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On Davos 2019: is Digitalization in Southeast Asia Really Inclusive?

Benedict Leong

Inclusiveness in eCommerce

Disillusionment with globalisation and digitalisation from those who have been left behind has been growing. How can we use technology so that the benefits of digitalisation and globalisation reach everyone? How can we use technology to help as many different groups of people as possible?

These were some of the themes and questions brought up during the World Economic Forum which took place from 22nd January to 25th January 2019, particularly in panels discussing the following:

  • Is this the End or Beginning of Globalism?1

  • Making Digital Globalisation Inclusive2

  • Digitalising Emerging Markets3

During these talks and throughout most of the forum, one major theme was how digitalisation and globalisation seem to have left the middle-income and lower-income groups behind. These groups either had no access to technological capabilities that could help them, or did not have the skills required to make use of this technology and as such could not benefit economically from it.

As a result, these groups feel let down by the promises of globalisation and digitalisation since very few of the benefits seem to have reached them. We’ve seen these effects in the USA and EU regions, which were also discussed extensively during the recent talks at the World Economic Forum 2019, but let’s bring the discussion closer to home. Has digitalisation and globalisation been inclusive in Southeast Asia?

In the panel discussion, ‘Making Digital Globalisation Inclusive’ Erik Brynjolfsson, Director of the MIT Initiative on the Digital Economy from the MIT – Sloan School of Management, mentions that while digitalisation expands the size of the economy, the way we use new technology to benefit as many people as possible is just as important.

What this means is that it’s more about the policies, planning, and initiatives that come with a digital transformation rather than just racing to have the latest tech. In this respect, it’s good to remember that both government and businesses have a role to play when it comes to building up economies. Businesses, despite their commercial motivations, tend to help society by driving innovation and advancing technology forward. Governments would then create public sector initiatives and policies to either support these initiatives if they’re beneficial or regulate those that could negatively affect society.

In other words, if businesses end up helping out different parts of society through their digitalisation initiatives and operations, policies introduced by the government can amplify these digital initiatives’ positive impact on society.

It’s tempting to think that Southeast Asia isn’t home to too many technological advancements, but this region does have strong evidence on how both digitalisation and globalisation can help out the masses. E-commerce, for instance, is seen as a way to bridge the gap between smaller and larger businesses while reducing the barriers to entry for those who want to start selling online.

Initiatives to help out Southeast Asia’s e-commerce scene come at a good time as Google and Temasek’s report4 estimates that Southeast Asia’s e-commerce market will grow to US$ 102 billion by 2025 from a 2018 value of US$ 72 billion, showing that e-commerce still has plenty of room to grow in the region. Here are some of the ways that the region has been benefiting.

It’s about The Way We Use Technology

SMEs make up between 51.7% and 97.2% of all employment in ASEAN countries5, and efforts to develop them will support the growth of many people. Some of the infrastructure initiatives can also boost the standard of living of people living in those regions as well. From working out regional e-commerce cooperation to developing transport and broadband, here are some of the ways governments in SEA are supporting their countries through e-commerce.

Tokopedia’s founder, William Tanuwijaya, mentions in an interview6 that his e-commerce marketplace’s vision is to help any Indonesian merchant sell online and also bridge the trust gap between the Indonesian populace and e-commerce. It also aims to simplify the e-commerce process for both sellers and buyers as much as they can.

Tokopedia is now one of the biggest e-commerce marketplaces in Indonesia now and serves around 5 million merchants. Tokopedia’s arrival enabled 70% of its e-commerce merchants7 to open their very first e-commerce stores.

Zilingo was founded with similar ideals8. Zilingo is a fashion e-commerce marketplace that has been serving the Southeast Asian region since 2015. The company started in Thailand with the idea of helping to bring more small, traditional merchants online to a wider audience. This idea came to be when Zilingo’s founder saw the variety of fashion items being sold at street markets in Thailand and imagined their wider potential if someone could help them digitalise.

Alibaba in 2017 set up an e-commerce hub in Malaysia9 with the aim of helping Malaysia be part of Jack Ma’s Electronic World Trade Platform. This platform aims to bring e-commerce’s benefits to developing economies and is also primarily targeting small and medium enterprises with Rwanda recently joining the Electronic World Trade Platform3 in 2018.

