Digital collaborations, RCEP free trade to help power ASEAN economy beyond pandemic
By Celine Chen
SINGAPORE, NNA - The long-awaited launch of RCEP, the world's largest trade deal, is expected to spur trade and the digital economy even further in the Asia Pacific as its 15 members will collaborate in digitalization efforts to enhance cross-border connectivity, trade and integration.
ASEAN, the 10-member bloc of Southeast Asian countries, signed the Regional Comprehensive Economic Partnership (RCEP) agreement together with China, the second biggest economy in the world, and the developed nations of Japan, South Korea, Australia and New Zealand on Sunday (Nov. 15) after eight years of negotiations and delays.
The historic pact, which will benefit nearly the entire Asia-Pacific region excluding India, will see Japan’s first participation in a free trade framework that includes China, its biggest trading partner, and South Korea. Encompassing 30 percent of global gross domestic product and nearly a third of the world’s population, RCEP is the world’s largest free trade agreement to date.
Initiated by ASEAN, RCEP was hailed as a "major achievement" by Singapore Prime Minister Lee Hsien Loong when speaking at the 37th ASEAN Summit, held via video conference last Thursday. (Nov. 12).
Lee said it affirms ASEAN’s collective commitment to economic integration and an open, rules-based multilateral trading system. Besides Singapore, which has been leading digitalization efforts in the region, other member countries in the bloc are Indonesia, Malaysia, Thailand, the Philippines, Vietnam, Brunei, Cambodia, Laos and Myanmar.
Apart from opening up new opportunities and giving RCEP members preferential access into growing markets in the region, the agreement also covers enhancements in areas such as online consumer protection, online personal information protection, transparency, paperless trading and acceptance of electronic signatures. It also includes commitments on cross border data flows.
"This provides a more conducive digital trade environment for businesses and provides for greater access" to the markets of RCEP participating countries, said a statement issued by Singapore's ministry of trade and industry.
The disruptions caused by the unexpected arrival of the coronavirus pandemic have necessitated a stronger coordination to strengthen links and supply chains quickly in the region and throughout the world.
Across ASEAN, governments and businesses are emphasizing the increasing importance of digitalization of trade, ecommerce, digital banking and cross-border services on platforms and apps.
About 40 million in Southeast Asia became first-time online users during the pandemic, bringing the total number to 400 million and pushing digital payments to grow from $600 billion in 2019 to $620 billion this year.
A recent report by Google, Singapore's state investment firm Temasek, and Bain & Co. consultancy shows unprecedented growth of the region's internet economy, which hit the $100 billion mark this year, and is on track to surpass $300 billion by 2025.
"We are not only in the midst of a global pandemic; we are also at the centre of a digital revolution, one that would fundamentally change societies and economies around the world. Change was already gaining momentum before COVID-19, and the pandemic accelerated the pace of change," said Singapore's Deputy Prime Minister Heng Swee Keat, who noted telecommuting, video calls, e-learning, online shopping, and digital payment have surged in the midst of the turbulence.
Hence, countries can grow the digital economy by working together for mutual benefits as it is "one of the few growing sectors during the pandemic, and its longer-term growth potential remains strong and probably will be stronger", said Heng at an event in October.
Singapore is also working actively with trading partners beyond Southeast Asia to accelerate digital innovation in trade throughout the world.
"Countries can better harness this potential by strengthening digital connectivity to enhance cross-border digital trade. This is why Singapore strongly supports an open digital trade architecture, and is actively growing our network of Digital Economy Agreements with like-minded countries," said the deputy premier, adding that international cooperation is especially important in cybersecurity to build trust in digital exchange.
Singapore has launched initiatives to work with businesses, researchers and innovators globally to develop solutions in areas such as maritime and construction, and also, to create a network of partners in major cities to help businesses seize new opportunities, he said.
"We are also seeing collaborations between companies and academia, not just within our shores but also across borders. One example is the R&D collaboration between the National University of Singapore and Cisco Systems, in areas such as cybersecurity, AI and data analytics," Heng noted, when speaking at an event which marked International Cyber Week in October.
Last Thursday (Nov. 12), Singapore announced that it will launch in January a new working tech pass to attract up to 500 “founders, leaders and technical experts with experience in established or fast-growing tech companies” as part of efforts to develop Singapore’s tech ecosystem.
Pass holders can run a business, or be an investor, employee, consultant or director in Singapore-based companies. They can also be a mentor to start-ups or lecture at a university.
"Once here, they not only add vibrancy to the overall ecosystem but will also create exciting new opportunities and collaborations with fellow Singaporeans," said Singapore's Trade and Industry Minister Chan Chun Sing, adding that the tech pass holders will add to the critical mass of established tech talent in Singapore and create a flywheel effect to further strengthen its position as a leading tech hub for the region.
In its report on regional recovery, the Asian Development Bank (ADB) said micro, small, and medium-sized enterprises (MSMEs) must be strengthened with "innovation and internationalization" as they are key to revitalizing Southeast Asian economies devastated by the pandemic.
