The fourth industrial revolution (4IR)—the interaction of technologies across the physical, digital, and biological realms—is expected to disrupt everything, from institutional structures of government bodies to operating models of businesses.
The new revolution, much like previous ones, will test countries’ ability to adapt to new systems.
In the case of the Association of Southeast Asian Nations (ASEAN), 4IR has shifted the focus of the ASEAN Economic Community from creating a single market and production base with free flow of goods, services, investments, capital, and skilled labor to a digital single market and service base with emphasis on free flow of information and data.
With this systemic change, how will ASEAN fare in a world relatively different from what it has prepared for? One way to determine ASEAN’s readiness is to evaluate the prevalence of 4IR drivers—connectivity, e-commerce, and technology-driven human capital—in its member states.
Internet connectivity is the backbone of 4IR. 3D-printing manufacturing components across borders, real-time product maintenance, and online cargo tracking are all tasks that require a high-speed, reliable internet connection to function properly. ASEAN members have indeed taken measures to improve internet connectivity over the last few years, but progress has been unequal.
According to the 2012-2016 World Economic Forum’s Networked Readiness Index, all ASEAN members have made steady progress on internet connectivity, with Singapore topping the chart for two years straight. Delving deeper into the sub-indices, however, shows that the progress is quite uneven.
Malaysia, Singapore, and Thailand have constantly upgraded their digital infrastructure. Thailand spearheaded the growth with 7.65% over five years, followed by Singapore with 2.31%. On the other hand, Cambodia, Indonesia, and Viet Nam experienced negative growth rates at -7.12%, -2.23%, and -7.98%, respectively.
Usage performance for all 10 members is constantly improving. Indonesia, Malaysia, and the Philippines are leading in internet usage, while only Lao People’s Democratic Republic has a negative growth rate (-2.85%), although the country data are incomplete.
E-commerce represents the shift from the production- to the service-based business model. Companies that used to sell CDs and records are now offering music online (Spotify), or transitioning from selling goods at physical retail stores to displaying goods on online platforms and delivering them (Alibaba).
At the moment, ASEAN still lacks a bloc-wide standard for e-commerce. In fact, member states currently impose different duties and customs on imports and exports. The duty-free cap in Singapore is about $300, but only $100 in Malaysia. The five biggest markets—Indonesia, Thailand, Viet Nam, the Philippines, and Malaysia—all impose high VAT, duties, and other taxes.
Despite the less favorable regulatory environment, e-commerce companies continue to flourish in ASEAN countries. Online shopping platforms such as Lazada, Qoo10, and Zalora are dominating markets; in fact, Alibaba recently acquired a close to $1 billion stake in Lazada.
E-commerce players would grow even faster with harmonized ASEAN-level standards on sales tax, financial transactions and payment systems, and spectrum allocation among internet service providers to name a few.
Technology-driven human capital
To fully realize the potential of improved connectivity and e-commerce, we need more tech literacy. Singapore, Malaysia, and the Philippines are the only ASEAN members with comprehensive strategies to help grow tech-savvy human capital.
Singapore is the example to follow. Through its flagship Infocomm Media 2025 strategy to develop computational thinking capability among citizens, Singapore encourages initiatives tailored for students, industry workers, and media professionals respectively. The government also offers incubator support for local startups, and Block 71 is now considered the Silicon Valley of Southeast Asia.
Nonetheless, it’s important to note that education systems in most ASEAN member states continue to rely on traditional curriculums, and many schools lack proper equipment. Only Singapore has been progressively adapting its education system and promoting 4IR re-skilling with its SkillsFuture program.
Singapore’s readiness is not surprising given that the learner-to-computer ratio for primary and secondary schools in Singapore is 4:1, even better than those of Japan and the Republic of Korea. The ratios for primary schools in Malaysia and Thailand are 17:1 and 15:1 respectively, and 412:1 in the Philippines. The situation is worse in Cambodia, with ratios of over 500:1 and 441:1 for lower and upper secondary schools.
Is ASEAN ready?
Based on the progress made so far on the three drivers of 4IR, ASEAN as a whole is underprepared at the moment for the fourth industrial revolution.
The question now is, when will it be ready?
Singapore’s massive success and continuous efforts in adapting to this technology era can spearhead other members into adopting similar approaches. Malaysia has already answered the call with its own initiatives: Digital Malaysia, MDeC, MAGIC accelerator program, and Axiata-MAVCAP venture capital.
The recent endorsement by ASEAN leaders of the World Economic Forum’s study on accelerating ASEAN regional integration ahead of 4IR is a positive sign. Strong government support is a big leap for ASEAN in its efforts toward coding a unified response to 4IR. By Sovannaroth Tey, Graduate Student, National University of Singapore
The views and opinions expressed in this article do not necessarily reflect the official policy or position of the ASEAN Trade Union Council.
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