, the Singapore Singapore’s leading developers number of years. We value our government launched its Smart and industrial estate managers, independence highly, which Nation Programme, which set is also driving progress in has enabled us to differentiate out a vision for the government this field. The Jurong Town ourselves in the marketplace, to better harness the capabilities Corporation (JTC) identified and with offices spread across of digital technology to improve the need to develop a digital the ASEAN region we are well the lives of Singaporeans. Since masterplan for the 110+ Ha placed to support ASEAN then, different government Woodlands development in clients around strategy, design, agencies have been developing Northern Singapore. The scheme operations and insight.

Steve Turner leads Arup’s consulting work on smart cities. His clients include city and national governments, industry and urban developments. Recent work includes strategy and policy work

64 Advancing ASEAN in the Digital Age STEVE TURNER & LIYU TSENG

for UK cities and national governments including, London and Manchester as well as urbanisation policy across China.

LiYu Tseng is a Senior Consultant in Arup Digital, where she focuses on digital strategy. She is passionate about how technologies can change the way businesses and people behave. Her recent projects include the development of a smart city and digital strategy for national governments and property developers in the Middle East and Asia.

Advancing ASEAN in the Digital Age 65 New Zealand’s opportunity with ASEAN in today’s digitally connected world Peter Vile and Mitchell Pham, Directors, Augen Software Group and Kiwi Connection Tech Hub

New Zealand needs partners more integrated since the in Southeast Asia to grow in establishment of ASEAN. Trade today’s digitally connected agreements have also opened world. Our high-tech nation can up markets in ASEAN to both also contribute significantly to domestic and international the regional ASEAN Community competition. for economic development as New Zealand is well as political, security, social New Zealand is well advanced well advanced in and cultural advancements. in knowledge and development knowledge and across many industry sectors. New Zealand is a country The expertise and know-how development geographically about the that we have developed can across many same size as Japan, United be leveraged as IP to help industry sectors. Kingdom and Vietnam, but on lifting ASEAN industries to The expertise and a global population scale is one international levels in order know-how that we of the smallest in the world. to compete and thrive. This have developed In comparison the ASEAN is where New Zealand has region is one of the top seven the opportunity to make a can be leveraged economies, globally. The region difference with our tech and as IP to help lifting has an abundance of tech business sectors. ASEAN industries talent, investment capital and to international large markets for products and ASEAN has plenty of tech levels in order services. Singapore and New talent, investment capital, large to compete and Zealand are both ranked No.1 populations and exponentially- in the world for ease of doing growing digital technology thrive. business. Kiwi businesses today uptake across the region. can easily engage with member All of this represent massive countries of ASEAN - the New opportunities for its businesses Zealand Government has a to innovate locally. However, strong presence in the region many member countries are new through the Ministry of Foreign to the development of know- Affairs and Trade and New how, scientific R&D, harnessing Zealand Trade and Enterprise. of intellectual property and innovating with many types of Why New Zealand is relevant to technology. Also, developing ASEAN nations tend to start from a The ASEAN Economic smaller foundation of IP. Community is equivalent to one single economy. This economy For the region, there is an has progressively become opportunity to work with

66 Advancing ASEAN in the Digital Age PETER VILE & MITCHELL PHAM

external partners who bring technology innovation. These Tech Hub. The group’s business a wealth of both expertise again make the ASEAN region model expanded to include and IP. New Zealand is a well- important to fuel our growth. assisting Kiwi companies to developed digital nation, with physically deliver technology nearly 29,000 technology firms On top of this, technology has offerings into Vietnam and the from a population of just 4.5 been lacking as part of the New ASEAN region as well as provide million. Again, this is where New Zealand story that we have more extensive support to Zealand has the opportunity to been projecting to the world, international customers across make a difference to ASEAN especially in regions such as more time zones and doing so with our tech and business ASEAN. This must change, if we more cost effectively. sectors. are going to gain more traction in doing business with ASEAN Collaborators and supporters Why ASEAN is relevant to New markets. so far include the ASEAN-New Zealand Zealand Business Council, Export Technology innovation in New An example of New Zealand New Zealand, New Zealand Zealand continues to grow engagement in ASEAN Trade & Enterprise, Ministry rapidly and is a key enabler and In recent years, there has been of Foreign Affairs & Trade, accelerator on all fronts for the an increasing number of New Asia New Zealand Foundation, rest of the economy. However, Zealand businesses and tech KEA, New Zealand Technology so far, we have only seen the tip firms establishing their presence Industry Association, New of the iceberg. There is still room and engaging in the ASEAN Zealand Software Association, for Kiwis to achieve much more region. One example is the Kiwi Canterbury Technology Cluster, with our tech businesses and Connection Tech Hub located Auckland Tourism, Events also to effect more significant in Vietnam, managed by the & Economic Development, impact in regions such as Augen Software Group. Wellington Regional Economic ASEAN. Development Agency, Christchurch Augen started to help Kiwi New Zealand, Auckland University Being a small economy, we businesses tap into the large of Technology, University of do not have large customer growing pool of tech talent Auckland, University of Canterbury, markets for our businesses. in ASEAN by establishing its among others. Consequently, many of our offshore base in Ho Chi Minh City, companies innovate for the Vietnam in 2005. Since then, the Augen’s plan is to continue global market by default. This company has been assisting expanding Kiwi Connection makes the large and rapidly dozens of NZ businesses across Tech Hub through partnering growing markets and digital numerous industry sectors with to include supporting Kiwi economies in the ASEAN region innovation projects, in ways that businesses to access investment important to our growth. accelerate development and capital and distribution networks speed-to-market with increased to large customer markets in the At the same time, while aspiring capacity, scalability and cost ASEAN region. to capture global demand for efficiency while reducing risk, our innovation, we do not have complexity as well as cultural Some tips for Kiwi tech enough tech talent to provide barriers. businesses wanting to engage the capacity needed to speed up in ASEAN our development for speed-to- In 2016, in collaboration Technology is playing an market. We also have a limited with business, industry and increasingly important role in pool of investment capital government partners, Augen New Zealand and ASEAN trade as well as risk appetite for launched the Kiwi Connection growth stories. The ASEAN

Advancing ASEAN in the Digital Age 67 PETER VILE & MITCHELL PHAM

tech market is expected to be delivering with the scale that is need to connect and engage a major regional performer over needed to meet demands. with the ASEAN region as part the coming years due to strong of our global growth strategy. growth dynamics, while New Our companies, industries and Zealand’s technology sector Summary government also need to more grew to more than US$6.5 billion New Zealand and the ASEAN strongly and pervasively assert dollars in 2016. Community are highly relevant the New Zealand technology to each other. story to the ASEAN region as As far as the tech sector goes, well as the world. we are not an island. It would be As ASEAN continues to become smart and important to engage more integrated as well as ASEAN markets alongside internationalised, its industry other Kiwi industry sectors sectors need to rapidly lift their which have been doing business standards and grow capabilities development in the region for to compete, and so stand to much longer and therefore are benefit from New Zealand’s bigger, stronger, better known, expertise and know-how in the more visible, more active and form of IP that we can share with more connected in the region. the region. At the same time, New Zealand can also share It is also vital that Kiwi businesses the strengths of a digital nation do their market research and and our large and constantly engage in rigorous on-the- advancing tech sector. ground validation of their target customers in the region, then Conversely, New Zealand is a follow-through after their visits small population, and as such to progress relationships into we have limited capacity in business. We have to prove to terms of tech talent, investment the markets in the region that capital, large customer markets we understand their needs and and fast-growing digital are capable of engaging and economies. Our businesses

Peter Vile is co-founder and director of Augen Software Group and Kiwi Connection Tech Hub, executive of ASEAN-New Zealand Business Council (ANZBC).

Mitchell Pham is co-founder and director of Augen Software Group and Kiwi Connection Tech Hub, chairman of the New Zealand Technology Industry Association (NZTech) and the New Zealand Financial Innovation and Technology Association (FinTechNZ).

68 Advancing ASEAN in the Digital Age ADVANCING ASEAN IN THE DIGITAL AGE Jaime Augusto Zobel de Ayala, Chairman and CEO, Ayala Corporation

At a time of enormous volatility nearly double, from 81 million in various parts of the world, households in 2013 to 163 million ASEAN has shown consistent in 2030. growth and has become such a dynamic region. Even with ASEAN is also experiencing global headwinds, I believe that rapid urbanization. Populations the outlook for Southeast Asia in major cities all over the region Much more needs remains bright, maintaining have grown by as much as 50 to be done in a relatively positive growth percent over the last decade. capturing the trajectory and remaining an ASEAN’s cities account for attractive destination for over 65 percent of regional opportunities investments. gross domestic product. This is and navigating likely to grow, with more than the challenges What makes this development 90 million people expected to that digital more impressive is the move to urban centers by 2030, transformation interplay of key trends that driven by the prospect of higher brings. have contributed to ASEAN’s wages. potential for sustained growth. Southeast Asia is undergoing a Finally, ASEAN’s commitment demographic dividend, with over to an open trade environment, 50 percent of the population as seen in the ASEAN below the age of 30. Higher- Economic Community and in skilled workers are also on the its participation in other free younger end of the workforce, trade agreements and economic with a median age in the mid- initiatives, provide a boost to 20s, suggesting an increasingly the region’s potential. well-educated population that bodes well for ASEAN’s future The confluence of these factors productivity. This is particularly drove the rapid transformation valuable when it comes to of many industries across the disruptions in employment that region. The digital revolution, require more education, greater in particular, is changing skill, and higher adaptability. how consumers find and buy products and services, The growing economies of how businesses interact with ASEAN member-nations drove customers and their supply increasing affluence. By 2030, chains, how governments the number of households engage citizens, and even how with greater discretionary ASEAN works with the rest of purchasing power is poised to the world. We have observed six

Advancing ASEAN in the Digital Age 69 JAIME AUGUSTO ZOBEL DE AYALA

key technology trends that are machine to machine, presents transformation to cater to the fueling this digital revolution. greater efficiencies in the needs and preferences of the way we do things. Finally, modern citizen. First is mobile technology. advanced analytics are helping Today’s mobile devices are solve various challenges in In closing, much more needs equipped with enormous sectors such as healthcare and to be done in capturing the computing power, ever larger education to national security. opportunities and navigating screens, pervasive high speed the challenges that digital networks, and made even more Overall, these six technology transformation brings. This entails accessible to individuals. Second trends present tremendous collaborative efforts among is social media that has changed potential and opportunities governments, the private sector, the way people and societies for enterprises, societies, and the academe, and research interact with one another and governments. However, the institutions, particularly in the rest of the world. Third is the challenge lies in how we can support for harnessing intellectual shift in the way individuals now properly harness the benefits knowledge, innovation, and interact with their surroundings. they bring and on the flipside, enabling frictionless flow of data From face-to-face and personal manage their potential misuse. and information. More than ever, engagements, interactions are close cooperation among ASEAN now done through a screen - With how the mobile and member nations is crucial in this from mobile phones to tablets Internet economy is changing journey towards digital revolution. to laptops and PCs, and even our lifestyle, it is imperative that digital billboards. Fourth, the ASEAN enterprises be able to cloud has allowed individuals adapt quickly by integrating and enterprises the flexibility to digitization into their business store data, keep memories, and strategies and operations. manage IT infrastructure. We have seen how start-up companies are flourishing Fifth is the accelerating in this environment where adoption of the Internet of the nature of employment Things, which allows offloading and entrepreneurship are mundane interactions between shifting. Similarly, governments humans and machines into must adapt to the digital

Jaime Augusto Zobel de Ayala is the Chairman and CEO of Ayala Corporation, one of the largest business groups in the Philippines, with interests in real estate, banking, telecommunications, water, power, industrial technologies, infrastructure, healthcare, and education. Outside the Ayala group, he is a member of various business and socio-civic organizations in the Philippines and abroad, including the JP Morgan International Council, Mitsubishi Corporation International Advisory Council, and the Council of Foreign Relations.

70 Advancing ASEAN in the Digital Age The transformation of ASEAN’s financial sector Chartsiri Sophonpanich, President, Bangkok Bank

The financial services industry to enter the top-five digital globally is facing one of its economies by 2025 thanks to greatest-ever challenges with rapid developments in areas increasing competition from such as cashless payments, FinTechs and the growing smart cities, mobile financial use of technologies such as services and new-generation blockchain, the “cloud” and manufacturing. Technology can Artificial Intelligence (AI). In its also help SMEs Global FinTechs Report 2017, The same report estimates gain much-needed PwC predicts that FinTechs’ that transforming the AEC access to credit growing influence will make the into a leading global digital as potential industry unrecognizable within economy would potentially five years. generate an additional US$1 lenders can more trillion in GDP over 10 years. accurately assess Fortunately, ASEAN has many As the transaction provider for business potential advantages which will help goods and services, the enabler and pinpoint us make this great leap into for wealth management and risks through the future. For one, we are source of finance for business the aggregation already well along the path development, the financial sector to transformation, spurred by will clearly play an essential role of digital and the formation of the ASEAN in this transformation. Given that alternative data, Economic Community (AEC) new entrants are challenging and advanced and its commitment to economic traditional providers in all these analytics. and financial integration. areas, we must lead the way with Moreover, our fast-growing better facilitation of goods and economies, youthful population services settlement, and provide (over 50 percent of people are highly secure and affordable under 30 years of age), and the electronic payment systems rapid adoption of technology that are widely accepted across (including smartphones) will all all channels and even across support the region’s transition national borders. to a digital future. Digital financial solutions will A recent report by A.T. Kearney, also help with the provision a management consultancy, of banking services to people suggests that although the AEC who are currently unbanked lags behind other economic by providing customer and blocs in its embrace of the digital verification processes which economy, it has the potential are fast, convenient and low-

Advancing ASEAN in the Digital Age 71 Chartsiri Sophonpanich

cost, and which use mobile rapidly – for example, the to provide universal internet applications such as e-wallets. number of internet users in Laos access, another important Technology can also help SMEs grew by 83 percent in 2016! step in the AEC’s transition gain much-needed access to to a digital economy is the credit as potential lenders can Most AEC countries are establishment of comprehensive more accurately assess business leapfrogging straight to the payments platforms that are potential and pinpoint risks mobile internet, rather than fast, secure and can be easily through the aggregation of connecting via PC, which is an used by everyone. Thailand is digital and alternative data, and advantage as the mobile platform well advanced in this endeavor, advanced analytics. is one of the most dynamic with the government, the areas for the development central bank (Bank of Thailand) The first step towards the of new FinTechs services. As and commercial banks working digital economy is electronic we have seen in China, where together to establish a secure connectivity. However, AEC people are abandoning cash and standardized e-payment countries are at very different for mobile payments, once platform linked to the national stages of development in people are connected to the ID system. this area. At one end of the internet via their mobile devices, spectrum, Singapore is an their behavior changes very The centerpiece is a system advanced high-income country quickly and this opens many called “PromptPay” that links which already ranks in the top opportunities for different kinds bank accounts to mobile phone 10 of the United Nations ICT of commerce and new forms of numbers and/or Citizen ID cards (Information, Communications payment. Thanks to the AEC’s to provide highly secure and and Technology) Index, while youthful population we can extremely low-cost electronic others such as Myanmar and expect very fast adoption here transfers. The Bank of Thailand is Laos are emerging economies also. also encouraging all businesses, still lacking vital infrastructure. no matter how small, to accept This gap is reflected in internet As mobile devices become electronic payments as part of connectivity – Singapore, Brunei, the dominant channel for its mission to make Thailand Thailand and Malaysia have accessing banking services, a cashless society. The latest internet penetration rates of this is stimulating demand for innovation is a QR Code system around 80 percent, while Laos, biometric systems of customer which is standardized across all Cambodia and Myanmar have identification and authorization banks, and which is now being rates of less than 30 percent. coupled with e-KYC (electronic rolled out to market vendors However, once infrastructure Know Your Customer). and marketed by banks as the is available these emerging most convenient, secure and economies can catch up very Aside from the requirement easy way to receive payments using mobile devices. The Thai government is also linking the PromptPay system with electronic delivery of tax returns ≈ 80% and welfare payments – another important step towards a digital economy.

