How ASEAN’s Diversity Can Be a Strength in the Digital Revolution

May 24, 2017

by Manu Bhardwaj and Yuwa Hedrick-Wong

ASEAN has the potential to become a leader in the digital revolution by harnessing its diversity to power its development.

On a map, ASEAN’s (Association of Southeast Asian Nations) 10 members can easily be overlooked. While ASEAN’s collective population comes to 650 million people, or roughly 9% of the global population, its entire region consists of a land area of 4.4 million square kilometers, a mere 3% of the world’s land area.

Yet despite its population and size, ASEAN’s 10 member states possess disproportionate economic strength. If ASEAN were a single country, it would already be the seventh-largest economy in the world. Moreover, its economic strength will only grow with time. According to a recent analysis by McKinsey, ASEAN nations should collectively rank as the fourth-largest economy by 2050.

Today, ASEAN is also one of the most diverse regions in the world. Its members vary significantly in a range of areas, including per capita GDP and population size, and it has a dizzying array of cultural, linguistic, religious and ethnic diversity. Diversity can be either a strength or a weakness, and the future challenge in ASEAN is to ensure that the power of its diversity is unleashed while avoiding the potential of fragmentation.

In fact, given the increasing volatility and uncertainty in the global economy, turning this diversity into a strength will be essential if the ASEAN region is to sustain robust economic growth and development.

Diversity can be integrated with “hardware” such as by building physical infrastructure like highways or ports. But in the Fourth Industrial Revolution, it can also be integrated with “software” such as by building digital infrastructure to allow for greater online connectivity through smartphones or email. Hardware integration is indispensable, but it is also a long-term process. So while pursuing hardware integration, fast-tracking and prioritizing digital integration can also yield rich dividends in the shorter term. Digital integration will enable business development to move ahead faster and help connect ASEAN countries with regional supply chains in production and distribution. This will, in turn, stimulate faster development of physical infrastructure, setting in motion a virtuous circle of “software-hardware” integration and fostering greater inclusive growth.

The Mastercard-Fletcher School Digital Evolution Index reveals huge gaps in digital capability and readiness between different ASEAN countries. Years ago, many ASEAN economies developed policies that enhanced competition, allocated spectrum efficiently, and promoted private sector investment in their digital infrastructure. As a result, these economies now benefit from thriving e-commerce markets and broadband adoption rates.

In Singapore, for example, over 80% of the population is online; that’s one of the highest rates in the world. Singapore has also positioned itself well in continuing to benefit from emerging technologies and opportunities created by digital innovation. While Singapore remains a stand-out in the ASEAN region and globally, there is reason for optimism among other nations in the regional bloc. The index shows that Malaysia has grown considerably, with a remarkable 67% broadband penetration rate. And today, six of the eight biggest publically traded ASEAN internet companies are located in Malaysia, while the other two are based in Singapore. At least three more ASEAN countries – Indonesia, Vietnam and the Philippines – have the potential to rank as leading digital economies if they continue to demonstrate a consistently impressive upward trajectory in improving their readiness.

ASEAN countries need to have the right policies that encourage investment in digital integration rather than government micromanagement. Only by becoming a leader in the digital economy can ASEAN effectively harness its diversity to power its development in an increasingly challenging global economic environment. In ASEAN, and everywhere, tomorrow’s worldwide web will have its roots in the government policy of today.

Manu Bhardwaj is the vice president of research and insights at the Mastercard Center for Inclusive Growth. Yuwa Hedrick-Wong is the chief economist at the Mastercard Center for Inclusive Growth.

This article originally appeared in the World Economic Forum’s Agenda during the 2017 ASEAN Summit.

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