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The Importance of Interoperability for ASEAN’s Digital Framework Agreement

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Pacific Money | Economy | Southeast Asia

The Importance of Interoperability for ASEAN’s Digital Framework Agreement

Creating seamless regional integration is crucial to the success of the bloc’s pathbreaking digital economy agreement.

The Importance of Interoperability for ASEAN’s Digital Framework Agreement
Credit: Depositphotos

On December 1, the member states of the Association of Southeast Asian Nations (ASEAN) commenced their first round of negotiations for the ASEAN Digital Framework Agreement (DEFA), which, if concluded, would become the world’s first regional digital economic pact. By developing a more sustainable, resilient, and inclusive digital environment, this framework could yield a significant financial benefit of up to $2 trillion through the development of the region’s digital economy by 2030.

The DEFA initiative is critical to sustaining the region’s recent strong digital economy growth. Despite the global macroeconomic uncertainty, Southeast Asia’s digital economies successfully hit $100 billion in revenue, after increasing eightfold over the last eight years. Implementing the DEFA will augment this growth and potentially bolster the region’s position in the global digital economy amid the escalating geo-tech rivalry between China and the United States.

DEFA’s main objective is to promote convergence in the regulatory landscapes of digital economy governance across Southeast Asia in nine key areas, including cross-border e-commerce, payments, cross-border data flows, digital identification, talent mobility and cooperation, digital trade, and collaboration on emerging topics such as blockchain and artificial intelligence. The harmonization of legislation across these areas is vital to ensure fairness and competition in the region’s digital markets.

Another important part of the DEFA is interoperability. This plays a crucial role in ASEAN’s pursuit of regional integration, by dismantling digital barriers between member states. This interconnection aligns with the primary objective of creating an interlinked digital environment, which in turn will strengthen the region’s collective power in the global digital arena.

To facilitate the smooth flow of information and services in digital markets, it is crucial to establish a framework that prioritizes the interoperability of various digital platforms. Hence, a more converged interoperability mechanism will play a pivotal role in fostering innovation and open competition to spur exponential regional digital economy growth.

For the business sector, interoperability acts as a crucial driving force for market growth by enabling seamless cross-border transactions. This provides enterprises with more prospects for implementing business expansion and contributes to the overarching goal of establishing a cohesive digital economy throughout ASEAN. Integrating digital systems promotes innovation by enabling firms to enhance their products and services instead of merely dealing with compatibility challenges. This has the potential to transform the region into an epicenter of the global digital economy.

Moreover, the DEFA would allow consumers utilize digital services across various platforms, mitigating the negative impact of being constrained within national markets and enhancing the user experience simultaneously. The increased range of options available to consumers would promote healthy rivalry and enhance the overall standard of digital services throughout the region.

Nevertheless, implementing interoperability among Southeast Asian economies is still potentially hampered by three factors: namely, a lack of clarity on interoperability categorization, the region’s uneven cyber resilience, and ASEAN’s insufficient attention to intellectual property rights.

When implementing an interoperability framework, it is imperative to clearly define and categorize the level of technical integration required in order to facilitate convergence at a time of rapid technological advancement in the region. In this regard, Southeast Asian governments can learn from the European Union, which has distinguished between two forms of interoperability: horizontal and vertical interoperability. The former is designated for products or services operating at the same layers of systems, such as email platforms, while the latter applies to products or services at different levels of the value chain, such as cross-border services.

On top of that, the glaring gap in Southeast Asian economies in terms of cyber incident prevention is also alarming. These shortcomings can be attributed to the uneven development of standards for protecting personal data between member states, which has created an online menace for consumers. Among the ASEAN member states, only Singapore, Malaysia, Thailand, the Philippines, Indonesia, and recently, Vietnam have enacted specific legislation concerning personal data protection.

Most countries are not willing or able to stipulate data protection regulations because they are, in some forms, a tax on data-intensive industries. They may also need more administrative capacity to enforce privacy and data protection measures in order to safeguard sensitive information. Simultaneously, this suggests a need for ASEAN to narrow the gap by providing countries such as Laos, Myanmar, and Cambodia with empowerment programs based on best practices from countries with more advanced cybersecurity systems, like Malaysia, Singapore, and Indonesia.

Finally, the formulation of interoperability measures also runs into the challenge of safeguarding intellectual property (IP) rights. The DEFA should incorporate the deliverable actions in the ASEAN IP Rights Action Plan 2016-2025 to enhance the framework’s IP protection, in order to ensure that small and medium enterprises in the region would be able to compete in a fair regional business environment. This would provide consumers with more diverse choices for goods and services and prevent any single market player from monopolizing the digital markets.

Successful implementation of interoperability would drive market growth for businesses and provide consumers with a broader range of options, ultimately positioning ASEAN as a hub of the global digital economy.