< 30% Moves to encourage a cashless society are also taking place in ASEAN INTERNET PENETRATION RATE other parts of the AEC, such

72 Advancing ASEAN in the Digital Age Chartsiri Sophonpanich

as Indonesia, Malaysia and blockchain-based transfers, SME providers can bring innovative Singapore. The experience of lending, and P2P invoice trading products and services to the these countries in providing – all of which point the way to market more quickly. With national digital payment systems the kinds of innovations we can Big Data and AI they can mine will provide useful models expect to see in the future. their customer data (richer than for others in the region and ever before thanks to mobile potentially a base for providing Meanwhile, commercial banks are banking) to target and tailor cross-border payments using adopting new business models. services to individual clients, technologies such as blockchain. Rather than attempting to provide while blockchain will enable The close cooperation a full range of services as in the old them to speed up delivery between governments, central “financial supermarket” model, of transactions, reduce costs banks, regulators and private they are forming partnerships and better manage identity institutions within the AEC with FinTechs companies and verification processes. should help facilitate this. These providing services to their institutions also need to work customers through Application Here in ASEAN we could lead the collaboratively on cyber security Programming Interfaces (APIs) way in the transformation of the as the shift to digital financial whereby the bank connects the financial sector but it will require services is greatly increasing the customer with a service through close cooperation between all risk of cybercrime an application such as micro- parties – governments, central finance for small businesses and banks, regulators, telecoms, Another major trend shaping the robo-advisory. financial institutions and direction of our region’s financial FinTechs start-ups. Let’s hope services is the emergence of This trend was reflected in the we rise to the challenge! FinTechs startups and their Global FinTechs survey which innovative new services. At found 82 percent of financial Bangkok Bank, we have first- providers planning to increase hand experience of the vitality partnerships with FinTechs of this sector through our global providers in the next five years. FinTechs accelerator program, Meanwhile 77 percent expected Bangkok Bank InnoHub. to adopt blockchain for part of Members of the initial program their processes by 2020, and 30 come from five countries, percent are investing in AI. and their services include technology solutions for wealth By forming partnerships with management, mobile security, FinTechs, financial services

Mr. Chartsiri Sophonpanich is President of Bangkok Bank, a leading Thai bank with a long-standing presence across Southeast Asia as well as greater China, Japan, New York and London. Its international network, including wholly-owned subsidiaries Bangkok Bank (China) and Bangkok Bank Berhad in Malaysia, spans 32 locations in 15 economies.

Advancing ASEAN in the Digital Age 73 Digital Revolution in ASEAN: The Impact Today and Drivers of Tomorrow Paul de Courtois, Managing Director of BMW Group Asia, BMW

How will the digital revolution rolled out new features to impact economic prosperity enhance user experience. In in ASEAN? What will be the August 2017, Grab launched its driving factors? new peer-to-peer fund transfer feature, to enable consumers to transfer GrabPay Credits to one 2 Specifically No matter what industry you another . looking at the are in, “digital” is a familiar term that comes up in nearly every BMW is also riding the digital automotive conversation today, especially wave globally and in the region and transport if you are in ASEAN. Whether from manufacturing plants industries, it’s DBS Bank, Axiata Group, to showrooms. For example, regional tech Carousell, or RedMart, each in 2016 Performance Motors companies, global of these companies is actively (PML), the authorised dealer for BMW cars and motorcycles in car manufacturers embracing the digital revolution and are making strides to Singapore, launched their newly and even local engage with today’s tech savvy renovated showroom under the governments are consumers. “Future Retail” concept. As part also leveraging of the launch, a new key offering digital innovations Specifically looking at the in the form of the Virtual in order to connect automotive and transport Product Presentation (VPP) device was introduced to enable with consumers industries, regional tech companies, global car manufacturers and the display of car configurations within ASEAN. even local governments are also on a high-definition 3D displays leveraging digital innovations in in a highly realistic and detailed order to connect with consumers representation. Customers no within ASEAN. longer have to rely on their imagination, or need to see in A New Digital Experience person, the colors, options, and Grab, the region’s leading mobile packages they have chosen for taxi booking service network, their new BMW. is in 55 cities across Southeast Asia and the Grab app has In order to bring the showroom been downloaded onto over 45 to the customer, this year ASUS million devices1. Since its launch, Global introduced the availability the company has continuously of the BMW i Augmented Reality

1 https://www.grab.com/sg/press/business/grab-celebrates-fifth-anniversary-significant-user-milestones/ 2 https://www.grab.com/sg/press/tech-product/grab-launches-peer-to-peer-fund-transfer-in-grabpay-mobile-wallet- in-singapore/

74 Advancing ASEAN in the Digital Age Paul De Courtois

(AR) Visualiser to customers Human Capital exchange of best practices, in Singapore. Compatible with According to “Digital in policies, information and the new ASUS ZenFone AR Southeast Asia in 2017”, a technology will benefit all smartphone and powered by special report by We Are Social parties by creating a more Tango, Google’s smartphone and Hootsuite, 53 percent of favourable environment for the augmented reality technology, the combined population in sector to develop and flourish in customers can explore and pre- the region is online today, 47 the long run. configure their ideal BMW i3 or percent are active social media BMW i8 wherever and whenever users, 133 percent have mobile Public and Private Cooperation they chose to. subscriptions and 42 percent According to Jack Ma, founder are active mobile social users. and executive chairman of the In the public transport sector, In order to tap this customer Alibaba Group, “There are big Singapore announced in 2017 base and stay ahead of the problems that change the world. that users with NFC-enabled game throughout the digital If we are working together, mobile phones can simply tap revolution, organisations need that will make us understand in and out of the MRT, LRT and a different type of “human each other, appreciate each public buses using their phones. capital” than what was needed other, help each other.” When it The country is also exploring in the past. comes to the digital revolution, the use of health and fitness private companies can only do wearable devices as payment In the past, we looked for so much. Without support and modes for public transport rides. employees with technical skills cooperation with the public Thanks to digital innovations, who could build innovative sector, whether it be academic Singapore is well on its way to digital technologies. While institutions or government a “hands free” fare system for they are still important today, bodies, there is a ceiling to what public transport. organisations across the region can be achieved. need to search for employees The Road Ahead in ASEAN who live and breathe the digital For example, in order for It’s clear the digital revolution world. This new type of “human electric vehicle adoption to be is alive and kicking throughout capital” is understanding what a success, car manufacturers certain markets in ASEAN. a customer wants and needs can develop the vehicles, However, the question remains from a digital world and what technology companies can as to how ALL markets in experience they are looking for. develop the applications, and ASEAN across all industries can service providers can assist embrace digital innovations Regulations in the installation of charging in order to grow not only their With 10 different countries infrastructure. However, individual economies, but the within ASEAN, there are 10 without support from academic region as a whole. As the world’s different sets of regulations for institutions for R&D or 3rd largest economy with more every sector. The good news government organisations to than 630 million people, 70 is, as a region, we are making incentivise consumers to adopt percent under the age of 40, progress in this area. For the new technology, success will across 10 countries, ASEAN has instance, Singapore, Malaysia, be hindered. a tough road ahead, but not Thailand and the Philippines an impossible one. In order to recently signed a memorandum New Opportunities, New prosper in the next 50 years, of understanding (MoU) to Expectations a few key factors need to be establish the ASEAN Federation The proliferation of digitalisation considered. of Electric and Hybrid Vehicles has opened new doors to how Association (AFEHVA). The we live, work and play and

Advancing ASEAN in the Digital Age 75 Paul De Courtois

the demand for hassle-free experiences wherever we go has resulted in the development of new and innovative solutions. ASEAN is unmistakably at the forefront the digital revolution and, based on current and future developments, the region has a strong chance of maintaining this position globally.

Mr. Paul de Courtois began his career at the BMW Group in 1997 in the Sales department of BMW Group France. He then worked at BMW Group headquarters in Munich, BMW Group Hungary and BMW Group Poland before taking on his current position as Managing Director for BMW Group Asia in Singapore.

76 Advancing ASEAN in the Digital Age ASEAN’s path into the Digital Age Martin Hayes, President, Bosch Southeast Asia

The world is becoming to hit US$2.6 trillion by end 2017 interconnected at a phenomenal with an economic growth rate of rate. Today, the world’s 4.6 percent. This places ASEAN population stands at around 7.6 as one of the world’s biggest billion people and is reaching 9.8 and most dynamic economic million by 2050, as estimated by regions. If counted as a single the UN. According to Gartner, entity, it would rank sixth only Adaptive there will be approximately behind the United States, China, leadership 20.8 billion devices worldwide Japan, India and Germany. In is needed to connected to the internet by addition, ASEAN is one of the 2020. These are not only the fastest-growing internet regions overcome mobile devices and wearables in the world with over 480 challenges within that we have today, but also million users by 2020. an uncertain include sensors such as in cars environment. or machines. What’s more, the Most recently, the economy of Both business and cost of connecting a product ASEAN picked up the pace with political leaders will decrease drastically from a growth of five percent annually US$4 to US$2.50 in 2015 to in Q2 of this year, according should possess the US$2 to US$1 in 2020, thereby to an estimate of regional GDP knowledge and fuelling the growth of connected compiled by FocusEconomics. capability to be devices. This is ASEAN’s best performance agile, adaptable since Q3 2013. Such a momentum and resilient. ASEAN is in a prime position to is expected to continue in the leverage on such technological coming years, as the largest connectivity and harness its economies in the region have economic benefits. With a GDP pledged to increase infrastructure of US$2.55 trillion for the full investment with over US$60 year of 2016, ASEAN is expected billion a year until 2020.

While infrastructure investment ASEAN INTERNET USERS BY 2020 would lead to improvement in domestic and regional connectivity, it is the rapid ASEAN adoption of new technology ONE OF THE by ASEAN member countries FASTEST-GROWING INTERNET REGIONS that would be the biggest driver of economic growth and integration for decades to come. OVER 480 MILLION USERS BY 2020 However, digital transformation is not without its challenges, and

Advancing ASEAN in the Digital Age 77 MARTIN HAYES

these are the areas that require by detecting that an accident ensure that fair competition attention from ASEAN to reach has occurred, and dispatching is upheld, governments must its potential of fully leveraging emergency medical services not foster any protectionist such technology and advance in automatically to the accident measures that purely serve the the digital age. site. In the near future, the car interests of specific sectors as a product will be a part of a or companies. In ASEAN, an Complexity connected system where they effective competition policy In a Volatile, Uncertain, Complex will be able to communicate with should entail enforceable rules and Ambiguous (VUCA) world one another via the internet to that proscribe anti-competitive today, disruptive technologies warn of hazards and obstacles activities, so as to facilitate are redefining business models on the road, as well as to detect liberalization, as well as a unified and ruffling the feathers of vacant parking lots as they drive market and production base existing players in the industry. pass. And the next evolution within the region. Harmonized Policymakers have to take on the would be that this system of cars competition laws based on challenge to keep track on the is part of a larger system that international best practices latest technology developments comprises other sub-systems also need to be implemented and consider legislative such as traffic information, in all ASEAN member states at adjustments, facilitate the environmental situations and the national level. At present, adoption of innovative solutions GPS navigation - and this would merger control will almost while mitigating the risks they be when autonomous driving will certainly form part of nine of potentially entail. truly be available for everyone. the ten ASEAN competition law regimes. However, our We are seeing rising customer Adaptive leadership is needed suggestion is for all member states expectations and requirements to overcome challenges within to have mandatory notification such as product customization, an uncertain environment. requirements – something that the availability of 24/7 service Both business and political is not present at this point. and shortened delivery times. leaders should possess the New social behaviours are knowledge and capability Data Security also emerging and becoming to be agile, adaptable and A digital economy transcends prevalent, such as online resilient. The looming question physical boundaries and shopping, while new ecosystems is that while the private sector borders. The responsible use are appearing and merging with is embracing or spearheading and treatment of data forms the existing ones. Take a car for new technologies, methods and very basis of consumer trust that example. Bosch first started business models, how are the can also become a competitive making a car smart by installing local governments supporting advantage. Clear and precise automotive assistance systems business and economic growth, regulations and legislation on that detect imminent collisions but yet ensuring fairness and how to treat data are required to and help drivers brake ahead a level-playing field in the ensure transparency and avoid of time; or notify drivers if they industries? ambiguity. For privacy reasons, veer away from their lanes and certain national governments even steer the car back on track. Growing Competition legislated that local data must Next, we add connectivity to the Traditional markets are facing also be hosted locally, with car – by today’s standards, this increasing competition from new a tendency to build up even would be by way of the in-car entrants not only through vertical stricter data laws that may navigation system, for example and horizontal integration, but potentially restrict growth and eCall – an emergency response also by means of disruptive progression for cloud platforms system that helps saves lives technologies and services. To and other services. For non-

78 Advancing ASEAN in the Digital Age MARTIN HAYES

personal data, or “inactive data”, fast fish that eat the slow fish.” I clear rules are required to avoid believe that the future that he’s legal uncertainty. referring to is already upon us.

