ASEAN’s $2 trillion digital dream DEFA negotiations now progress
Southeast Asian nations are advancing negotiations on a pivotal Digital Economy Framework Agreement (DEFA), designed to unify the region’s burgeoning digital landscape. The strategic initiative aims to harmonise digital trade regulations and is anticipated to propel the bloc’s digital economy towards a projected $2 trillion valuation by 2030.
Officials describe DEFA as a comprehensive framework distinctly focused on digital economy governance, setting it apart from e-commerce provisions within wider trade agreements. It has been crafted to suit ASEAN’s specific circumstances, seeking a balance between ambitious targets and the flexibility required for all member states to benefit, irrespective of their digital maturity.
The framework aims to integrate the bloc’s diverse digital environments by harmonising digital trade rules, facilitating secure cross-border data flows, and establishing coherent regulatory structures. These will cover essential areas such as paperless trade, e-commerce, cybersecurity, digital identity, and online payments, thereby reducing regulatory divergence and transaction costs.
Given ASEAN’s high mobile penetration, reportedly at 136%, analysts say robust digital infrastructure, interoperable systems, and inclusive policies are crucial. DEFA is positioned to act as a catalyst for these advancements.
The development of DEFA involved extensive consultations with governments, businesses – notably Micro, Small, and Medium Enterprises (MSMEs) – and academics. A key reported outcome is the empowerment of MSMEs, which constitute approximately 97% of ASEAN businesses and account for 85% of regional employment, through streamlined digital regulations and enhanced e-commerce access.
Investor confidence in ASEAN’s digital sector appears strong. In 2023, 71% of venture capital deals in the region were reportedly linked to the digital economy, a figure 11% above the global average. Annual investment in communications, data processing, and hosting services has seen a substantial increase, from an average of $777 million in 2015 to an estimated $4.4 billion by 2024.
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DEFA is expected to accelerate this growth, further unlocking innovation and solidifying ASEAN’s standing as a key destination for digital investment. It also aims to create enhanced opportunities for women entrepreneurs, rural innovators, and youth-led start-ups through initiatives focused on skills development, talent mobility, and digital literacy.
Beyond its economic focus, DEFA is also framed as a sustainability agreement, aligning with ASEAN’s environmental objectives. Proponents suggest interoperable digital tools can reduce trade’s environmental footprint, improve supply chain transparency, and foster green innovation, including paperless customs and smart agriculture.
The framework incorporates high standards for cybersecurity, data governance, and consumer protection, aiming to bolster user confidence in digital interactions and cross-border transactions. Provisions for cooperation on emerging technologies are also included to ensure ASEAN remains adaptable.
DEFA builds on previous ASEAN digital initiatives, including the Bandar Seri Begawan Roadmap and the Consolidated Strategy on the Fourth Industrial Revolution. It is also seen as contributing to the ASEAN Community Vision 2045, which targets the bloc becoming the world’s fourth-largest economy.
DEFA is expected to complement ASEAN’s existing cooperation with international partners such as Australia, China, the US, the EU, India, Japan, South Korea, and New Zealand. It will provide a platform for collaboration on digital standards, data flows, and capacity building.