Copy Reference This year was deemed the China-ASEAN Year of Digital Economy Cooperation. Since the outbreak of COVID-19, the digital economy has become an even more important tool to restore economic and social development, create employment opportunities, and improve living standards.
Cooperation Momentum
As the primary force behind a new wave of scientific and technological revolution, digital technology has become a new growth driver for China-ASEAN cooperation. ASEAN is at a key transformational stage of industrialization and modernization. Many ASEAN countries have formulated unique “Industry 4.0” plans with the aim to industrialize by vigorously developing the digital economy.
Economic digitalization could optimize the industrial structures of ASEAN countries so they can achieve great economic leaps and avoid the middle-income trap while also strengthening their position in the global value chain and enhancing their competitiveness in the international market.
The World Economic Forum evaluated the Industry 4.0 competitiveness of 141 economies and published the 2019 Global Competitiveness Report. Singapore ranked first, Malaysia 27th, and Thailand 40th, with the other ASEAN countries all below 50th. Digitalization in ASEAN still has a long way to go and needs more technology and capital support.
China is an ideal partner for ASEAN due to its advanced technology and plentiful digital economy capital. The 2019 Digital Economy Report issued by the United Nations noted that the geography of the digital economy is highly concentrated in two countries: China and the U.S. According to the UN Conference on Trade and Development’s contribution to the report, U.S. and China account for 75 percent of all blockchain-related patents, 50 percent of global spending on the Internet of Things (IoT) and more than 75 percent of the cloud computing market.
China is eager to expand its digital economy into overseas markets to ensure rapid development, and considers ASEAN the ideal launchpad. In 2018, the digital economy in ASEAN accounted for 7 percent of GDP, much lower than the figure in China, Japan, Europe and the U.S. It still has great potential for growth.
In ASEAN countries, 3G network coverage is relatively high, which offers a solid foundation for digital economic cooperation. Moreover, ASEAN is already wielding a large digital economy market. With increasing numbers of internet surfers with stable incomes, ASEAN is home to more than 650 million potential customers, making it an attractive target for global digital platform vendors.
Seizing Progress
In recent years, both sides have made great achievements in key cooperation areas. On digital infrastructure, China Mobile, China Telecom, China Unicom and other telecommunication enterprises have already entered the ASEAN market. China Mobile’s first overseas data center opened in Singapore in 2019. China Unicom has set up offices in ASEAN countries including Indonesia, Malaysia, Singapore, Vietnam, Thailand, and Cambodia. China Telecom became the third telecommunications firm invited into the joint venture Mislatel by cooperating with a local partner. Huawei has invested in Singapore and Malaysia by building data centers and set up a 5G testing platform in Thailand. ZTE has provided telecommunications network and technology service in Indonesia, Thailand, and Vietnam. The flagship project of digital economic cooperation, the China-ASEAN Information Port in Guangxi aims to nurture a new highland hub for China-ASEAN digital economic cooperation.
Enterprises facilitating e-commerce and online payments have already established operations in the ASEAN market. Alibaba invested US$1 billion to acquire Lazada, the largest online platform in Southeast Asia, and established the e-commerce platform e-WTP jointly with the digital economy development organization of Malaysia. Tencent invested in the new e-commerce platform Shopee in Southeast Asia and chose Malaysia as the pilot country for overseas WeChat payments.
Enterprises focused on scientific and technological innovation and research institutions from ASEAN countries and China are working together. SenseTime and China Harbour are working with G3 Global to build the first artificial intelligence industrial park in Malaysia. National University of Singapore and Suzhou Industrial Park jointly set up the NUS AI Innovation and Commercialization Center in 2017. Thailand invested some 10 billion THB to build its first Digital Innovation Park and provide a friendly environment for Chinese sci-tech innovation enterprises seeking to enter.
Facing Up to Challenges
For China and ASEAN, many future challenges remain.
Small and medium-sized enterprises have played an important role in economic development in ASEAN countries. They facilitate 52 percent to 97 percent of employment and contribute 23 percent to 58 percent of GDP in ASEAN countries. However, limited digitalization in ASEAN’s small and medium–sized enterprises severely restricts their participation in China-ASEAN digital economy cooperation. Limited knowledge and expertise on digital technology in these enterprises have become an Achilles’ heel in terms of modernization.
For national security and safety, most countries in ASEAN have enacted strict laws and regulations on data localization. Most ASEAN countries prohibit enterprises from developing international operations through restrictions on network data flow. Data localization makes it difficult for data platform authorities to supervise online merchants, which damages the interests of online shoppers. Such policy also makes acquiring precise information on merchants difficult, creating a hotbed for cheats and scams.
A shortage of cross-border logistics providers and payment systems is another problem. Cross-border logistics requires handling customs clearance and international transportation. The region’s logistics infrastructure is lagging compared to other places. Cross-border online payments still lack the convenience of seamless connections.
COVID-19 has created other pressure. Since most ASEAN countries are already highly dependent on China’s economy, the sharp decrease in demand for foreign goods and services in China caused by COVID-19 severely impacted the ASEAN economy. COVID-19 has also caused political instability in some parts of ASEAN countries. Although a few ASEAN countries have endured lengthy domestic political turmoil, COVID-19 has intensified unrest.
New Opportunities
Even though bilateral cooperation was interrupted by COVID-19, some new opportunities for future cooperation still emerged.
First, China and ASEAN need to promote the Digital Silk Road and Health Silk Road. Because of the COVID-19 pandemic, most Belt and Road projects involving China and ASEAN were suspended. In contrast, the Digital Silk Road and Health Silk Road projects promoted by China have been invigorated with a strong driving force. Digital technology will play an important role in pandemic prevention and control in ASEAN. For example, digital infrastructure can ensure medical supplies are distributed precisely and efficiently. Digital medical equipment can improve the efficiency of treating patients.
Second, both sides should boost regional economic recovery through VR tourism. Because of the pandemic, international tourism has come to a complete standstill. ASEAN countries are urgently seeking alternatives to tourism. Emerging VR technology from China may provide the best option. By applying VR technology to traditional tourism, visitors can watch and tour the scenery remotely.
Third, both sides can work together to empower smart city construction with 5G technology. As noted by Miao Wei, head of China’s Ministry of Industry and Information Technology, development of smart cities is a key area for China-ASEAN cooperation in the post-pandemic era. In 2018, ASEAN launched the smart city network ASCN, but progress on it has been slow due to a shortage of strong technology support. Increasingly improved Chinese 5G technology may provide a new driving force for smart city construction in ASEAN.
The digital economy has already become an important leader of cooperation. In the future, both sides should actively promote digital transformation of regional industry and share the benefits through digital economic development.
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The World Economic Forum evaluated the Industry 4.0 competitiveness of 141 economies and published the 2019 Global Competitiveness Report. Singapore ranked first, Malaysia 27th, and Thailand 40th, with the other ASEAN countries all below 50th.
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L0059.T003.JPG cloud computing market
China and the U.S. According to the UN Conference on Trade and Development’s contribution to the report, U.S. and China account for 75 percent of all blockchain-related patents, 50 percent of global spending on the Internet of Things (IoT) and more than 75 percent of the cloud computing market.
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Small and medium-sized enterprises have played an important role in economic development in ASEAN countries. They facilitate 52 percent to 97 percent of employment and contribute 23 percent to 58 percent of GDP in ASEAN countries.
About the author Xu Liping is a senior research fellow at the National Institute of International Strategy (NIIS) under the Chinese Academy of Social Sciences (CASS).