E-commerce deal sets a foundation

19:00 | 11/04/2019
The ASEAN bloc last November signed an agreement on e-commerce, which, however, has been kept under wraps until now. While contents may be lacking for some companies, it can still be viewed as an important platform for future policies, and firms should be ready to engage when opportunities arise. Dr. Deborah Elms, executive director at the Asian Trade Centre in Singapore, tells us more.
e commerce deal sets a foundation
Dr. Deborah Elms

The 10 member states of ASEAN have been slowly and steadily working towards greater integration. However, the over-arching business goals of the ASEAN Economic Community for free movement of goods, services, investment, skilled labour, and freer movement of capital remain some way off.

In the meantime, the ASEAN has begun to make forward progress on another key area of importance with the signing of an agreement on e-commerce. But what does the deal that was released last week actually do? In short, it provides the groundwork for the future.

E-commerce and digital trade are likely to be critically important areas of upcoming growth. As per a report by the Asia Pacific MSME Trade Coalition (AMTC), the benefits of digital tools are especially vital for smaller firms. Micro, small, and medium enterprises (MSMEs) can reduce time costs by nearly 30 per cent, and drop direct business costs by over 80 per cent using digital technology.

Most of the nearly 2,500 MSMEs involved in AMTC are in e-commerce and digital trade. While not all are located in the ASEAN, many are engaged in or support trade flows across the region. Most have reported challenges related to inconsistent trade rules and regulations within the ASEAN.

These can be direct issues, like problems with customs valuation, paperwork or handling returned items, or indirect challenges, such as rising computing costs if world-leading cloud-based services are not available for use domestically.

e commerce deal sets a foundation
Southeast Asian nations vary widely in digital experience and implementation Photo: Le Toan

Approaching digital trade

The Southeast Asian digital economy is already estimated to be worth $72 billion. The region is also home to important unicorns like Grab, Go-Jek, 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, ASEAN countries are headed in problematic directions, creating policies in various areas that could dramatically impede the ability of future unicorns to thrive, and strangling the prospects for smaller firms along the way.

Hence, there is a necessity for the ASEAN to start tackling e-commerce and digital trade in a regional manner.

The agreement reached in November 2018 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.

The agreement contains co-operative commitments on key issues that companies care about most, such as in ICT infrastructure, legal and regulatory frameworks, electronic payments and settlement, trade facilitation, intellectual property rights in the digital era, competition policy, and cybersecurity.

Part of the challenge in crafting an agreement is the wide gaps in ability between ASEAN member states. This is a perennial challenge for the ASEAN, of course, but the distance between member 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.

Unfortunately, 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.

Creating e-commerce policy

As with many things in the ASEAN, however, all is not lost, as the agreement provides the starting point for new discussions on e-commerce and digital trade. It will be monitored by the Senior Economic Officials Meeting (SEOM) and carried out by the ASEAN Coordinating Committee on Electronic Commerce (ACCEC), with the latter ensuring co-ordination with other ASEAN entities.

Since nothing happens in the ASEAN unless it is embedded in the correct 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 also 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.

A report by Google and Temasek notes benefits that are already flowing into the ­region. 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 eight million rides per day. Keeping these innovative goods and services moving and paying for them are vitally ­important activities for the ASEAN in the future.

The e-commerce agreement for the 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. Businesses also need to be ready to respond with ­specific recommendations for inclusion to help create ­successful e-commerce and digital trade policies for the bloc.

E-commerce and digital policy discussions are now ­taking place at the domestic level, within the ASEAN, with its dialogue partners inside the ­Regional Comprehensive ­Economic Partnership in Asia, and even in Geneva as part of a World Trade Organization ­initiative. Given the outsized importance of digital trade in Asia, all ASEAN members have important roles they must play in shaping future trade arrangements that matter.

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