Why Asean holds the edge in a digital future: it’s the youth factor

Whether it is building a digital economy or preparing for climate change, nations like Vietnam and Indonesia are busy putting long-term plans into action
They have a trump card in the form of their youthful, digitally savvy and upwardly mobile populations

Andrew Sheng

Published: 10:30am, 31 Aug 2019

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Today, Malaysia celebrates its 62nd anniversary of independence, led by the country’s 94-year-old but digitally savvy Prime Minister Mahathir Mohamad. Singapore also celebrated its 54th National Day earlier this month, with Prime Minister Lee Hsien Loong speaking about how to prepare the city state for climate change. And, in marking the 74th anniversary of its independence, Indonesia’s President Joko Widodo announced an ambitious plan to move the capital from Jakarta to Borneo.

Travelling around Asean this month made me realise that, while the rest of the world is more preoccupied with the turbulent present, Southeast Asia is already thinking about and preparing for the future.

The reason is straightforward. With 600 million people and more than US$2.5 trillion in GDP, Asean economies make up one of the youngest and fastest-growing regions in the world. The success of the Association of Southeast Asian Nations since the 1960s has been built on trade, peace and stability, and dedication to economic growth rather than politics. Its future success hinges on its political neutrality, despite attempts by the Great Powers asking the region to choose sides.

In Hanoi for a Young Scholars Initiative meeting, I was struck by how Vietnam was already planning for a digital economy by 2030 and 2045. Vietnam has been a major beneficiary of China shedding low-cost industries and the diversification of the Asian global supply chain. In 2010, Vietnam achieved the World Bank’s middle-income status and, at the current trajectory, could surpass Singapore’s economy by 2029, according to a DBS study.

To maintain its growth momentum and provide jobs for a growing youth population, Vietnam has envisaged four possible digital futures, as a buyer or seller of digital products and services.

In the first, “heritage” scenario, of using traditional engines of growth with low digital transformation, the additional growth could be minimal. In the second scenario of “digital exporter”, with overseas companies hiring Vietnamese workers for exports, the projection shows only marginal benefits.

The third scenario of “digital consumer” leverages Vietnam’s own large consumer market, but current jobs at risk would be a third higher than in the two earlier scenarios. The fourth scenario, of “digital transformation” across industries and government services, projects an additional 1.1 per cent annual GDP growth, but 38.1 per cent of current jobs would be at risk of transformation or disruption.

Vietnam shuns Huawei as it seeks to build Southeast Asia’s first 5G network

In essence, Vietnam realises that its own industries can be cannibalised by relying only on the foreign sector and it should therefore have a total domestic transformation that engages digitally with the rest of the world. That scenario lays out a road map that would give priority to infrastructure, network security, increasing digital skills and capabilities, modernising government, an industry 4.0 and national innovation plan, and significant tax and regulatory reform.

Arriving in Jakarta last week for a conference on digital finance, I was struck by how everyone was focused on how digital transformation, social justice and climate change would be critical to Indonesia’s future.

The move out of congested Jakarta and building a new capital in Kalimantan will cost US$33 billion. But another US$40 billion will be spent on transforming Jakarta in the next 10 years, as two-fifths of the city lies below sea level and parts are sinking due to rising seas and soil settlement.

Indonesia is moving fast into the digital space, with an internet user growth rate three times faster than the global average, and an internet user community that is still only 56 per cent of its total population. President Widodo understands fully that “data is the new type of wealth for our nation, it is now more valuable than oil”.

But since Indonesia is one of the biggest markets for Google, Facebook, YouTube and WhatsApp, the key to future growth will be the access to data. Will Indonesian companies, government and start-ups have access to data so they can compete equally with multinationals willing to pay for it? If we, as individuals, cede our private data to these platform companies, which then sell them as “private income”, when will data become a public good for growth?

One reason I am optimistic about Asean digital economies is that they are actually more innovative than the present indicators suggest. The latest Global Innovation Index puts Switzerland at No 1, the US third and Singapore eighth, while Hong Kong, China and Japan are at 13, 14 and 15, respectively, far ahead of Malaysia (35), Vietnam (42), Thailand (43) and the Philippines (54).

These scores are essentially weighted in ways like the famous IQ tests, which were essentially euro-centric in bias. In the digital space, innovation and the ability to capture markets are very much in the “speed x scale x scope” framework. China was able to compete rapidly with the US because of the scale of its internal market (800 million internet users), high-speed broadband infrastructure and scope of hybrid services across multiple sectors (Alibaba and WeChat).

Asean countries have youth, diversity of culture and access to world-class knowledge, as well as strategic geographical location … they will become the cutting-edge digital future

Within Asean, Indonesia, Vietnam and Philippines have scale, given their populations. But Asean’s real strength is the youth of its population, already digitally savvy and moving into middle- and higher-income ranges.

It is precisely because Asean countries have youth, diversity of culture and access to world-class knowledge, as well as strategic geographical location, that they will become the cutting-edge digital future.

No economy today can afford to be complacent. Least of all in terms of flawed indices. To think that Hong Kong, considered by the Heritage Foundation to be No 1 in economic freedom, can descend into protests because of an intergenerational dispute over the rule of law and inequality, means we need a root-and-branch review of how to compete in a complex digital world.

Andrew Sheng writes on global issues from an Asian perspective

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