Cyber-attacks and cybercrimes It is true that ASEAN has the are top concerns for companies makings of a fast fish. However, and governments alike. No even the fastest of fish slow single IT system is 100 percent down in the face of obstacles. invulnerable. However, does The question is: do we allow that mean that we cut off access such challenges to slow us altogether, or embrace reality down, or do we work together to and invest in cybersecurity? overcome them? The potential With a rapidly evolving business is there, so let us come together landscape, companies will have and remain fast in the digital to choose the latter path and age. with it, its ever-changing risks. ASEAN governments need to strengthen cooperation within the region in combatting cybercrimes as part of the 2025 blueprint for political security that will foster greater confidence by companies and consumers alike. For instance, ASEAN countries should adopt internationally-accepted encryption standards.

Fast Fish or Slow Fish? As respectable Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum said in October last year, “In the future, it will not be the big fish that eat the small fish; it will be the

Martin Hayes has helmed the business operations of Bosch in Southeast Asia as President and in Singapore as Managing Director since 2011. A founding member of the EU-ASEAN Business Council, Mr. Hayes is passionate about promoting shared business interests in ASEAN, especially in the areas of technology and innovation.

Advancing ASEAN in the Digital Age 79 Transformational Technologies Are Taking Off: Can ASEAN Benefit? Manu Bhaskaran, Advisor, CIMB ASEAN Research Institute and Partner, Centennial Group

The world is seeing an unusual and adoption is rapid. All confluence of multiple three – physical, biological and technologies reaching take off digital - are deeply interrelated: points almost simultaneously. that means that the various Clichés such as “game changing” technologies benefit from each and “disruption” do not do full other, feeding off and reinforcing justice to the dramatic effects each other to produce an We could be in that these technologies will have unprecedented rate of change an era similar on virtually every aspect of our that looks like changing the to the early 20th lives. In this article, we will focus landscape so thoroughly that on what these changes mean for some observers have taken to century when ASEAN’s economies and how labelling them collectively as the confluence well ASEAN is likely to cope with the fourth industrial revolution. of electricity, such monumental challenges as Second, the economic potential the internal well as opportunities. is sizeable. Third, there is also a combustion high risk of economic disruption engine and new An array of new technologies or dislocation. emerging manufacturing There are several major The economic gains could be processes technology trends which massive unleashed many are important. There are We could be in an era similar decades of technologies that will affect to the early 20th century when economic growth. our physical world including the confluence of electricity, the nanotechnology, advanced internal combustion engine and materials, renewable energy new manufacturing processes such as solar and wind, 3D unleashed many decades of printing and automation. Then economic growth. Here are there are biological technologies some likely broad economic with genome mapping and tissue implications: engineering being the most prominent. Then there are digital First, we should see higher technologies such as fintech economic growth as a result of (including blockchain) as well as two forces: social-mobility-analytics-cloud • A pickup in investment: The computing – and, of course, the high returns promised by these internet of things (IOT). new technologies will spur a new wave of investment. So These technologies are diverse transformational are these but share a few features. First, emerging technologies that the rate of technological change much of the existing capital

80 Advancing ASEAN in the Digital Age MANU BHASKARAN

stock will become obsolete premium on scale favouring such as e-commerce, fintech and will need to be replaced. countries with large populations: and SMAC are proving to be less This higher investment will add It cannot be a coincidence labour-intensive than traditional to demand and raise economic that the biggest winners from manufacturing sector. Even the growth. recent technological advances manufacturing jobs of the future have been the likes of Apple, will likely require less menial • Accelerating productivity Facebook, Google and Amazon workers to put parts together growth will also improve from the United States as well and more knowledge workers economic growth: Automation as Alibaba, Tencent and Baidu to operate and troubleshoot and robotics will result in from China. The ability to reach automated assembly lines. The greater efficiency as more massive scale quickly by having labour market will likely see output is generated with the easy access to a huge market significant disruptions as these same amounts of inputs. The seems to be becoming more emerging technological trends IOT will also spur productivity important. take root. gains as interconnected smart devices lead to time savings • Capacity to leapfrog could Still, this is not the entire story. for the users. E-commerce and help less developed economies: There are several reasons why fintech platforms will also allow The new technologies offer the impact on employment may consumers to purchase goods the laggards in economic not be as malign as some of the and services without being development the scope to alarmist reports claim: physically present and would leapfrog ahead of others. In India likely cut out the middlemen. and Africa, for example, mobile Technology comes with Once artificial intelligence (AI) technology has helped spawn overhead costs which create is integrated with the other advances in finance which are new kinds of jobs: For example, technologies, smart factories, promoting financial inclusion how many analysts forecast warehouses and even devices and new payments platforms. the massive expansion of the will learn from their surroundings cyber security industry when and become more efficient the Third, employment patterns the internet emerged? The fact more they are used. And this is will also evolve in different is that all new technologies only the beginning! directions: come with side effects and There is much talk about the spillovers that need to be Second, the structure of destruction of jobs as a result managed. Recall how the advent competitiveness could change: of these technological changes of the motor car resulted in the • We could see more re-shoring, given the automation potential growth suburbs, a whole new or the return of manufacturing and the possibility that robots, industry of support services back to developed countries: for instance, could perform such as traffic lights and traffic Automation and the use of AI better at many occupations than management and promoted could well raise productivity human beings. industries such as local tourism. in developed economies so Indeed, by raising economic high that their unit labour It is indeed true that automation, growth and expanding the costs fall sufficiently to make robotics and AI could displace a scope of business opportunities domestic manufacturing more large number of jobs, not limited in so many unpredictable ways, viable compared to relocating to blue-collar factory jobs but the demand for employment as manufacturing to economies even white-collar professional a whole will rise. More efficient with low labour costs. jobs such as accounting and the ways of doing things in areas as back offices of financial services. diverse as manufacturing and • There could be a greater Furthermore, rising industries legal services, opens the way for

Advancing ASEAN in the Digital Age 81 MANU BHASKARAN

higher salaries for the specialists caused at the industry level. How attract many of the global and so higher demand as they strong is the bottom up capacity giants that are emerging from spend more. With less of their to adjust to these changes and the fourth industrial revolution. time taken up by mundane will the top down policy and Its business eco-system may, tasks, they will be able to be regulatory structures impede or however, not be as friendly as more creative as well. facilitate such adjustments? it needs to be for companies to innovate and compete. The What will determine who the This analysis suggests that the good news is that President winners and losers are? benefits of economic change Joko Widodo’s administration One thing is clear – we are might be uneven across ASEAN. appears to understand this and entering a period tumultuous Most ASEAN economies is reforming regulations steadily. change which will bring have actually improved their opportunities as well as economic resilience since the • Viet Nam and the Philippines dislocation. It strikes us that two Asian crisis of the late 1990s. are similar in some respects factors will determine which The divergent performances to Indonesia – their large countries will do better out of could come from differing levels populations offer scaling this period than others. of flexibility: opportunities but their business environments need to see more The first determinant is resilience • Thailand and Malaysia, for regulatory reforms. to shocks. In a period of instance, have shown a capacity dislocation, economies will have for bottom up entrepreneurial Overall, we think that the ASEAN to deal with greater volatility ingenuity in adjusting to challenges region can address impediments and more frequent stresses or and exploiting new opportunities, to successful adaptation to even outright shocks. Countries despite some challenges. the new economy and has the need to be able to absorb these potential to emerge as a great shocks and bounce back. For • Singapore has demonstrated node of growth and dynamism that they need to be diverse, a tremendous capacity for top in the world economy. have a strong capacity for policy down mobilisation of resources responses and ensure that for development but may not their fundamentals especially be as strong in terms of the financial structures are strong. entrepreneurial flair that is so critical in determining successful The second determinant is adaptation to this new world. the flexibility to adjust to competitiveness challenges • Indonesia offers tremendous and the dislocations that will be scale economies which will

Manu Bhaskaran is an Advisor, CIMB ASEAN Research Institute (CARI). Mr. Bhaskarans is a Partner of the Centennial Group, a strategic advisory firm headquartered in Washington DC and, as Founding CEO of its Singapore subsidiary Centennial Asia Advisors, he coordinates the Asian business of the Group which provides in-depth analysis of Asian macro trends for investment institutions, government agencies and companies with interests in Asia, leveraging off his more than 30 years of studying Asia.

82 Advancing ASEAN in the Digital Age ADVANCING ASEAN IN THE DIGITAL AGE Tunku Zain Al-’Abidin ibni Tuanku Muhriz, Senior Fellows, CIMB ASEAN Research Institute

Identifying the beginning of the and its dissemination on social “digital age” depends on which media platforms further fuels definition and criteria adopted, a confrontational and sceptical but certainly there was a time mindset amongst citizens. when the rapid acquisition of digital technology by middle class The two now classic examples populations - represented by that relate to this phenomenon Across the the personal computer, internet are the election of Donald Trump world we see connectivity and mobile phones as President of the United States examples of - was supposed to herald an era and the United Kingdom’s vote where greater communication, to leave the European Union. greater distrust, knowledge exchange and virtual The response to these events in societal division interaction was supposed to turn has also triggered reactions and security have eliminated barriers across ranging from those advocating challenges to communities and nation states, for a return to constitutional nation states promoting peace, mutual principles on the one hand, to catalysed by respect and the advancement of those who feel that only radical democratic values. change can result in sustained the very same peace and prosperity once again. technology. That promise has not been universally fulfilled. Across the In ASEAN too, we see evidence world we see examples of greater that similar narratives may be distrust, societal division and unfolding. Despite the existence security challenges to nation of the ASEAN Charter and states catalysed by the very regular public commitments same technology. The propensity to the development of the of authoritarian states in ASEAN Community, across the controlling the media continually region we see how divisions catches up with technological among ethnic, cultural, religious, advancements, and in some linguistic, geographical or class cases the state has successfully lines persist, or in some cases pressured so-called champions are being widened, often in of free speech to modify their pursuit of political objectives. In principles in return for market other words, deliberately sowing access. But even in democracies, division can lead to electoral public confidence in traditional rewards or the consolidation of institutions has been dented, power. accompanied by polarising ideologies and radical politics. The most graphic and egregious The proliferation of fake news example is the tragedy affecting

Advancing ASEAN in the Digital Age 83 Tunku Zain Al-’Abidin ibni Tuanku Muhriz

the Rohingya in Myanmar that is and indeed it is often noted overarching legal system, and increasingly being described as that the greatest contributions don’t create a common currency “ethnic cleansing”. But all across to intra-ASEAN interaction and without an understanding of the the region political actors can connectivity have been enabled economic consequences. As be seen to be making appeals to by businesses. I write, another lesson will no narrowly-defined constituencies doubt be drawn from the EU’s to strengthen their position, These are important drivers response (or lack thereof) to stultifying democratic progress. in a world where economic demands for independence (and nationalism coupled with the legal status of referenda on Despite this, it must be political authoritarianism are that question) in Catalonia. recognised that many advances (once again) becoming a new in the ASEAN agenda have been normal, championed as they Advancing ASEAN in the digital made by these leaders or their are by the world’s traditional age will no doubt require its predecessors. Commemorations and emerging superpowers. chief proponents to understand of the 50th anniversary of Yet, a key question will be how these lessons, but before that, ASEAN have pointed out of successful non-political agents an important prerequisite is course that the bloc’s raison can be in such an environment. working towards a common d’être has changed over the five understanding of the ASEAN decades, but even to maintain The answer will come from within Charter and the pillars of the peace between countries the cohort of young middle class ASEAN Community at the very of such diverse cultural and ASEAN citizens who have fully least - if not the introduction religious populations and forms embraced the digital age. It is of ASEAN-related history and of government is a feat in itself, they who will be assessing how geography components in when some other regions of the well the promises of ASEAN - schools across the region. That world have fared far worse. apart from their own national is a crucial link in the necessary institutions - are serving them. step of transferring participation Explicit ASEAN agendas If participation with the regional in, and ownership of, ASEAN that comprise dialogues and agenda remains too aloof and from the political and diplomatic conventions towards freer remote, they may conclude that elites to a wider base of citizens. trade, greater connectivity ASEAN is irrelevant to them. and cooperation on problems such as human trafficking It has long been a staple of Without these ingredients, or transboundary pollution conferences on ASEAN to ASEAN’s peoples may turn have indeed helped to raise cite the lessons we are able towards greater polarisation and living standards for potentially to learn from the European division, with the advent of the millions of people across the Union: don’t transfer too much digital age serving destructive, ten countries. These in turn (any?) sovereignty, be careful rather than cooperative, encourage the private sector and about establishing a common interests. civil society to push for more, parliament or adopting an

Tunku Zain Al-’Abidin is Senior Fellow at CARI and the Founding President of the Institute for Democracy and Economic Affairs. A regular columnist in the Malaysian press since 2008, he is a trustee of four foundations, an independent director of two public listed companies, a director or advisor of several educational organisations and a patron of numerous cultural initiatives.

