Talking Trade blog
ASEAN’s e-commerce agreement
Published 27 March 2019
The ten member states of ASEAN have been slowly and steadily working towards greater integration. The headline business goals of the ASEAN Economic Community ( AEC ) of the “free movement of goods, services, investment, skilled labour and freer movement of capital” remain some way off.
In the meantime, ASEAN has begun to make forward progress on another key area of importance with the signing of an agreement on electronic commerce (e-commerce). The deal was concluded in November 2018, but the text was finally released last week.
What does it do? The short answer—it provides the groundwork for the future.
E-commerce and digital trade are likely to be critically important areas of upcoming growth. As a previous AMTC report indicated, the benefits of digital tools are especially vital for smaller firms. Micro, small and medium enterprises (MSMEs) can reduce time costs by 29 percent and drop direct business costs by 82 percent using digital technology.
Most of the nearly 2500 MSMEs involved in our Asia Pacific MSME Trade Coalition (AMTC) are in e-commerce and digital trade. While not all are located in ASEAN, many are engaged in or support trade flows across the region. Most have reported challenges related to inconsistent trade rules and regulations within ASEAN.
These can be direct issues, like problems with customs valuation, paperwork or handling returned items, or indirect challenges, like rising computing costs if world-leading cloud-based services are not available for use domestically.
The Southeast Asian digital economy is already estimated to be worth US$72 billion. The digital economy is on track to hit $240 billion by 2025, more than $40 billion higher than originally projected in a Google/Temasek study. The region is increasingly home to important unicorns like Grab, GoJek, Lazada, SEA and Tokopedia.
Getting these firms and others that follow to flourish requires a nurturing policy framework. So far, ASEAN member states have had limited experience in crafting complementary digital regulations. At the domestic level, many ASEAN countries are headed in problematic directions—creating policies in various areas that could dramatically impede the ability of future unicorns to grow and thrive and strangling the prospects for smaller firms along the way.
Hence the necessity for ASEAN to start to tackle e-commerce and digital trade in a regional manner.
The agreement reached in November puts in place some useful provisions to get going. It urges member states to use paperless trading schemes and the use of information (other than financial services) via electronic means including digital signatures. It encourages members to be transparent about consumer protection measures and urges online personal information protection.
The agreement includes a clause to review the agreement within three years.
Most of the agreement remains at the level of cooperation, however, especially on key elements that companies care most about. This includes commitments that will cover issues of ICT infrastructure, legal and regulatory frameworks, electronic payments and settlement, trade facilitation, intellectual property rights in the digital era, competition policy, cybersecurity and so forth.
[ASEAN watchers may be interested to note that Vietnam has exempted itself from time delays in this document. While Cambodia, Lao PDR and Myanmar all received additional time for implementation of some provisions, Vietnam did not.]
Part of the challenge in crafting an agreement that might matter for firms are the wide gaps in ability between ASEAN member states. This is a perennial challenge for ASEAN, of course, but the distance between ASEAN countries is particularly glaring in the digital space. Even the knowledge levels between officials in charge of crafting policy can be starkly divergent.
A second obstacle to creating a meaningful agreement for digital trade was a lack of engagement with the business sector. While it is usually better to talk to companies when negotiating over trade issues, in the rapidly evolving e-commerce and digital realm, it is absolutely critical that officials continuously discuss ideas with the business community.
This engagement did not happen. The final agreement will therefore be greeted with a yawn by many companies who are likely to be quite disappointed by the outcomes embedded in the document.
As with many things in ASEAN, however, all is not lost. This agreement provides the starting point for new discussions on e-commerce and digital trade. The agreement is meant to be monitored by the Senior Economic Officials (SEOM), and carried out by the ASEAN Coordinating Committee on Electronic Commerce (ACCEC). The ACCEC will ensure coordination with other ASEAN entities.
Since nothing happens in ASEAN until and unless it is embedded in the right institutional framework, these are important outcomes. The ACCEC is now officially tasked with managing ASEAN’s e-commerce and digital trade policy objectives. The SEOM will have to report regularly on progress to ministers and then to leaders.
The ACCEC has a mandate to work with other groups in ASEAN that are also important to ensuring the success of e-commerce and digital trade objectives. As the agreement itself notes, this includes future work on areas like data privacy, intellectual property, and customs and trade facilitation.
To see how it might operate, a different ASEAN body, the Telecommunications and Information Technology Ministers meeting (TELMIN), recommended that officials craft an ASEAN Framework on Digital Data Governance in 2019. This work will now be coordinated through the ACCEC.
The Google/Temasek report notes benefits that are already flowing the region, even absent coordinated policies. These include $23 billion in e-commerce sales from 120 million shoppers, $30 billion in online travel services, and $8 billion in online transport and food delivery from 35 million users taking more than 8 million rides per day. Keeping these innovative goods and services moving and paying for them are vitally important activities for ASEAN in the future.
The e-commerce agreement for ASEAN starts the process. Member governments will need to continue to seize opportunities at the domestic level and across the region to effectively reach the potential growth prospects available in the future. Firms need to be ready to respond with specific recommendations for inclusion to help create successful e-commerce and digital trade policies for ASEAN.
E-commerce and digital policy discussions are now taking place at the domestic level, within ASEAN, with ASEAN and its Dialogue Partners inside the Regional Comprehensive Economic Partnership (RCEP) in Asia, and even in Geneva as part of a World Trade Organization (WTO) initiative. Given the outsized importance of digital trade in Asia, all ASEAN members have important roles they must play in shaping the future trade arrangements that matter.
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