Many challenges before Asean embraces digital economy: Report
But MAS report says much of region still in early stages of digital transformation
There are many challenges remaining before the Asean economies will be able to embrace the digital economy, a report by the Monetary Authority of Singapore (MAS) noted.
However, if the region can do so successfully, it can reap substantial productivity gains.
In its recent Macroeconomic Review, MAS issued a special report on the digital economy of Asean. It noted that in Asean economies, the ICT (information and communication technologies) sector is growing fast and accounts for about 3 per cent of the total value added in the region currently.
The increasing heft of the sector is most noticeable in Indonesia, Malaysia and Singapore.
The e-commerce market in the Asean-6 countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) was valued at more than US$5 billion in 2015 but it is expected that by 2025, this will swell to US$90 billion (S$120 billion), with Indonesia poised to be the largest sub-market.
MAS noted that digital transformation can bring many benefits to the Asean economies.
ICT can play a central role in broadening access to goods and services in under-served regions.
Mobile payments allow farmers in the region to send and receive payments at affordable rates.
In Indonesia, the McKinsey Global Institute noted that portable ultrasound devices operated by trained midwives have helped increase access to pre-natal care.
Digital technologies can also help manufacturers lower costs and increase profitability.
For example, on the production front, a network of sensors on factory floors would help firms identify bottlenecks, reduce wastage and optimise production.
This would enable tracking to take place across the entire length of the supply chain on a real-time basis.
Another plus point is that by infusing ICT into the manufacturing sector, countries that embrace digital technologies can quickly move up the value chain.
Multinational corporations such as Intel and Panasonic are major players in Malaysia's electrical and electronics industry.
Samsunghas set up production facilities in Vietnam to take advantage of its educated workforce and relatively lower factor costs.
The report noted that online firms in e-commerce, telco, media and fintech sectors compete with offline ones and reduce corporate pricing power and rents. These lower prices will benefit consumers.
But much of Asean is still in the early stages of digital transformation, the report added.
If the right factors and policies are in place, with a supportive regulatory environment, emerging Asean has the potential to leapfrog other countries.
The report suggests that if the region can collectively foster the development of ICT infrastructure, promote such skills and drive greater adoption of ICT in firms, the region will be able to reap substantial productivity gains. - THE STRAITS TIMES