84 Advancing ASEAN in the Digital Age Getting E-FIT: From workforce to thinkforce Donald Kanak, Chairman, EU-ASEAN Business Council

ASEAN has much to celebrate on Automation is not limited to its 50th birthday – it is the fifth manufacturing - Amazon and largest economy worldwide1; Alibaba have launched cashier- and it has raised its citizens’ free stores. About four of every standards of living steadily in a five Wall Street firms have largely peaceful environment. already implemented, or plan to ASEAN’s success has been built use, some form of AI2, and some ASEAN only on strong fundamentals. With law firms are automating client received 1.5 the world’s third largest work name checking and document percent of the force, and globally competitive drafting. wages, ASEAN has benefited global total [new greatly from the diffusion of Looking ahead, the changes venture funding], technology and the migration in the nature of work require less than the of work to the most efficient ASEAN to transform its amount received locations. However, fundamental workforce into the world’s third by Israel, which changes in the paradigm of largest “think force”. To do this, has just 1 percent global competitiveness are ASEAN needs to get “E-FIT”, afoot. The advantage of low improving its education, finance, of ASEAN’s labor costs is being eroded by infrastructure and technology. population and technological advances such as just one-eighth of natural language processing, Education ASEAN’s GDP. machine learning, big data The transformation from analytics, and connectivity workforce to thinkforce starts between humans and machines. with education. In order to make the next 50 years just as celebration-worthy, ASEAN needs to continue ASEAN will need to rely on to improve its compulsory more diverse pillars of growth education (i.e., up to 15 years capitalising on technology. old). In OECD’s PISA, Singapore was #1 across science, In fact, the future is here already. reading and mathematics, and There are Chinese clothing encouragingly, Vietnam was manufacturers opening factories #8 in science, and average manned by robots (and some on reading and mathematics. human supervisors) in Arkansas, Thailand and Indonesia were USA – much closer to US markets below the OECD average in than competitors in ASEAN. all 3 areas, and other ASEAN

1 “GDP (current US$)”, World Bank (as of 12 Oct 2017). ASEAN #5 after US, EU, China and Japan 2 Greenwich Associates

Advancing ASEAN in the Digital Age 85 DONALD KANAK

countries were not covered. playing field for different parties multi-year effort from both to participate and new modes private and public stakeholders The future challenges extend of individualized learning taking are required to speed-up capital to higher education. In terms advantage of mobile technology. markets development, from of researchers per million of establishing benchmark assets, population3, Singapore ranks Finance promoting a deep and broad #6 worldwide, Malaysia #37, The financial industry is not only investor base, encouraging while Indonesia, the Philippines, one of the largest employers of issuance, to setting transparent Thailand and Vietnam rank below skilled workers; its development rules and friendly taxation policies. #50. Ranking in research foretells also attracts capital and funds This will allow ASEAN to attract levels of innovation. For example, long-term investments. capital, support development and Singapore leads ASEAN ranking enable all aspects of the economy at #13 in patent applications per While ASEAN’s savings rates are to flourish. million of population4, Malaysia generally high, most savings are in next at #36, while Indonesia, cash, bank deposits or property. Interconnectivity for the Philippines, Thailand and Capital markets (stocks, bonds Competitiveness Vietnam rank below #70. and money markets) are critical Strengthening intra- to channel the savings into long- region infrastructure and Even if students do not work in term productive investments. interconnectivity will lower laboratories upon graduation, These include physical production costs, create a larger education in science and infrastructure (such as transport market, and encourage inward mathematics is important as they and communications), social investments in supply chains. build skills that allow humans to infrastructure (such as schools Closing the infrastructure interface with and improve the and hospitals), and funds to gap through public and functions of machines. These grow business and industry, private efforts will be critical skills include problem solving, including new ventures. in information connectivity. critical thinking, interpretation This includes not only ports, and openness towards new ASEAN’s capital markets are less rail, roads and power but also ideas, and the willingness to mature relative to developed telecommunications and data. challenge old ideas. Education economies. The ratio of floated In 2016, only 40 percent of that strengthens communication book value of equity and bonds ASEAN’s population had and develops relationship skills outstanding to GDP – a measure internet access6. will also be needed. of capital markets maturity - was only 34 percent in Indonesia, Strengthening interconnectivity Improving on all those fronts will 36 percent in Vietnam and 65 in ASEAN is not just about require greater investments in percent in the Philippines in infrastructure. It also requires education - private and public, 2016. The same ratio was 262 increasing commitment to for-profit and charitable – and in percent in the US and UK, 282 remove trade barriers and every stage of a child’s life, from percent in Japan and 191 percent frictions. Doing so is estimated early childhood development, in South Korea5. to increase GDP by 9.3 percent7. through to compulsory This will boost ASEAN’s share education and higher education. Long-term planning from the of global trade – critical as It also requires opening up the government and concerted, both total merchandise export

3 Global Innovation Index 2017 4 The World Economic Forum Global Competitiveness Index 2016 5 Floated book value from Bloomberg; Bonds outstanding from Asia Bonds Monitor 6 ITU 2016 statistics ”Percentage of Individuals using the Internet” 7 “Enabling Trade Valuing Growth Opportunities”, World Economic Forum, 2013

86 Advancing ASEAN in the Digital Age DONALD KANAK

ASEAN’S R&D SPENDING IS LAGGING BEHIND WORLD LEADERS

RANKS #15 2.2% RANKS #2 SOUTH KOREA RANKS #29 1.3% 1/4 ASEAN

RANK BELOW #50

ASEAN’S GROSS EXPENDITURE ON ON A VALUE BASIS RESEARCH AND DEVELOPMENT AS A ASEAN IS SPENDING ONE-QUARTER OF WHAT PERCENTAGE OF GDP SOUTH KOREA DOES

and inflow of foreign direct does and roughly the same as should work on policies to investment peaked in 20148. Israel (ranked #1). encourage investment, whether Although work is underway to domestically or by foreign address issues such as non-tariff Another measure to consider is companies, and also develop an barriers, customs procedures new venture funding (including overarching strategy to create and trade facilitation, standards angel, venture capital and the interrelationships among harmonization and intellectual corporate venture capital global technology companies, property rights protection, funding). While venture funding local education and research speedier integration across for Asia increased dramatically institutions, and government the region are needed to stay from US$9.5B or 6 percent of the resources and incentives. competitive. global total in 2012 to US$98B or 28 percent in 201610, this was Conclusion Technology dominated by China. ASEAN ASEAN has made exceptional Innovation and the digital only received 1.5 percent of the progress in its first 50 years, but economy are driven by research global total, less than the amount it must become an innovation and technological breakthroughs. received by Israel, which has just center and equip its people to However, ASEAN’s gross 1 percent of ASEAN’s population compete effectively in the digital expenditure on research and and just one-eighth of ASEAN’s economy. With continued focus development (R&D) as a GDP. Today, Israel has the third on becoming E-FIT - improving percentage of GDP is low9. most companies listed on the education, developing financial While Singapore ranks #15 with tech-focused NASDAQ stock markets to mobilise long-term 2.2 percent and Malaysia #29 exchange after the US and China11. capital, building inter-connectivity with 1.3 percent, Indonesia, the and investing in technology and Philippines, Thailand and Vietnam Both increasing the level of R&D research -- ASEAN can fulfill its rank below #50. On a value basis, investments and coordinating potential and become a leading these six ASEAN countries are and concentrating the spending source of global growth in the spending just one-quarter of is key to innovation of new next decade. what South Korea (ranked #2) technology. This means ASEAN

Don Kanak is the Chairman of the EU-ASEAN Business Council, the primary voice for European businesses in ASEAN.

8 ASEANStats as of 30 June 2017 9 Global Innovation Index 2017 10 CB Insights. Only has data for 8 ASEAN countries: Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam 11 “Israel is a tech titan. These 5 charts explain its startup success”, The World Economic Forum. 19 May 2017

Advancing ASEAN in the Digital Age 87 Why ASEAN Needs Policy Guidelines to Power and Protect its Emerging Digital Industrial Economies Wouter Van Wersch, President & CEO, GE ASEAN & ANZ

IoT SPENDING ACROSS ASEAN

YEAR 2020  35% GROWTH US$7.5bn As the digital YEAR industrial playing US$1.6bn field is vast, wide, 2015 and borderless,

drawing in players ASEAN’s industrial roots are Like Singapore (number 10 in from all parts deep, diverse, and developing the DGMCI rankings), Malaysia, of the economy, constantly to embrace new Indonesia, Thailand, and Viet developing opportunities and technologies. Nam have invested in programs fundamental designed to enhance their ‘rules of the As reported in the “Fifty Years On, Industrial Internet of Things Southeast Asia Emerges as Global (IIoT), or Industry 4.0 readiness. game’ to Growth Leader” story published Malaysia is following a National support sector by Bloomberg, factors such IoT Strategic Roadmap while development is as growing domestic demand, Thailand, Indonesia, and Viet a pressing need infrastructure improvements, Nam, have similar campaigns in across ASEAN. and lower labor costs have play. Across ASEAN in fact, IoT helped ASEAN emerge as strong spending is expected to grow manufacturing alternative to in value by 35 percent from an neighboring China. estimated US$1.6bn in 2015 to reach US$7.5bn by 20202. In addition, according to findings from the 2016 Deloitte Global 50 billion connected devices by Manufacturing Competitiveness 2020 Index (DGMCI), Malaysia, Indonesia, Viet Nam, and These plans underline the Thailand are anticipated to be importance that governments among the 15-most competitive across ASEAN have placed in manufacturing nations in the maximizing the potential of IIoT world by 2020.1 to transform their economies.

1 https://www.nst.com.my/news/2016/05/144515/mighty-five-nations-be-asian-powerhouses 2 https://www.dealstreetasia.com/stories/iot-developments-in-asean-highlight-economic-potential-in-the-region-64946/

88 Advancing ASEAN in the Digital Age WOUTER VAN WERSCH

Cisco IBSG predicts that 50 customers, powered by Predix Privacy - billion devices will be connected – GE’s platform for the Industrial Governments should not adopt to the Internet by 20203, while Internet. privacy regulation designed market research company, for the consumer internet and MarketsandMarkets estimates We work with industrial apply those same policies the IIoT will be worth US$195 customers around the world for the Industrial Internet. billion by 20224. to advance their Industrial Data generated by industrial IoT ambitions. Through these equipment (unless healthcare For GE, the Industrial Internet collaborations with customers related) rarely includes anything refers to the integration of physical - whose industrial assets cross that could be construed as machines with networked sensors many borders – we have personal data. Most of the data and software. Industrial Internet identified a need for regulation/ collected from locomotives, technologies gather data from policies to expedite the turbines, airplane engines, and machines and analyzes it, and development of this space. oil wells concern the function of the combination of technology, the machine itself. the curation of vast quantities Policy guidelines of data, and predictive analytics Freedom of Contract - can have a profound impact on Industrial Internet regulation Industrial Internet services not only industrial processes, but today is in a premature are B2B, or B2G, with legally also health, energy efficiency and state. As the sector develops sophisticated parties on both the lifespan of industrial assets, however, policymakers will sides. Given this, contracts as well as the safety of industrial better understand the space are proving to be an effective workers. and appropriate regulations. means to address a range of We believe a multi-pronged issues with potential public While the Industrial Internet is approach is the best way to policy ramifications such as relatively young, it is progressing harness its full potential and key liability, data rights, customer quickly driven by strong private- policy areas include entitlement to software updates, public sector innovation aimed and intellectual property. at promoting interoperability Data Sovereignty - Contracts also offer more for industrial customers. GE Large aggregated data sets flexibility than legislation as began its Industrial Internet yield the greatest insights, to Industrial Internet innovation push as an internal project in the benefit of Industrial Internet continues. Government policy 2011 to understand how to use users and society. Given this, should respect the enforceability data from GE machines to gain governments should not adopt of contracts and promote more efficiency from our assets. laws or policies (without sound freedom of contract. GE then saw the opportunity public policy justification) that to do the same thing for its require data to be located in a Data Access and Use – customers, creating GE Digital particular jurisdiction, or restrict Rights to industrial Internet in 2015 as the business unit to transfer of data across borders. data are best handled through take this forward. This business Laws that restrict aggregating contractual arrangements, and delivers applications in Asset data across borders deny the not by government imposed Performance Management (APM) countries that enact such laws rights. Many Industrial Internet and Field Service Management the full benefit of the Industrial companies determine issues (ServiceMax) to drive value for Internet. of data ownership through

3 https://www.cisco.com/c/dam/en_us/about/ac79/docs/innov/IoT_IBSG_0411FINAL.pdf 4 http://www.marketsandmarkets.com/PressReleases/industrial-internet-of-things.asp

Advancing ASEAN in the Digital Age 89 WOUTER VAN WERSCH

contracts with customers, and private-sector led groups Engagement – suppliers, researchers, and are the most effective means Governments have clear other parties – the contracts are to maximize innovation and interests around promoting negotiated by organizations interoperability. Governments the Industrial Internet and with a deep understanding of that adopt country-specific digitization of businesses. They the context in which the data will Industrial Internet standards should consider using tools such be developed, shared, and used. risk fragmenting the Industrial as research funding, international The sheer variety of scenarios Internet, and cutting their cooperation agreements, and involving technical data in B2B countries off from the benefits infrastructure spending to and B2G dealings are best of insights based on global data promote new technologies. In handled by bespoke contractual sets. addition, government policies arrangements not one-size-fits- should encompass not only all ownership rights, or access Intellectual Property – manufacturing, but a broad rules imposed by governments. Governments should not range of business sectors and discriminate, based on field of applications – investments in Cybersecurity – technology, about the issuance digital infrastructure should Cybersecurity regulation should of patents. Given the prominent be considered as important be technology neutral with respect role that software is playing in and beneficial as physical to where data is processed and the functioning of the Industrial infrastructure projects. stored, and not discriminate Internet, it is vital that software against the Cloud. As in other areas innovation is protected under As the digital industrial of IT, the nature of cybersecurity robust patent and IP laws. In playing field is vast, wide, and threats targeting the Industrial software, like other technology borderless, drawing in players internet is constantly changing, fields, robust IP protections from all parts of the economy, and the response from vendors incentive R&D investments that developing fundamental ‘rules must similarly evolve. drive progress. of the game’ to support sector development is a pressing need We believe voluntary, private- Workforce Development – across ASEAN. sector led, performance and The Industrial Internet represents risk based cybersecurity a significant opportunity for While Singapore, Malaysia, standards, such as the U.S. faster productivity growth, but Thailand, Indonesia, Viet Nam, National Institute of Science with accompanying potential and other nations, deserve Technology (NIST) framework disruption to job markets. plaudits for their Industrial IoT is the most effective approach Governments should adopt foresight, it is imperative they to promoting cybersecurity. a comprehensive approach ensure sector policymaking While cybersecurity is a shared to leverage digital industrial receives as much attention, responsibility, government innovations for faster job priority, and action, as high- has a unique role to play in creation with measures to profile initiatives such as protecting private-sector critical support digital training and infrastructure development, infrastructure from nation-state retraining programs, labor technology implementation, attacks and cyberterrorism. market reforms, redesigned education, and smart city plans. social safety nets, and measures Standards – to promote digital innovation, A “working in tandem” plan is Given we are in the early and facilitate the adoption of highly recommended, and given adoption phase for the Industrial skills-augmenting technologies. the pace of change, it may be Internet, its global nature, the difference between a well- and pace of innovation, open Direct Government paced, step-by-step digital

90 Advancing ASEAN in the Digital Age WOUTER VAN WERSCH

industrial transformation, or being caught in a perpetual cycle of playing ‘catch up.’

Wouter’s career in management, sales, and marketing, began with Vivendi Universal, and includes senior positions with Airbus, and Alcatel in China and Indonesia. He joined Alstom in 2006 as VP Sales Europe and promoted to SVP Asia Pacific in 2011. He was appointed Growth Leader in the GE- Alstom integration in 2014 before taking his current role in 2015.