These examples are a good reminder that it is indeed possible for digitalisation and globalisation to be inclusive. While many of these initiatives tend to be primarily commercially driven, they still manage to have an inclusive social impact. Tech-based initiatives like these can help out small-to-medium enterprises by giving them access to tech they otherwise wouldn’t have. As a result, a more even playing field is achieved and more economic benefits can flow to the medium and lower-income groups, as long as they have internet access.

Infrastructural and Regional Developments in SEA

E-commerce and other impacts of digitalisation and globalisation are bringing infrastructural and regional development to SEA

Coming back to how both governments and businesses tend to work in tandem to help out society, the momentum generated by e-commerce, digitalisation and globalisation’s growth in the region is causing Southeast Asian governments to plan initiatives to support this growth.

On 12th November 2018, ASEAN member nations have acknowledged the importance of e-commerce and signed the ASEAN Agreement on Electronic-Commerce10. During that economic council meeting, ASEAN leaders discussed ways to boost e-commerce cooperation in a way that helps their citizens, boosts the regional economy and strengthens their cybersecurity.

The objectives11 agreed by ASEAN members include:

  • Facilitating and speeding up cross-border e-commerce transactions

  • Contributing to creating an environment of trust and certainty for the use of e-commerce

  • Deepening cooperation among ASEAN member states to further develop and intensify the use of e-commerce to drive economic growth and social development in the region

If this agreement bears fruit, it will create fertile ground for SEA’s e-commerce market to flourish which can benefit both businesses and the rest of society. People gain more e-commerce security and protection through initiatives like dispute resolution, better internet connectivity and access to e-commerce services and also more potential jobs created through e-commerce.

In Thailand, Pichet Durongkaveroj, the Digital Economy and Society (DE) Minister also aims to strengthen community e-commerce12 in the country. In Thailand, the Thailand 4.0 initiative is providing boosts to rural internet penetration which can bridge the technology access gap between income groups in Thailand.

To do this, access to the national broadband network has been installed in around 25,000 villages, with plans13 to further expand this to 50,000 more villages in 2019. Thaipost also announced a plan to create ‘e-commerce units14’, physical drop-off points to help rural vendors deliver items on an online marketplace via Thailandpostmart.com15. The idea behind these rural drop-off points is to make it easier for rural vendors to access the e-commerce ecosystem in Thailand.

The development of logistics infrastructure, which includes railways and highways, can also lead to gains in the economy and to society in general. Apart from boosting the effectiveness of eCommerce deliveries, academic16 and private research states that public investments like investments in infrastructure can lower unemployment. Jobs can be created as companies receive government contracts and hire more manpower. The newly connected regions also create more opportunity for new companies and jobs to be created too.

Speaking of which, Thailand has also been aiming to become a regional trade hub17 by working on its logistics infrastructure. For instance, Thailand is planning to develop its Eastern Economic Corridor and expanding transport networks to Cambodia, Laos, Vietnam and Myanmar which can potentially make it an e-commerce delivery hub to these countries as well.

In Vietnam, large investments have been made by Alibaba’s Lazada as well as Amazon18. Frost and Sullivan predicts Vietnam’s e-commerce market will grow from US$1.719 billion in 2016 to US$ 3.7 billion in 2030. It is also regarded by Google and Temasek as having the second highest20 e-commerce growth rate just behind Indonesia.

However, the Vietnamese government is aware that the country’s poor transport infrastructure is impacting not just e-commerce, but its economy in general. To address these issues, Vietnam’s latest Transport Strategy 202521 outlined steps to attract more investment into local infrastructure and review and amend provincial plans and production structures related to logistics service. These initiatives could potentially alleviate Vietnam’s long delivery times22, drive e-commerce growth and potentially bring more employment to the newly connected regions.

While e-commerce may not be the sole driver for these developments, many governments in SEA have taken note of its socioeconomic potential. Government policies and investments to support e-commerce and national telecoms and transport infrastructure can go a long way in developing both SMEs capabilities and even improving the general standard of living in their country.

Providing Digital Literacy and Access to Technology

Another major point which was brought up during the World Economic Forum was the importance of providing access to new technology and ensuring people learn the skills necessary to utilize that technology. The public and private sectors of Southeast Asian nations understand that to make full use of digitalisation’s benefits, people will need help upskilling. Examples of this can be found in Thailand, Malaysia, and Singapore among others.