The bank noted that MSMEs have been a critical driving force in their economies, accounting for an average of 97 percent of all enterprises and 69 percent of the national labor force from 2010 to 2019. They contributed an average of 41 percent of each country’s gross domestic product during that period.
ADB Chief Economist Yasuyuki Sawada, said, “MSMEs in Southeast Asian economies mainly focus on domestic markets and their level of entrepreneurship remains suboptimal. Supporting the development of MSMEs, particularly in technology adoption and participation in global supply chains, will contribute to inclusive growth and aid in recovery efforts from COVID-19.”
Recognising the importance of MSMEs, ASEAN member states have strived to strengthen the resilience of these enterprises with stimulus measures besides taking action for longer-term structural transformation. They have encouraged enterprises to re-evaluate their business models, upskill their staff, digitalize and explore partnerships to sell their products and services.
Bountheung Douangsavanh, who chairs the ASEAN coordinating committee on MSMEs, said “while each ASEAN member state is doing its best to manage the crisis domestically, information sharing and learning from one another is crucial to strengthen MSME resilience in the region.’’
“Invaluable exchanges of information and lessons learnt would pave the way for effective regional actions and collaborations to go through this hard time, " he said.
Continuing their support for the business and digitalization efforts of ASEAN are nations with more advanced technologies like Japan, the United States, Germany, Britain and Canada which have been forging stronger trade and digital partnerships with the region.
Ambassador of Canada’s Mission to ASEAN Diedrah Kelly said “meaningful partnerships that facilitate collective learning and growth to ensure MSMEs can remain operational during this pandemic are critical for sustainable economic recovery.”
To better leverage the complementary strengths of Singapore and German SMEs, Enterprise Singapore and the Asia-Pacific Committee of German Business (APA) signed a Memorandum of Understanding in October to support enterprise development through industrial and digital transformation in sectors such as advanced manufacturing, digitalization and innovation, medical technology and healthcare, and future of mobility. They will enhance their collaboration in open innovation and jointly explore market opportunities in Southeast Asia and Europe.
Welcoming the new partnership, Dr.-Ing. Gunther Kegel, CEO of Pepperl+Fuchs SE, a German SME, said, “Singapore is our Southeast Asian hub for procurement, manufacturing, distribution sales and R&D and has proven to have a very robust and reliable structure specifically during the corona crises.”
In June, Britain launched its Asia Pacific Digital Trade Network and is setting up a UK-ASEAN Digital Business Challenge to give companies in the region more assistance to meet challenges.
Natalie Black, the UK’s Singapore-based Trade Commissioner for Asia-Pacific, told Financial Times in September, “We think the future is in this part of the world not just because of the growth figures but because of how trade will be conducted. The work that Singapore has done across the region on digital trade can teach us a lot.”
Despite the digital economy surging on accelerating growth in Southeast Asia this year, there are warnings.
The World Economic Forum (WEF) has cautioned that while technology-driven job creation is expected to outpace job destruction over the next five years, the current economic contraction is reducing the rate of growth for the jobs of tomorrow.
In its report on the future of jobs released in October, WEF said, "There is a renewed urgency to take proactive measures to ease the transition of workers into more sustainable job opportunities. There is room for measured optimism in the data, but supporting workers will require global, regional and national public-private collaboration at an unprecedented scale and speed."
The pace of technology adoption is expected to remain unabated, and may even accelerate in some areas. The use of cloud computing, big data and e-commerce remain high priorities for business leaders, following a trend established in previous years, said WEF.
Interest in the use of encryption, non-humanoid robots and artificial intelligence has also risen significantly.
WEF estimates that by 2025, 85 million jobs may be displaced by a shift in the division of labour between humans and machines, while 97 million new roles may emerge and adapt to the new division of labour between humans, machines and algorithms.
Automation, in tandem with the COVID-19 recession, is creating a ‘double-disruption’ threat for workers, said WEF. Besides the current disruption from the pandemic-induced lockdowns and economic contraction, technological adoption by companies will transform tasks, jobs and skills by 2025.
WEF said 43 percent of businesses indicated in a survey that they are set to reduce their workforce due to technology integration while 41 percent plan to expand the use of contractors for task specialization. However, 34 percent plan to expand their workforce due to technology integration. Overall, employers expect emerging professions in their company to grow from 7.8 percent to 13.5 percent by 2025.
Ryosuke Shimizu, secretary-general of the Japanese Chamber of Commerce and Industry in Singapore, said while certain jobs will be lost as a result of digital transformation, businesses should take advantage of new jobs emerging from growing sectors.
He told NNA that governments and companies should not allow any resistance to change to fester just because of worries over job losses. Instead, they should prepare themselves and workers for new opportunities, he said, adding that human resource staff with a deep understanding of their digital needs will be needed to guide company transformation.
He said, "JCCI also provides useful information through seminars and institutional newspapers from time to time to share with companies the digital solutions that they can adopt. But at a recent seminar on Artificial Intelligence, they still asked many questions like 'I don't know where to start' and 'I can't decide what kind of issues should be solved with AI'."