Advancing ASEAN in the Digital Age 91 Building for Billions: Core Lessons from Google Sajith Sivanandan, Managing Director, Google Malaysia, Viet Nam, Philippines and New Emerging Markets

ASEAN’S FUTURE INTERNET USERS

1/3 WITH INTERNET ACCESS NEXT BILLION 1/2 INTERNET USERS The people WITH NO coming online INTERNET ACCESS through 600M smartphones are FROM ASEAN using the Internet 7.5 BILLION PEOPLE in radically new Would it surprise you to know for billions.” ways, and there that out of the 7.5 billion people is a massive in the world, more than half still Building for billions means do not have access to Internet - designing new technology for potential for something one-third of the world everyone from the very start creativity and takes for granted. Out of the of the design process. The innovation in next billion users of the Internet people coming online through trying to help that are coming from this group smartphones are using the them solve their of as-yet unconnected citizens Internet in radically new ways, problems. of the world, 600 million are and there is a massive potential from the ASEAN region, and for creativity and innovation in virtually all of them will become trying to help them solve their familiar with the Internet only problems with the technology via a smartphone. A device that they have in their hands. The didn’t exist just a decade ago! future of the Internet will be written by these people and At Google, we’ve been mindful more than ever, tech companies of these ‘mobile first’ user like Google that grew up during behaviors for a while now as the Personal Computing boom a company - the majority of need to focus on reshaping our whom reside in the Asia Pacific apps, services, and platforms region. They, and the incoming to work for the majority of the billions of new users across mobile first planet. Southeast Asia, South Asia, Latin America and Africa are A decade ago the One Laptop part of a trend that is about to Per Child initiative planned to redefine the Internet: “building build a US$100 laptop for every

92 Advancing ASEAN in the Digital Age Sajith Sivanandan

child on the planet. In recent data consumption or allowing Optimize for speed. For users on years, smartphones look to content to be taken offline 2G, it can take 25 seconds to load be partially fulfilling that goal for later use. We invest into a webpage and use 1MB of (very of making technology more making more languages work expensive) data. So in 2015 we accessible. Google’s Android on smartphones through open- started optimizing webpages mobile operating system alone source fonts, flexible keyboards, for users on slow connections powers two billion active handwriting and voice inputs, so in Indonesia, India, and Brazil devices. Smartphones, which that people don’t have to learn which load four times faster now come cheaper than US$100, English — or learn to type — just and use 80 percent fewer bytes. have more power than a laptop to use the Internet. And we are This did not just improve users’ from ten years ago and millions piloting new apps that serve experiences but publishers are of apps available for download. new Internet users’ specific getting 50 percent more traffic needs, including YouTube Go, an from these lighter web pages. We should not become offline-first video app that works complacent, however, that during low or no connectivity. Speak multiple languages. In the spread of smartphones India, we found that people completely bridges the digital But the work of one company would switch between Hindi divide. The push for more isn’t enough. The biggest and English to figure out which affordable smartphones is change we can make is by language provided the best far from over. There is a lot of empowering other developers information. In response, we potential to create cheaper and companies to solve these set up what we call “tabbed phones that don’t sacrifice much issues. There are three core search,” which lets you quickly quality. But when thinking about lessons that Google’s learned flip between the search results building for the billions who will over the last few years building in each language. Given this use those phones, we need a for billions, and in sharing them option, users are searching 50 second revolution to solve the we hope other app developers percent more. next three major gaps: reliability and startup entrepreneurs can of connection, data costs and more quickly reach the newest While these concepts might relevant content. billion Internet users: seem simple, they’ve proven remarkably powerful as core At Google, we have a team called Reduce data required to use design principles. And if you Next Billion Users who travel the your apps. A third of global want to know more, we have world to hear about people’s smartphones have less than 1 GB more tips for designing for Internet pain points and think up of storage, so apps need to be the new reality of the world’s new solutions. Their experiences small. India’s Ola Cabs fixed the Internet at developers.google. led them to build programs problem of heavy native apps com/billions. like Google Station, a model by creating a Progressive Web for improved connectivity that App (PWA) — a lightweight Today, there are 2.8 billion is already bringing millions of mobile website that feels like smartphone users globally, people high-quality Internet an app.Their PWA is only 0.5MB and there will be hundreds of access at more than 100 and takes up just 50KB of data millions more by the end of the Indian Railways stations. We on its first payload and then 10 year. The Internet is becoming have meanwhile adapted our KB on subsequent loads. This truly global, and we believe that Search, Chrome, YouTube, and greatly opens up the number of this will give developers from Maps apps to work for users people in India who can call up Southeast Asia, Africa and Latin with unreliable or intermittent an Ola cab. America an unprecedented connectivity, through reducing new canvas for their talent

Advancing ASEAN in the Digital Age 93 Sajith Sivanandan

and entrepreneurialism. And as people come online for the first time, we must train more developers in those countries, since they are the closest to local users’ needs and can build apps that work best for them. And this is great for the globe. Building within the kinds of constraints the next billion users face gives developers a head start in the new rush to the wider trend of building for billions. Catering to the Internet’s next billion users is not just about expanding familiar tech to new places, but developing completely new things for the future.

Sajith Sivanandan is the Managing Director of Google Malaysia, Viet Nam, Philippines and New Emerging Markets where he oversees sales and business development operations as well as developing strategic plans in these countries. He was previously Head of Travel for Google Southeast Asia.

94 Advancing ASEAN in the Digital Age ASEAN primed for a digital future Kevin Martin, Regional Head of Retail Banking and Wealth Management for Asia Pacific, HSBC

Half a century into the ASEAN everything from messaging to story, the growing importance payments, now has 963 million of digital innovation will shape regular users1. the next wave of economic development. True, neighbouring ASEAN, with its 10 member countries, is not As the Association of Southeast China. The region spans a huge ASEAN is on the Asian Nations (ASEAN) turns 50 array of cultures, languages, cusp of an all- this year, the economic strides and political systems. Levels encompassing that have made the regional of affluence, economic and bloc the world’s seventh- infrastructure development, and digital largest economy will set it up internet and mobile penetration transformation, for sustained growth, increased vary widely. with technology prosperity and exciting promising to prospects for the next half Still, the region holds some of offer a new way century. the same potential that can of life and better already be witnessed in China. Technology, and how it will experiences for continue to change the way Take a look at the sheer numbers. consumers in this people live, work, shop, dine, At 630 million or so, ASEAN’s dynamic region. travel and save, is perhaps one population is less than that of the most fascinating advances of Wechat’s user base. But 15 in recent times, and one that years from now, the region will presents vast opportunities have added another 120 million ahead. inhabitants2 - the equivalent of one-and-a-half Germany’s3. China gives us a glimpse of the transformative power of ASEAN’s population is also one online and mobile innovation in of the world’s youngest. For a young, increasingly affluent, example, half of the population and tech-savvy population. of the Philippines, and over From a standing start in 2003, 40 percent of Indonesians are the country has become the under 25 years old4. largest e-commerce market in the world. Likewise, Tencent’s Meanwhile, disposable incomes Wechat app, which launched as are gradually rising in much of recently as 2011 and can now do the region. ASEAN as a whole,

1 Tencent q2 earnings: Tencent Announces 2017 Second Quarter and Interim Results 2 HSBC Global Research: ASEAN Economic Community, 19 November 2015; World Bank: Population 3 World Bank: Population 4 Index Mundi

Advancing ASEAN in the Digital Age 95 Kevin Martin

NUMBER OF MIDDLE CLASS HOUSEHOLDS IN ASEAN

125 MILLION MIDDLE CLASS HOUSEHOLD BY 2025

62.5 MILLION 2010

Source: McKinsey: Understanding ASEAN, Seven Things You Need to Know

will have some 125 million three-quarters of transactions will come to take for granted middle class households by 2025 are still paid by cash7. And a world in which they can – roughly double the number in while Asia-Pacific, as a whole, chat with friends online 24/7, 20105. accounted for 40 percent of and shop and access banking global e-commerce sales in the services (from remittances and All this means is that for first quarter of 2017, the vast payments, to foreign exchange businesses, bankers and majority of those sales went to and stocks, credit cards and investors, ASEAN offers a large, China, Japan, Korea, Australia, personal loans) via their phones dynamic and eager consumer and India rather than Southeast easily and securely around the base – and one they can tap Asia8. But that leaves plenty of clock. and service increasingly easily room for growth, and positions via digital tools and mobile the region as the next frontier It’s already clear that people in handsets. for e-commerce and digital the region are receptive to digital payments. tools. A recent HSBC survey Take internet penetration. Last found that four in five home year, only about 260 million Meanwhile, it is easy to see that buyers in Malaysia, for example, ASEAN inhabitants were ASEAN’s young consumers, used online channels to research internet users – but that number just like their “millennial” their recent property purchase, is expected to soar to 480 counterparts in China, the U.S. and over three-quarters went million by 20206. or Europe, are highly likely to online for financing options9. want to incorporate online and Similarly, in much of the region, mobile innovation into multiple Amid all this change and cash-on-delivery, rather than aspects of their lives. potential, it is no wonder that digital payments, still dominates ASEAN has begun to spawn a when it comes to paying for As internet and mobile number of fintech companies. online purchases: an estimated penetration pick up, they too In Indonesia, for example, the

5 McKinsey: Understanding ASEAN, Seven Things You Need to Know 6 Google and Temasek Presentation; Bloomberg “Google. Temasek See S.E. Asia Web Economy Reaching US$200 Billion 7 eCommerceIQ: Why Everyone is Wrong About Southeast Asia’s True Ecommerce Potential World Bank: Population 8 Business Insider: Southeast Asia Set for Explosive E-commerce Growth 9 HSBC Beyond the Bricks – The future of home buying report

96 Advancing ASEAN in the Digital Age Kevin Martin

highly popular Go-Jek platform ASEAN is on the cusp of has started to add digital an all-encompassing digital payment functionality to its transformation, with technology core transportation services. promising to offer a new way In Thailand, there is Omise – a of life and better experiences payments platform that has for consumers in this dynamic already raised US$50 million in region. funding10. The opportunities are numerous Traditional banks are starting and ripe for the taking; the to invest significantly in their challenge is to be quick, bold digital capabilities to offer a and flexible to change. simpler, better, faster and more secure banking and payments experience. This includes working more and more with nimble fintech start-ups to ensure that their services meet the demands of a young, tech- savvy consumer base.

Meanwhile, some ASEAN governments are working to enable innovation. Singapore, for example, is leveraging its status as an established financial centre to take a leading role in fintech development, with support from the Monetary Authority of Singapore11.

Kevin Martin is Group General Manager and Regional Head of Retail Banking and Wealth Management, Asia-Pacific at HSBC. Based in Hong Kong, he is responsible for delivering the global RBWM strategy in Asia to continue to grow a sustainable business across the region.

10 Omise: About 11 Monetary Authority of Singapore: Singapore’s FinTech Journey - Where We Are, What is Next

Advancing ASEAN in the Digital Age 97 ASEAN’s Digital Economy: An attractive investment Henry Nguyen, Managing General Partner, IDG Ventures Vietnam

ASEAN is viewed to be amongst frequency and size, particularly the most exciting places to with regards to growth-stage invest over the next decade. financing. According to a CB The region is on track to reach Insights report, Southeast Asia a historic number of venture has already seen more venture capital deals in 2017, with 244 capital than any prior year with deals accounting for nearly US$5 nearly US$5 billion in total In the last few billion in total funding through funding. Relative to investment years, quite a 31th July. The wave of Venture destinations like Malaysia and few VC firms Capital (VC) firms has already Indonesia, Singapore appears to begun coming into the region be a crucial connector to other have added for a few years, giving a lot of Asia Pacific and international eCommerce as encouragement for the local markets. In case of the most a strategic pillar ecosystem. This essay will look at successful regional companies, of investment... how this wave is evolving across they have been actively However, a the countries in ASEAN and how cooperating in Singapore to key shortfall much VC firms can bring to the obtain final-stage financing and table other than the capital. most global VC firms expand in the ASEAN into Singapore when they decide ecosystem at Much of the ASEAN’s growth is to invest in the region. Since this time are exit rooted in macroeconomic trends 2012, Singapore has seen over considerations that are seeing the expansion 700 disclosed deals with an for ventures... of the digital economies and aggregate value of US$7.3 billion, the region will middle classes. Deep-diving the most of any country in the into the opportunity, the report region, followed by Indonesia, need to show that commissioned jointly by Google Malaysia, and Vietnam. it can provide and Singapore’s sovereign more potential wealth fund, Temasek identified There is an active interest in the exits in a way that three main drivers for this region from technology investors brings meaningful optimism in the ASEAN region as there has been an increased returns to that will drive this explosive focus on B2B, robotics, and growth: a fast-growing young automation. Meanwhile, fintech- entrepreneurs and population of 70 percent being focused start-ups are expected investors. under 40, a growing middle class to continue to garner significant of consumers that will contribute investment in Asia. Apart significantly to GDP growth, from technology, the Google- and the lack of major retail Temasek also report showed establishments as compared to that ASEAN’s internet economy the rest of the world. Investments was expected to be valued in ASEAN are growing in both at more than US$200 billion

98 Advancing ASEAN in the Digital Age HENRY NGUYEN

within a decade. With around In the last few years, quite into Singapore and Indonesia 260 million users in the region, a few VC firms have added and 65 percent of the sum going ASEAN has become the 4th eCommerce as a strategic pillar into five giant start-ups – Grab, largest eCommerce market in of investment. To illustrate, VC PropertyGuru, Trikomsel, Qoo10, the world. However, this market firms are prone to companies and iCarsClub. In Southeast Asia’s still remains underdeveloped, in the branded consumer space ride-hailing market, Grab has accounting for less than 1 percent that showcase a strong desire successfully raised US$2 billion of total retail sales, compared to to achieve profitability and have from SoftBank and Didi Chuxing rates of an average of 7 percent strong balance sheets. However, in July 2017. This investment in Europe, China, and the United a key shortfall in the ASEAN is expected to create a more States. As early as 2025 the size ecosystem at this time are exit powerful rival to Uber, which has of the eCommerce market is considerations for ventures. already struggled to build a base foreseen to grow into a US$88 Within the next two to three in the region. Similarly, Go-Jek, a billion market, led by Malaysia, years, the region will need to bike and car on-demand platform Thailand, and Singapore. While show that it can provide more in Indonesia that is seen widely as online shopping experiences potential exits in a way that the market leader in the country, remained constrained five years brings meaningful returns to is competing with Grab by ago, in 2016 some internet entrepreneurs and investors. securing a new round of US$1.2 retailers reported that mobile billion led by Tencent Holdings already surpassed 50 percent According to Temasek’s report, in May 2017. Understanding of online sales across Southeast there are currently around that the business environment Asia. For example, the online 7,000 start-ups in Southeast in ASEAN is highly fragmented, sales of The Gioi Di Dong (MWG), Asia, with 80 percent of them Grab has established a clear Vietnam’s leading enterprise in based in Singapore, Indonesia, leadership in the region based the digital device distribution and Vietnam. In 2016 leading on its market position, superior sector, grew 94 percent in 2016, VC firms such as Alibaba, technology, and truly local far outpacing its competitors Tencent Holdings, SoftBank, insight. In the digital economy, in Vietnam. Additionally, MWG 500 Startups, and Golden Gate the transformation requires is also one of a few Vietnamese Ventures invested US$1.1 billion businesses like Grab and Go- businesses that have US$1 billion in Southeast Asia’s start-ups, Jek to fully understand multiple or more in capitalisation value. spreading over 355 deals. With cultures and languages, localise 88 percent of the cash going their products, connect with local business contacts, and recruit a talented local team.