Another Thailand 4.0 agenda involves preparing its populace’s skills23 for a digital future. To do this, the Thai government aims to reform the education system and create skills development programs. The Electronic Transactions Development Agency in Thailand has also been launching a host of programmes24 to upskill students and the general public’s e-commerce skills, such as its Young Talent Platform.

In Singapore, the Info-communications, Media and Development Authority has a Tech Skills Accelerator Office25. This office aims to upskill and reskill Singapore’s veteran workforce to help them keep up with developments in technology through specialised training programmes. These programmes26 include coding skills and would help participants gain entry-level ICT jobs by the courses’ ends.

As for e-commerce, Singapore has initiatives from the public and private sector such as getting subsidies for e-commerce related courses through Singapore’s Skillsfuture programme and also offering courses on how to run online businesses27 from private and public institutions.

Malaysia is trying to help its youth upskill26 in preparation for jobs that might be lost to automation. One of the things that the Malaysia Digital Economy Corporation is working on is to integrate subjects like computational thinking into the national curriculum at the pre-university level while training teachers for these subjects. The Malaysian government is also working with institutions like Harvard28 to nurture data professionals to prepare them to enter the digital economy.

This is in addition to other partnerships between Malaysia and international private institutions. For example, Alibaba’s Global Initiatives Program29 aims to create a generation of innovative e-commerce entrepreneurs.

Teaching and providing the populace the skills it needs to use the latest technology helps to reduce the number of people left unemployed due to digitalisation and automation. While both public and private sectors would have differing reasons to upskill the people, the net effect is still beneficial as it leaves fewer people out from digitalisation and globalisation’s benefits.

 

All of these initiatives show that both public and private sectors can come together to prepare more people for inclusive digitalisation. The example of E-commerce’s development in SEA, though not a perfect one, is just one instance of how digitalisation and globalisation can be implemented without creating further inequality. At the end of the day, with proper planning, collaboration and the right intentions, we can build a society where nobody gets left behind.

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References:

  1. World Economic Forum: Is this the End or Beginning of Globalism?
  2. World Economic Forum: Making Digital Globalisation Inclusive
  3. World Economic Forum: Digitalizing Emerging Markets
  4. Think With Google: e-Conomy SEA 2018: Southeast Asia’s internet economy hits an inflection point
  5. ASEAN: SME Developments in ASEAN
  6. Inc42: How Tokopedia Aims To Better Shape Indonesia By Becoming Indonesia’s Taobao
  7. Matamatapolitik: 3 Ways Technology Companies and Governments Prepare for the Future of Work
  8. Tech Crunch: Southeast Asia Fashion Startup Zilingo continues its meteoric rise with $54m Series C
  9. Alizila: Alibaba helps to shape Malaysia’s eCommerce Future
  10. The Straits Times: E-commerce pact aims to lower costs, protect consumers
  11. Gov.sg: ASEAN agreement on eCommerce 
  12. Bangkok Post: Thailand Post targets community e-commerce
  13. Phom Penh Post: Internet service for all Thai villages by end of this year
  14. Bangkok Post: Thailand Post targets community e-commerce
  15. Thailand Post Mart
  16. Can national infrastructure spending reduce local unemployment? Evidence from an Australian roads program
  17. Royal Thai Embassy: Integrating with ASEAN and Connecting Thailand to the Global Community
  18. Nikkei Asian Review: Amazon to enter Vietnam in challenge to Alibaba
  19. VOV VN: Vietnam’s e-commerce market sees many new arrivals
  20. Viet Nam News: Vietnamese e-commerce sees impressive results
  21. VCI Legal: Vietnam targets to be a regional hub by 2025
  22. The load star: Vietnam e-commerce boom a headache for logistics players
  23. Royal Thai Embassy: Prepare Thais 4.0 for Thailand becoming a first world nation
  24. ETDA: ETDA continues to increase the power of e-commerce for both students and the public
  25. Skills Future: Techskills Accelerator
  26. Gov Insider: Malaysia vs Singapore – Two different approaches to the digital revolution
  27. Straits Times: New eCommerce courses from Alibaba group and Singapore Institute of Retail Studies 
  28. Forbes: Malaysia key partnership to asean growth 
  29. Alizila: Alibaba helps to shape Malaysia’s eCommerce future
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