How Southeast Asian Countries Could Lead In Digital Trade
Digital trade can accelerate economic recoveries by lowering transaction costs and accelerating time-to-market. For small and mid-sized enterprises in particular, (SMEs), it can mean the difference between expanding into global markets or remaining a purely domestic business.
South East Asian countries are in an excellent position to realize the benefits of embracing digital trade. They can jump-start the process by focusing on a few key priority areas.
Digital Trade Documents Really Help SMEs
First, governments can remove legal barriers to accepting digital trade documents. Digitizing paperwork helps all businesses, but especially the SMEs that research shows have a large and positive impact on job creation. Many SMEs lack the resources needed to maintain voluminous hard-copy records of every transaction processed and every permit and certificate applied for. Digital documents alleviate that burden and dramatically cut transaction time. In the UK, one recent study by the International Chamber of Commerce found that digitizing paperwork can improve business efficiency by up to 35% and for the UK alone would help generate US$34.5 billion in new economic growth for SMEs by 2024. Huawei is supporting this research in other markets because it makes simple practical business sense to support SMEs through digitalising trade documents and processes.
Going digital would mean all documentation would be electronic – certificates of origin, bills of lading, invoices and payment – enabling companies to clear customs procedures much more quickly. In Singapore, trade finance has already gone digital. Everything from opening a bank account to registering a company can be done online. Electronic invoicing and payment make transactions more reliable accuracy and efficient.
Moving Towards a “Digital RCEP”
Second, Southeast Asian countries can build on existing trading agreements across the regions to embrace digital trade. Last November, ASEAN member states and selected trading partners signed the Regional Comprehensive Economic Partnership (RCEP).
For example, RCEP has unified regional rules of origin, which help determine whether an exporter receives preferential treatment under the treaty. Previously, to certify a product’s country of origin, according to a mosaic of different rules in different markets, companies had to make that product on a dedicated production line and provide a dedicated certificate.
With RCEP, a single production line and one certificate covers an entire region. In a “Digital RCEP”, that certificate would be created, issued and delivered instantly to all checking gates in the customs process, saving many days in processing.
RCEP members make up nearly one-third of the world’s population and account for nearly one-third of global GDP. Embracing digital trade documents would accelerate the benefits for SMEs across the region.
Other certificates and processes benefit too. Singapore manages data transfers efficiently across a special network created under a Digital Economy Agreement using certificates authenticating that data protection policies conform to APEC Cross Border Privacy Rules APEC Cross Border Privacy Rules. Last December, Singapore also became the first to issue digital banking licenses, enabling non-bank entities to offer fintech services online only. This is another promising development for SMEs.
Talent for a Digital World
Digital transformation fuels economic activity across all sectors. Accordingly, it is driving demand for stable, high-capacity broadband connections that enable companies to energize the recovery. There is a particular need to close the digital divide by connecting remote areas to the network, ensuring that everyone, regardless of location or income level, has fast reliable access to the Internet and to the new opportunities of digital trade.
In addition to infrastructure, another success factor is a digitally skilled workforce. Some leading tech companies provide training programs that help prepare young engineers to work with tomorrow’s most advanced technologies. Opportunities abound for public-private partnerships in this area.
Finally, given the importance of start-ups to the regional economy, support for entrepreneurs will yield a bigger return on investment. That’s one reason Huawei last month announced plans to devote US$100 million to help start-up companies in Asia Pacific seize the opportunities created by digital transformation. The company’s “Spark Program” will benefit young, fast-growing companies in Singapore, Malaysia, Thailand, the Philippines, Indonesia, Sri Lanka, and Vietnam.
Southeast Asia is in a prime position to lead on many practical digital trade initiatives and become one of the world’s leading digital trade hot-spots by investing strategically in the right policies, infrastructure and support to its SMEs. Its time to prioritise digital documents, skills and start-ups. The benefits will be considerable and will last for years to generations to come.
Don’t miss part 2 of the Nikkei-Iseas forum tomorrow – Jay Chen, Huawei’s Vice President of Asia Pacific, and other experts will be speaking on the topic of digital trade.
Disclaimer: Any views and/or opinions expressed in this post by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Huawei Technologies.