THE POTENTIAL OF ASEAN’S E-ECONOMY Funds like 500 Startups has been targeting the Vietnam- US$200 connected start-ups since BILLION 2016. As a part of the ASEAN community, Vietnam is a rapidly growing country with talented 1 ASEAN entrepreneurs and engineers. 2 3 It is one of the world’s fastest 4 growing economies since 1990 2017 2027 ASEAN’S INTERNET 4TH LARGEST and has been Apple’s fastest ECONOMY EXPECTATION ECOMMERCE MARKET growing market in the world. WITHIN A DECADE IN THE WORLD This is further strengthened by

Advancing ASEAN in the Digital Age 99 HENRY NGUYEN

other developments, like the raising a series A investment in to the sheer complexity and agreement on the Trans-Pacific 2005. From there, this company heterogeneity of Southeast Partnership (now in abeyance), has built a platform stretching Asia that Western companies inexpensive labor costs, and from music downloads to mobile would look to establish their growing consumer spending. games to its flagship chat app, foothold here. Start-ups in Notably, IDG Ventures, a USA Zalo which was valued at US$1 the region have offered VC early-stage Venture Capital billion and secured US$100 firms their fundamental and firm, has been active in Vietnam million in revenue in 2016. Hence, strategic values in the markets since 2004. With US$100 VNG is an example of how the they operate in so it is widely million under management, the company specifically targets believed that by investing in firm has invested in a diverse Vietnamese consumers and is talent and in business, both portfolio of 40 start-ups in areas touching on a large enough entrepreneurs and investors like technology, media, and market to make it worthwhile for can yield successful cases in the consumer services and products. investors like IDG Ventures. ASEAN region. One of the first investments of IDG Ventures Vietnam was VNG, Overall, it is probably due

Henry Nguyen serves as the Managing General Partner of IDG Ventures Vietnam, a private equity firm focused on technology, media, and telecom investments in Vietnam. He is the Master Franchisee for McDonald’s restaurants and the Chairman for Forbes Magazine in Vietnam. He is also the President of the Vietnam Basketball Federation (VBF) as well as the Vice Chairman and Owner of the Los Angeles Football Club (LAFC), the newest club in Major League Soccer (MLS).

100 Advancing ASEAN in the Digital Age Logistics and the Digital Age in ASEAN James Evans, Director of Legal and External Affairs, Asia, Linfox International Group

We are now moving into the Asia uses the same concept to fourth industrial revolution of communicate directly to offer a significant relevance to the more customised and targeted logistics industry - the first channel of supply. being steam and water power; the second being electricity; To remain competitive, logistics and the third being automation companies must respond to Many of the and IT. This time it is internet customer needs: eCommerce is world’s top of things, ecommerce, big data, increasingly becoming a tool for technology 3D printing, artificial intelligence large retailers to connect with such as autonomous vehicles their individual outlets to provide companies and energy storage such as services such as automated are looking at electric vehicles. inventory management and improving energy reordering services using point- efficiency. Whether eCommerce of-sale data. This is particularly this is through ASEAN is one of the largest and relevant in the supermarket fuel technology or fastest growing eCommerce industry, where, across ASEAN, markets in the world, with competition is already at electrical battery Vietnamese programmers at advanced stages between major power, these the forefront of development, retailers for online purchase and advances will also Indonesia offering creative and delivery services. bring efficiencies complex distribution options to for the logistics the end consumer and Thailand, In ASEAN countries, traffic sector. Malaysia and Singapore having congestion will continue to be a well established eCommerce barrier to the efficient delivery of infrastructure already. goods. The industry must not be held back by this and the adage The supply chain industry “you are not stuck in traffic, you has been using eCommerce are traffic” illustrates that until tools such as electronic data public transport infrastructure to communicate with its improves and attitudes towards customers for over 20 years. private car use changes, we Supply chain partners use must get around the problem. the data to exchange order Put simplistically, the issue information between their of efficient road transport distribution centres and sales and infrastructure is a similar and customer service teams innovation tale – design around to ensure deliveries occur the problem and improve. on time and accurately. The explosion of eCommerce in The low traffic speeds in

Advancing ASEAN in the Digital Age 101 JAMES EVANS

Bangkok and Jakarta for Supply chain providers like others, particularly those that example, are directly influencing Linfox are now successfully filing require bespoke parts that may the rise of eCommerce with this gap with a fulfilment solution not be mass-market products. residents finding it increasing thatplugs into our customers’ However, if the consumer difficulty to access shopping online presence, providing a fully demands it, the level to which it malls and supermarkets. The integrated service and direct may disrupt the logistics market consumer stands to benefit access to the end-customer. It may increase. from efficient software, offers comprehensive services planned delivery schedules and for customers’ B2B and Autonomous vehicles appear motorbike transport. e-commerce offerings – ranging to be a fair way off the market, from basic ‘pick and pack’ and but its impact on road transport These new networks need dispatch services to reverse delivery will be huge. Long intelligent systems to provide logistics, repairs and track and distance driving will no longer accessibility and visibility of trace. be impacted fatigue laws, transactions for distributors programmers will argue that and consumers. Until recently, Logistics is a key part of the autonomous systems are more the high cost of driver devices process and Linfox is working efficient than human drivers was a considerable barrier to closely with our customers to and eventually, cheaper. In completing the visibility loop in provide solutions such as greater the warehouse, automation is the supply chain. But increasing network visibility, shorter delivery already well underway, and for wage rates and low cost smart timeframes, and innovations ASEAN, as soon as the cost phones is now solving this problem. in warehouse operations to of implementing and running meet higher volume small order automated warehouse systems As a result, new apps are requirements. makes economic sense, it will appearing in the market, eventually replace workers. replacing the old and expensive Looking ahead enterprise track and trace The fourth industrial revolution Many of the world’s top solutions with agile and – the internet of things, technology companies are intelligent proof of delivery ecommerce, big data, 3D looking at improving energy (ePOD) solutions. These apps printing, artificial intelligence efficiency. Whether this is allow customers to see where such as autonomous vehicles through fuel technology or their goods are in real time, and and energy storage such as electrical battery power, allow sellers and retailers to electric vehicles – is well on its these advances will also bring receive instant confirmation of way. efficiencies for the logistics orders reaching their destination. sector. Fuel economy is one As the use and understanding of of the greatest challenges the This development significantly big data and analytics deepens transport industry will face as speeds up the order to cash through the expansion of the valuable resources become more cycle for many businesses from Internet of Things, the range scarce and more expensive. To the manufacturer through to the of options for end consumers avoid increasing the price per delivery driver. It also maximises will be boundless. 3D printing kilometre, the road industry the flexibility of delivery options will provide flexibility on the and supply chain will need to by using GPS apps to adjust supply side and hence allow rely more on electricity, battery deliveries en route based on the consumer to tailor elements power and other innovations. traffic conditions or changes to of the product to meet specific Tesla is due to unveil its new customers’ requirements. requirements. It will affect Tesla Semi Truck in October this certain industries quicker than year, with a reported range of

102 Advancing ASEAN in the Digital Age JAMES EVANS

320-480 km on a single charge, which shows recognition of the importance of this technology to the logistics industry. With niche engine makers such as Cummins, high technology companies such as Dyson and motor giants such as Toyota also ramping up activity and we can expect imminent advances in this market.

Improvements in the supply chain should be embraced, as they bring significant benefits to consumer, in the form of choice and price and to the transporter and owner of the product as well as the environment. This must not be at the expense of safety, which should always be of paramount importance and policy makers will need to get ahead of the curve to ensure they don’t lag behind technological advances and changing customer demands.

As Director of Legal and External Affairs for the Linfox International Group, James oversees all legal, regulatory, compliance, external and government relations matters in Asia. James has worked in Asia for over 13 years across a wide variety of legal matters and jurisdictions. His background is in intellectual property, technology and innovation.

Advancing ASEAN in the Digital Age 103 How ASEAN Can Realize Its Digital Dream Dr. James Riady, Chief Executive Officer, The Lippo Group of Companies

I look at ASEAN at 50, at its every nine human beings today current stage of its development is a citizen of ASEAN. Over 50 and its likely future after five percent of that population is decades of existence. I look at it under 30, almost all of whom with the eyes of a businessman are literate. Most are “digitally and a stakeholder. I like what I see. engaged,” with a rapidly growing spending power. For ASEAN itself, ASEAN is by no means perfect. the best is yet to It is true that it makes progress Longstanding programs be. In the years incrementally. But the fact Several ASEAN countries remains that for half a century have been implementing ahead, as the it has been a decisive force for longstanding programs to cyber-driven peace and prosperity not only build digital infrastructures fourth industrial in Southeast Asia but also in and employ cutting edge revolution unfurls, the greater Asia-Pacific region. cyber technology in a bid to ASEAN has a Warts and all, ASEAN remains become globally competitive. tremendous the best thing that has ever Two remarkable examples are happened to Southeast Asia. Singapore and Indonesia. chance to build on its strong For ASEAN itself, the best is yet With more than 80 percent of fundamentals to be. In the years ahead, as the its population already benefiting and to redeem cyber-driven fourth industrial from access to the Internet, itself from its revolution unfurls, ASEAN has a Singapore is now focused on limitations. tremendous chance to build on innovation and harnessing new its strong fundamentals and to technologies such as artificial redeem itself from its limitations. intelligence and data science, It helps that ASEAN has cyber security, virtual and integrated itself into an augmented reality technologies, Economic Community that is and the Internet of things (IoT). committed to function as a Indonesia, on the other hand, single economic unit where is gearing its Palapa Ring fiber- goods, services, skilled labor and optic network to provide the capital investment flow freely. whole country with Internet As such, it is the sixth largest access by 2019. This year economy in the world today, alone the government will with a GDP of US$2.55 trillion spend US$1.5 billion to deliver and an average GDP growth of connectivity to areas not yet five to six percent annually. served by broadband. The government has a standing It has a vast population—one of Indonesia Broadband Plan (IBP)

104 Advancing ASEAN in the Digital Age DR. JAMES RIADY

that mandates it to stimulate has adopted a set of long- people must gain high computer and shape markets. term goals called Wawasan literacy to leverage the Internet. 2035, which will all be achieved Content is also important: In Malaysia the economy through information technology. messages and applications that enjoys a precocious 67 percent are socially and economically broadband penetration. Six of The world’s fastest useful, and those that promote ASEAN’s eight largest publicly Last year a study by Temasek good governance, have to be traded Internet companies are and Google predicted that just crafted and disseminated. So based in Malaysia, the other two six ASEAN countries would there must be people who have being in Singapore. become the world’s fastest or will acquire the skills to craft growing Internet region. The six: meaningful broadband content. The Philippines and are also Indonesia, Malaysia, Philippines, rated as potential leaders in the Singapore, Thailand and Viet This calls for a massive effort at digital economy, considering Nam, will have over 480 million education and training. All over their current pace of enhancing Internet users in 2020 and an the ASEAN region, educational their cyber capabilities. Internet economy of US$200 institutions, the relevant civil The Philippines is the world billion by 2025. However the society organizations and leader in business process fact that the four other ASEAN government extension workers outsourcing. In recent months members were not mentioned are called upon to organize and Viet Nam experienced a surge in the study could mean that the work together to see to it that in the number of fiber-based Association is not yet moving the great mass of the population broadband subscribers. forward on a sufficiently broad of the region receives the front in its Digital Revolution. knowledge and the skills to Last year Thailand established become native to the digital a Ministry of Digital Economy Nevertheless ASEAN has an economy. and Society to guide the ICT Master Plan designed to transformation of the country’s reduce gaps and enhance That is a tall order—putting up transformation into a more cyber interoperability among broadband infrastructure and oriented one. In Cambodia, members. What is needed now is building a regional ecosystem as e-commerce expands into for ASEAN to agree on regional while edifying all the people a multi-billion dollar industry, goals in terms of broadband on how to make the Internet the government is crafting the coverage, speed, reliability and meaningful. It demands a huge necessary regulatory framework security. The challenge is for investment of money and effort. to ensure the security of this all Member States to deal in But it will be worth it. important sector. concert with the technical and administrative complexity of Leap-frogging development In Myanmar, the government is running a region-wide digital If the ASEAN Internet Master Plan intensively promoting the use of ecosystem where no one is left is enhanced and becomes the digital technology in all sectors behind. blueprint of a Digital Revolution, to bring about the emergence it is projected that the region of a digital economy. In Laos, And beyond the building of will be among the world’s top the government is partnering the infrastructure for speedy five digital economies by 2025. with Microsoft to advance the Internets, they must think in This means that through digital country’s cyber technology terms of people. Whether integration, ASEAN countries for sustained economic they are students, blue-collar will have leap-frogged over the development. And in Brunei workers, white-collar workers, normal stages of development. Darussalam, the government homemakers, or senior citizens— They will have become pioneers

Advancing ASEAN in the Digital Age 105 DR. JAMES RIADY

in the generation of new digital world. Inclusive growth will services, including e-commerce bring about near universal and mobile financial services, participation in new ways of and in the application of the producing wealth and new ways Internet of things (IoT) so that of using that wealth. In absolute the production of goods in the terms, according to the World region is customized according Economic Forum, the Digital to the precise needs and desires Revolution will add US$1 trillion of consumers. to ASEAN’s GDP in ten years.

ASEAN economies will be firmly That may sound like a dream. linked with supply chains. Job But it is actually the way to go. opportunities will abound. It is the future economy. The Access to public services ASEAN countries need only to will be so efficient that it can fine-tune the ASEAN Internet create a new wave of political Master Plan, meet its investment enlightenment. Urban sprawls requirements, implement it will tend to morph into smart robustly and empower their cities, where information peoples through cyber literacy— technology is the main and they will reap the immense infrastructure and all economic rewards of the Digital Revolution. activities are sustainable.

The Internet will empower very senior citizens to become more independent and take better care of their health. The young will grow in creativity as they gain free and wide access to the wisdom stored in the great universities of the

Dr. James Riady is the Chief Executive Officer of Lippo Group, a Pan-Asian group based in Jakarta. The group has interests in property, department stores, food retailing, malls, IT services, hotels and other businesses. He is also the Founder and Chairman of Pelita Harapan Educational Foundation, or the Educational Foundation of Hope and Light, a group of co-educational K1-Year 12 private, international Christian schools in Indonesia.

106 Advancing ASEAN in the Digital Age Digitalization and Globalization: The Pillars of Growth Naotoshi Okada, President and CEO, Nikkei Inc.

Whenever I visit Singapore, innovative new businesses Bangkok and other major cities in that are disrupting old models. the Association of Southeast Asian Grab, a Singapore-based ride- Nations bloc, I am always struck hailing app provider founded by their youthful populations and by Malaysian entrepreneur economic vitality. Anthony Tan in 2011, now has a presence in 87 cities in seven This huge and There is plenty of data to back countries and competes with rapidly growing up these observations: The the industry’s biggest player, market, driven median age in ASEAN states Uber Technologies of the U.S. In is 29.1, compared with Japan’s 2014, Japan’s SoftBank Group by a young 46.9. ASEAN’s real economic Corp. invested 30 billion yen workforce, is growth rate in 2016 was 5.8 in Grab and became its largest adapting digital percent, while Japan’s was shareholder. This year, Toyota technologies at a 0.6 percent. ASEAN’s total Motor Co. teamed up with Grab faster pace than population is more than 630 to handle maintenance and many developed million, nearly six times that of inspections of cars managed by Japan. This huge and rapidly the startup. countries. growing market, driven by a young workforce, is adapting At Nikkei, we are keeping a close digital technologies at a faster eye on pioneers like Tan. In a pace than many developed front page feature series of The countries. Nikkei newspaper, titled “Asia’s future builders,” we focused on The explosive growth of several young Southeast Asian internet use in Southeast Asia innovators. One was Tan Min- should not be overlooked. Liang, from Singapore, whose In the past, connections company develops peripheral were predominantly wired, devices for games and has and building the necessary drawn worldwide attention. The infrastructure was both costly series also featured Philippine and time consuming. But the singer Charice Pempengco, mushrooming of cheaper who is known as the “net- cellular base stations paved the born diva” after cracking the way for smartphones to replace top 10 charts in the U.S. Their PCs as the main communication impressive accomplishments tools – putting the internet suggest a future in which within reach of far more people. digitalization propels Southeast Asian countries to the global This, in turn, is giving rise to center stage.

Advancing ASEAN in the Digital Age 107 NAOTOSHI OKADA

Southeast Asian governments, In 2014, we set up Nikkei’s “Be an innovator, not a too, are actively working to Editorial Headquarters for Asia follower.” That is our motto. We keep pace with the digital age. in Bangkok and doubled the resolved to make 2017 our “leap “The Eleventh Malaysia Plan” number of reporters spread year” toward becoming a truly announced by the nation’s across the region. Our goal is digital news organization. We government in 2015 includes to be the media leader in Asia, have revamped the Nikkei Asian policies to expand e-commerce in part through on-the-ground Review’s editing procedures and improve communications reporting of untold growth to focus on web-oriented links to outlying regions. That stories. publishing. We have also formed same year, the Thai government an Innovation Laboratory in set a new nation-building goal Alongside the Nikkei Asian Tokyo, with new trends like called “Thailand 4.0.” The idea Review, our strategy for regional artificial intelligence, fifth- is to jump from the “third stage” expansion has another pillar: generation mobile networks of economic development, led the Asia300. This is Nikkei’s and other new technologies in by heavy industry and exports, exclusive list of 300 influential mind. The objective is to start to the “fourth stage,” driven by companies from 11 economies integrating the tech that will the latest digital technologies. across the region, including 130 shape the way news is reported from ASEAN states. long into the future. With the support of such policies, the digital waves Since the launch of the Asia300 Nikkei’s new partner, Britain’s that have mainly benefited in 2014, our reporters have been Financial Times, joined us in urban areas will spread to the dedicating much of their time 2015. As a truly global media countryside and help reduce to these companies. As the next group, the Nikkei-FT alliance regional disparities. These step, we launched the Nikkei delivers unparalleled coverage policies will also contribute to Asia300 Index in December of Asia to readers worldwide. the expansion of the middle 2016 to provide a new gauge of Not only is the FT a trusted class – the driving force of Asian stocks. We believe these global brand, it is also a pioneer consumption. endeavors are a clear indication in the shift from print to digital of Nikkei’s focus on the region, media. We will continue to We recognize the importance and ASEAN countries in pool our strengths and digital of accurately conveying this particular. experience to provide the finest remarkable Asian growth story reader experience. to readers around the world. Dovetailing with our global To this end, we have made strategy is our commitment to Our emphasis on ASEAN numerous investments over digital-driven journalism. We countries, meanwhile, is not the last few years under our are investing to realize a new limited to news coverage. Nikkei slogan “G & G,” which stands for type of journalism that will stay in 2014 started working with “global expansion and growth.” relevant in this fast-changing, N2N Connect, Malaysia’s largest digital world. The Nikkei Online stock trading platform provider, The readership of the Nikkei Asian Edition – launched in 2010, to distribute corporate analysis Review, the English-language ahead of similar websites by tools and Nikkei Asian Review news service we established other Japanese newspaper content. We formed a capital in 2013, continues to increase. publishers – has grown into one and business alliance with Online and in print, it delivers of the world’s most successful StoxPlus, a leading financial the region’s economic news to news sites with a paywall, information service provider in a global audience – all with a with more than 550,000 paid Viet Nam, the same year. Nikkei uniquely Asian perspective. subscribers.

108 Advancing ASEAN in the Digital Age NAOTOSHI OKADA

also organizes international conferences in major cities throughout Asia, inviting top executives to share their unique insights with audiences.

ASEAN and Nikkei can be considered partners in digitalization. Nikkei is ideally positioned not only to track the pulse of this vibrant, dynamic region, but also to support and accelerate its development. I am certain that this mutually beneficial relationship will last for decades to come.

Naotoshi Okada is the president and CEO of Nikkei Inc. He joined Nikkei Inc. in 1976 and was a correspondent in Paris and New York, before becoming Editor-in-Chief. In 2013, he launched the Nikkei Asian Review. After being appointed president in 2015, he initiated the “Global Expansion and Growth” strategy and acquired the Financial Times the same year.

Advancing ASEAN in the Digital Age 109 Digitalization to Enhance ASEAN Economic Growth Prof. Dr. Od Phongsavanh, President, Phongsavanh Group

Today technology plays a These will totally change our crucial role in advancing regional payment systems. countries around the globe as they digitalize their industries In the banking sector, to support their economic digitalization requires huge growth. There are a number of investments and high security so advantages with digitalization it may also affect employment in This digital trend particularly in the financial and the sector. The more digitalized of cashless systems banking sectors. If we think systems we invest in, the lower may remove about the financial sector in the the number of bank or financial digital age, we may think about services staff are needed and at the currency cashless systems. Developing the same time banking service boundary among cashless systems may bring a units or financial institutions countries, bringing lot of benefits for people and may also decline since people all nations, it may change the way people will change their payment particularly ASEAN shop as they only have to use behaviors. We can see around countries, into a their mobile phone or any digital the globe, particularly in USA devices to make payments when a few years ago many big united region using for their desired products and banks halved their bank service one single digital services. To this matter, various units and bank branches as well currency. business sectors will transition as the number of bank staff. This to cashless systems for potentially affects employment payment, for the comfort and rate, affecting not only the convenience of both customers banking sector but also other and business owners. People sectors as well. are also likely to save more time as, nowadays, most banks tend Digitalization may bring both to have payment services for advantages and disadvantages public utility bills in order to to our growing economy, attract more customers. Also however, moving forward into bank services such as loans and the digital age may bring a deposits transactions can be lot of advantages rather than made through mobile or internet disadvantages and if we don’t banking. In the near future, I follow the movement of this foresee that people will use their trend, our businesses may mobile phone or digital devices fail in number of ways. The to do everything – shopping, important thing that we should making tax, rental and loan consider during this transition payments, borrowing, making into digitalization is how we can deposits, and many others. adapt our business operations.

110 Advancing ASEAN in the Digital Age Prof. Dr. Od PhongsavanH

It is very important for every ASEAN or develop a global digitalizing our industries to government in ASEAN to digital currency for conducting support regional economic supervise and manage properly any transaction around the growth. In Laos, our business potential issues such as the world. This digital trend of as Phongsavanh Group which unemployment rate and internet cashless systems may remove has at least 15 companies under security that may occur during the currency boundary among it is moving forward slowly the transition to the digital countries, bringing all nations, and digitalizing each business era. With close and proper particularly ASEAN countries, step by step. It may affect supervision and management into a united region using one employment in some sectors from ASEAN governments, single digital currency. but we may transfer those from these issues may be mitigated the affected sectors into other but if we don’t follow this In addition, this digital sectors since we have very digital trend, we may face a enhancement in business complex business operations lot of obstacles in our business operations will definitely lead throughout the country. Five operations. to better customer experiences, years from now, I believe that better brand reputation, digitalization will play a very In the banking and financial streamlined operations that crucial part in everyone’s life as sectors, meetings between bank save time and money, increased everything will be transacted clients or bank staff have been sales, a larger customer base, through digital devices. Cash made much more convenient in increased organizational is more unlikely to be used for the digital era. Clients can enjoy reach, improved management any transaction with cashless a variety of benefits from the decisions through technology systems completely replacing improved technology such as platforms, rapid development the need for notes and coins. being able to meet bank staff of new products and services, I foresee that every industrial directly via video or conference and a larger degree of creativity sector will move to the digital calls and benefiting from deposit and innovation. These are some world soon in order to improve and loan payments through the benefits we have gained or productivity. There might be Internet in real time. Financial will have gained as long as we various opportunities during transactions through mobile move towards fully digitalizing this digital transition and we will banking and internet banking are operations in this new era. stand to gain the most benefit more likely to enhance effective from it and do believe that and efficient business operations These days information digitalization will enhance our for users. Personally, I would technology has become a part of regional economic growth in love to bring cashless systems people’s lives and it will include ASEAN. into our ASEAN community or almost everything. Now is a use the same digital currency good time for ASEAN nations for financial transactions in to move forward together in

Prof. Dr. Od Phongsavanh is the President of Phongsavanh Group which has had an integrated business to serve society in the Laos and the region since 1977. Over past thirty-five years Dr. Od has established 10 subsidiaries under Phongsavanh Group. In addition to his success in business operations, he contributes to socio-economic development in the country and is currently a top member of the Lao Front for National Construction, a government organization.

Advancing ASEAN in the Digital Age 111 The Tsunami of Digital Innovation At The Doorstep Of ASEAN: ASEAN Businesses Must Initiate Disruption Themselves

Teresita Sy-Coson, Vice-Chairperson, SM Investments Corporation

In many ways, digital innovation penetration, inefficient logistics, is already upon us in ASEAN but and the lack of credit facilities. so far, except for a few areas On the other hand, Alibaba affected by headline grabbing has successfully demonstrated services like Facebook, AirBnb, in China how it resolved all of Netflix and Uber, our businesses these problems within a short (Singapore excluded) have period of time. been largely spared from the huge disruptions across What is different in this digital many sectors experienced by age is that physical borders What is different developed economies. While we are becoming less and less in this digital age have seen the proliferation and significant. For example, some significant successes of services are being provided to is that physical tech start-ups in ASEAN (e.g., local consumers and businesses borders are Lazada, Grab and Zalora), their by offshore companies that becoming less and overall impact remains minor at most haven’t even heard about. less significant. present. Competition in many sectors is becoming increasingly global. However, this may be about to Who would have thought that change. The virtual earthquake “taxi” services or retail services has occurred offshore and the would be provided by global digital tsunami is on its way companies in our domestic to disrupt our businesses. We markets? must look into innovating and disrupting our own businesses The pace of innovation and to compete in this new digital disruption is not abating but world of doing business. Amazon instead it is speeding up. Over and Alibaba are halfway inside the next decade with the the front door already and there advances in artificial intelligence, are hundreds if not thousands blockchain, cloud services, more behind them spanning all image recognition, battery types of businesses. technologies, driverless vehicles, and additive manufacturing, Some may reason out that expect to see major disruptions ASEAN has time to change to in the retail, banking, energy, adapt to the digital tsunami. manufacturing, transportation, There are conditions here that and healthcare sectors among hamper such from taking full others. effect including low broadband accessibility, low credit card What can companies do?

112 Advancing ASEAN in the Digital Age Teresita Sy-Coson

First, we must embrace must take extreme care that the digital innovation and live new laws and regulations do not and breathe it ourselves. We unduly burden the local companies need to understand and learn from competing with their foreign very quickly what this digital counterparts in the domestic and world is all about. We need to international markets. upgrade our people and their skills. We need to recreate our And this is where ASEAN plays organizations to be more flexible a significant role. A coordinated and agile so that changes can policy and legal environment happen in months instead of (e.g. tax fairness between local years. We must digitize data to and offshore entities, easier cross the fullest extent to support an border movement of goods and agile organization. services within ASEAN, common data privacy and data security Governments have key roles rules) across all ASEAN states to play as well. National laws will have a huge positive impact have to be upgraded to enable on helping ASEAN businesses local businesses to compete achieve a successful transition and thrive in an increasingly to a digital economy. It is timely digital economy. There are many that Singapore – the digital examples such as taxation technology leader in our region - matters of local companies will be the ASEAN Chair in 2018. hampered by laws that do not As Chair, Singapore is expected apply to foreign-based players. In to push for the digital economy crafting new laws, such as those agenda as one of the pillars of its on data privacy, local legislators chairmanship.

Teresita Sy-Coson is the vice chairperson of SM Investments Corporation (SMIC), a Philippine company with interests in retail, banking and property development. She is the chairperson of BDO Unibank (BDO), the Philippines’ leading bank, to date. Her expertise has helped transform the Group’s retail business. She is also an advisor to the board of SM Prime Holdings, one of the largest integrated property developers in the Philippines that is into mall, residential and commercial, and leisure and tourism development. She serves as the vice chairperson of SM Foundation, Inc. (SMFI), which takes the lead in effecting a community impact template that improves the quality of life of its host communities and promotes initiatives to enhance the sustainability of the environment. She is currently the Philippine representative to the ASEAN Business Advisory Council.

Advancing ASEAN in the Digital Age 113 Advancing ASEAN in the Digital Age: A Cambodian Perspective H.E. Dr. Sok Siphana, Managing Partner, SokSiphana&associates and Advisor, Royal Government of Cambodia

When Cambodia joined the commitment and has enabled Association of Southeast Asian Cambodia to move rapidly Nations (ASEAN) in 1999, the in its institutional reform and Royal Government of Cambodia economic development process. (Government) faced seemingly Successful reforms have led to insurmountable obstacles of significant improvements in the social, institutional, economic, services markets themselves in As a latecomer and political nature. From the terms of prices, quality, product to the digital economic point of view, the variety, and the availability of economy, country is confronted with new products. More efficient fundamental deficits. Cambodia provision of telecommunications, Cambodia is a small country with a banking, and other ICT related faces strong relatively small but fast growing services have also advanced competition from population, a large proportion the digital integration of the far superior of which is impoverished. economy with that of ASEAN. rivals as close Economic reintegration has as neighboring been an important objective of As a regional grouping, ASEAN the government in term of its is perceived as a wellspring Thailand and Viet growth vision for the country. of opportunity for high tech Nam. Cambodia’s For both political and economic companies because of growth e-commerce and reasons, Cambodia joining in the region’s digital economy fintech scene is the World Trade Organization coupled with a growing middle- more nascent and (WTO) in 2004 was a defining class base and its young lags behind most moment. With its ASEAN and and tech-savvy population. WTO membership secured, To ASEAN policy makers, other markets Cambodia could finally claim its technology is a great leveler in Southeast rightful place in the worldwide and the digital economy plays Asia, but this is family of trading nations. a strategic role as a critical changing fast. enabler for deepening regional The momentum From the outset, Cambodia has integration and as well as for catch up is made its position clear that it helping drive next-generation looked to the ASEAN Economic domestic demand led growth for felt rapidly in the Community (AEC) as a positive startups and SME’s. The launch sector. externality to stimulate and of ‘ASEAN ICT Masterplan 2015’ make irreversible substantial is a reflection of such belief that economic liberalization and ICT is a key enabler for ASEAN’s more comprehensive and social and economic integration. broadly based reforms. This clear policy direction was Cambodia, which was once translated into visible political a country synonymous with

114 Advancing ASEAN in the Digital Age H.E. Dr. Sok Siphana

conflict and poverty, now boasts covering e-Government services, the country is impressive and more than two decades of e-Public services, e-Economy provides opportunities for new impressive growth. In 2015, services and e-Education industries like mobile commerce, the country attained lower- services. on-demand services and fintech middle- income status. With to thrive. The rate of mobile this comes a growing middle In term of infrastructure to penetration is extremely high — class whose spending power support its digital economy, estimated at between 90 to 130 and consumer behaviors give Cambodia has witnessed a swift percent, with notably, some 50 rise to a need for new solutions transformation driven by the percent of phone users using in payments, credit, and mobile injection of new technological smartphones. According to a technology. As a latecomer to advancement, similar to other recent survey, 48 percent of the the digital economy, Cambodia advanced ASEAN countries. respondents stated they have faces strong competition from Rapid improvements in Internet used Facebook while 37 percent far superior rivals as close as accessibility and affordability, of Cambodians indicated that neighboring Thailand and Viet expansion of wireless networks they used Facebook on their Nam. Cambodia’s e-commerce and widespread usage of smart own phone. Facebook is now and fintech scene is more phones, absorption of advance the number one news source nascent and lags behind most technology among youths are all in Cambodia, having surpassed other markets in Southeast Asia, determining factors explaining television and printed media. but this is changing. Cambodia’s fast catching up in the regional digital economy. This year, the Malaysia- Policy wise, in its National Cambodia- Thailand (MCT) Strategic Development Plan According to the Ministry of Submarine Cable System and (NSDP) 2014-2018, the Government Posts and Telecommunications, Landing Station was launched set out a clear economic approximately 8 million out of in Cambodia and Telecom diversification policy agenda the country’s 15 million people Cambodia inaugurated its focused on developing the have now access to the Internet Greater Mekong Telecom backbone information and and it expects that number to Backbone Network project, telecommunication technology reach 9.5 million by 2020, out of which included the installation sector. Sharing the vision which 100 percent of the urban of a 467km fibre-optic of the ASEAN Masterplan, dwellers and 80 percent of the cable connection between the Government adopted its rural dwellers would have access Sihanoukville and Kampong Cambodian ICT Masterplan to the Internet. In term of mobile Cham. Cambodia’s mobile 2020 driven by four strategic telephony, 4G coverage across telecommunications company thrusts to harness the benefits of the so-called Fourth Industrial CAMBODIANS WITH INTERNET ACCESS Revolution: (i) Empowering people by way of human YEAR 2017 resource development and 8 MILLION e-Awareness; (ii) Ensuring WITH INTERNET Connectivity encompassing ACCESS national ICT infrastructure, legal 15 MILLION framework and cyber security; POPULATION YEAR 2020 (iii) Enhancing capabilities in the ICT industry, ICT standards, 9.5 MILLION and research and development; WITH INTERNET ACCESS and (iv) Enriching e-Services

Advancing ASEAN in the Digital Age 115 H.E. Dr. Sok Siphana

Smart Axiata, in partnership Sena Padei Techo Hun Sen with global ICT solutions emphasized the need for provider Huawei, also launched ASEAN to ensure that its growth the 4.5G network in Cambodia, vision and agenda be responsive marking the beginning of a new to the new context of a rapidly era of improved and secured changing world, especially the internet connection capable strong momentum generated of providing an Internet speed by the so-called Fourth 8 times higher than that of Industrial Revolution, which 4G. This latest evolution of creates a new growth dynamism mobile technology will enable characterised by dependence subscribers to enjoy better and on advanced technology and faster mobile internet, which markets. Already, Cambodia is indeed an important tool in has made the necessary shift developing a digital economy. towards innovation and solution Industry experts expect the first development in its efforts commercial launch of full-fledged to contribute to the highly 5G to happen in 2020. Moreover, competitive digital economy of Axiata has recently partnered ASEAN in the decades to come. with Mitsui to offer enhanced digital services and Internet- of-things that would leapfrog Cambodia’s digital economy.

Conclusion: Cambodia, no different than other ASEAN nations, is embracing the Digital Economy to advance its development agenda. Last May 2017, speaking at the opening ceremony of the World Economic Forum on ASEAN, Cambodian Prime Minister Samdech Akka Moha

Dr. Sok is a practicing attorney and the Managing Partner at SokSiphana&associates/a Member of Zicolaw. He was appointed as Advisor of the Royal Government of Cambodia with rank of Minister in 2009. Since 2011, he has also served as the Chairman of the Board of Cambodia Development Resource Institute (CDRI).

116 Advancing ASEAN in the Digital Age The Opportunity for ASEAN in the next 50 Years: Building a Community of Digital Innovations MA Huateng (Pony Ma), Chairman of the Board and Chief Executive Officer, Tencent

The 50th anniversary of computing, artificial intelligence the founding of ASEAN is a and intelligent manufacturing globally-significant milestone is in motion. To drive ASEAN’s that deserves congratulations sustainable growth in the next 50 from government and business years, digital innovations are key leaders around the world. for member countries to make Binding together 10 Southeast the quantum leap and seize The increasing Asian countries with diverse the opportunities generated by prosperity of populations, languages and the new industrial revolution, ASEAN’s growing cultures, ASEAN is an economic accelerating economic and community that celebrates societal development. Personally, middle-class open collaboration, showcasing there are three underlying drivers demographic a development model with that make me very positive about is driving remarkable symmetries to ASEAN’s future. higher-value today’s global digital economy. consumption, and First of all, ASEAN’s strong rising consumer Established two years before the economic growth has created the birth of the Internet, ASEAN’s foundation for digital innovations demand is a development coincided with to thrive. In recent years, the catalyst for digital the third industrial revolution average annual economic growth transformation of powered by computing, Internet rate of ASEAN member countries industries. and ICT technologies. ASEAN has has hit 5 percent, and growth become a critical player in the rates in some emerging countries global economy – collectively, such as Cambodia, Myanmar ASEAN and China now account and Laos exceed 7 percent. for a higher percentage of global The increasing prosperity of trade than the United States. ASEAN’s growing middle-class Grouping together ASEAN and demographic is driving higher- neighboring countries such value consumption, and rising as China and India, the super- consumer demand is a catalyst region is now the world’s most for digital transformation of economically-dynamic growth industries. The confluence engine, constantly adding new of demand- and supply-side impetus to the global economy, synergies is creating a virtuous and more important, is a bulwark cycle to propel economic of peace and stability. development in the region. Across ASEAN, we are seeing Today, the fourth industrial tremendous opportunities for revolution based on mobile new digital innovations and Internet, big data, cloud business models including O2O

Advancing ASEAN in the Digital Age 117 MA HUA TENG (PONY MA)

(Online to Offline) and the youths across the region have enabling ASEAN and China to sharing economy, similar to an inherent passion to embrace grasp the opportunities brought what we observed in China. For new technologies, driving digital about by the new industrial example, Go-Jek, an Indonesian innovations that expedite the revolution, but also helping to company that received an development of future-ready, enhance the quality of life of investment from Tencent, now has next-generation infrastructure. billions of consumers globally. more than 250,000 drivers in its Indeed, China has similar China’s experience in “Internet network, helping to reduce traffic experiences: in the past, personal Plus” and digital economy will congestion and shorten delivery computers had a lower rate of help ASEAN countries move into times, bringing convenience adoption in China, compared to the digital innovation fast-lane to consumers in metropolitan developed countries. Far from in a smoother and easier way. centers including Jakarta. being detrimental to China, Cloud, mobile payments and this was a factor that drove the other new infrastructure will also Secondly, the relatively young country to lead the rest of the help stimulate entrepreneurship demographic and the strong world in migrating quickly to and innovation in ASEAN need for infrastructure upgrades mobile Internet. China’s relatively countries. As China is a neighbor in ASEAN countries mean there is low financial and credit card to many ASEAN countries, our large scope for digital innovations penetration rate has also, to a affinity in lifestyles and culture is to flourish and deliver outsized certain extent, driven world- a great advantage for us to work economic benefits. Almost 70 leading innovations in mobile together to create digital services percent of ASEAN’s population payments. such as games, animation, online of 630 million are under the literature and music. For example, age of 40, and this not only The Southeast Asian region, Tencent’s online music application creates an enormous market including ASEAN and China, JOOX is now very popular in for consumption of goods and has become the world’s second Southeast Asia. services today, but also provides largest center of innovations a deep talent pool that will drive behind only North America. Looking forward, we hope that digital innovations for tomorrow. This extended digital innovation ASEAN countries will further ASEAN lacks well-developed community in the East is deepen their collaboration with transportation, communications delivering technologies that China’s technology centers such and retail infrastructure compared seamlessly integrate hardware, as the Guangdong-Hong Kong- to developed countries. However, software and services, not only Macao Greater Bay Area, taking advantage of policies such as the ASEAN’S POPULATION UNDER 40 “Belt and Road Initiative” to create new catalysts that help accelerate the growth of our shared 70% (630 million) community of digital innovations. ASEAN POPULATION We are fully confident about the UNDER AGE OF 40 continuing success of ASEAN in the next 50 years.

Pony Ma is one of Tencent’s Co-Founders and currently serves as Chairman of the Board and Chief Executive Officer. Pony oversees strategic development, overall direction and management of Tencent. Pony has more than 20 years of experience in telecommunications and internet industries. Pony received his Bachelor of Science degree in Computer Science from Shenzhen University in 1993.

118 Advancing ASEAN in the Digital Age ACKNOWLEDGEMENTS

The CIMB ASEAN Research Institute would like to thank all the contributors for sharing their views on where ASEAN is headed in the digital age. We would like to extend a special thanks to The Honourable Malcolm Turnbull, Yang Amat Berhormat Dato’ Sri Mohd Najib Razak, His Excellency Hun Sen and His Excellency Le Luong Minh for their contributions and we are deeply honoured that they have shared their thoughts on the current and future impact of the digital age on ASEAN.

We would like to acknowledge our knowledge partners, Accenture, A.T. Kearney and McKinsey & Co. for contributing their insights on this subject for this publication.

We would also like to recognise the following individuals from the network of supportive partners that CARI is privileged to have for making this commemorative publication possible.

In no particular order, we would like to thank Melanie Ullrich and Samantha Deave (Asiahouse), Chris Humphreys (EU-ASEAN Business Council), Dato’ Abdul Majid Khan (Malaysia-China Friendship Council), David Catty (ASEAN New Zealand Business Council), Grace Low and Stephen Mengyee (GE), Zeffri Yusof (Google), Casey Ho (Prudential), Steffen Hessel (Bosch), May Kek (Allianz), Preeti Gupta (BMW Asia), Tao Fu (Tencent), Andy Chan and Laine Santana (HSBC), James Kenny (Arup), Masashi Shindo (Nikkei Inc.) Stephanie Julienne (Prime Minister’s Office, Australia), Nora’in Ali, Gardina Kartasasmita and Yudi Sitompul (ASEAN Secretariat), Sun Daravan (Cambodian Embassy in Malaysia), Bann Sokvibol (Ministry of Foreign Affairs, Cambodia), Lini Marlina Ismail and Syed Aizat bin Syed Sultan (Prime Minister’s Office, Malaysia) Yow Hong Chieh (AirAsia), Norziana Mohd Inon (CIMB), Suwit Indracham (Bangkok Bank), Nguyen Pham (IDG Ventures Vietnam), Nina Aquino (Ayala Corporation), Shinta Pan (Lippo Group), Michelle Manlapas and Andrea Maningo (SM Investments Corporation), and Sharmeen Alam and Wina Wirsatyo (McKinsey & Co.), Fong Siew Keng and Karyn Chua (Accenture), Chua Soon Ghee (A.T. Kearney), Nazia Hussain (Nanyang Technology University, Singapore), Jillian Nyin, Nur Alwani Noor Amin and Ahmad Syawal Hafriz Abdullah (Ministry of International Trade and Industry, Malaysia), Nguyen Quynh Chi (Ministry of Industry and Trade of Viet Nam), Akmal Aji (Ministry of Foreign Affairs, Brunei) and Somboun Phongsavanh (Phongsavanh Group).

A special thanks to Eleanor Mak (Australia-ASEAN Business Council) for securing the contribution of the honourable Malcolm Turnbull, Prime Minister of Australia.

We would finally like to recognise CARI Chairman Tan Sri Dr. Munir Majid and the ASEAN Business Club for his guidance. Acknowledgements also go out to the CARI team namely, Amirah Aminuddin, Christine Wood, Hasifah Abdul Rahman, Dr. Bambang Irawan, and last but not least, Tamanna Patel who is the main coordinator of this project.

Hong Jukhee Director of Operations CIMB ASEAN Research Institute

Advancing ASEAN in the Digital Age 119 Logos of All Contributors

Employment Parity Initiative

ASIA GLOBAL INSTITUTE THE UNIVERSITY OF HONG KONG