Digging Deeper with DEFA | Fulcrum

Initiation of ASEAN Digital Economy Framework Agreement (DEFA) negotiations At 43^rd The ASEAN Summit in September was the highlight of Indonesia’s chairmanship of ASEAN this year. Much anticipated The first round of talks will be held on the 1st^St December The zero draft is expected to lay the groundwork for subsequent rounds of negotiations. At this juncture, ASEAN Member States (AMS) will get a glimpse of the level of ambition embodied in their fellow members’ negotiating mandates. A shorter timeline for negotiating ten AMS terms, with a target two-year runway for negotiation closure Nine broad areas of focus The 'least common type’ runs the risk of racing to the finish line without a deep and substantial outcome beyond the deal. While DEFA aims to move the needle on regional digital integration, it must proactively bridge the digital divide within the region to achieve better digital interoperability and eventual integration.

Establishing this balanced ambition can be challenging on several fronts. For one thing, varying levels of digital capabilities and the overall maturity of the digital ecosystems of the respective AMS may hinder the harmonization of standards, the level of digital integration and the speed with which it can be achieved. A summary ASEAN Digital Integration Index (ADII) Scores, which are defined under Readiness for Digital Economy Integration ASEAN Digital Integration Frameworkare shown in Table 1 along with some notable observations.

Table 1: ASEAN Digital Integration Index (ADII) Scores (2021)

First, countries scoring high and low on the six measurement pillars differ, and their scores do not necessarily correspond to relative levels of economic development, especially in the case of the best-performing AMS. For example, while Thailand and Malaysia are upper-middle-income countries in 'Digital Trade & Logistics’ and 'Data Protection & Cyber ​​Security’ respectively, Singapore and Brunei both score higher than high-income countries in the region. In contrast, low scorers are tucked into the lower-middle income bucket. Second, the disparity between high and low scores in each pillar is wide, with the largest gap reaching over 70 points in 'Data Protection & Cyber ​​Security’. Additionally, when comparing top performers among AMS across pillars against international benchmarks, high scorers are either very close to the stated benchmarks or significantly surpass them. points. Therefore, a key starting point for facilitating greater digital integration is to bridge these digital integration divides between AMS.

The Leaders’ Report on the Development of the ASEAN Digital Economy Framework Agreement (DEFA). It recognized the need to pursue „wider and deeper” cooperation to bridge these digital divides. Therefore, an integral component of DEFA will be a strategic action plan aimed at articulating how these objectives can be achieved. An effective capacity-building strategy includes key action areas with goals, activities needed to achieve the goals with clear timelines for benchmarking milestones, and some discussion of funding mechanisms for these activities spread across the AMS. Ideally, monitoring and evaluation of these capacity-building efforts should be included in the strategy, although this would increase ASEAN’s required budget for this effort.

Of course, a ASEAN-X Or a staggered approach to achieving goals for standards harmonization and regulatory liberalization has been adopted to effectively deliver longer deadlines for less digitally ready AMS to comply with agreed DEFA regulations. However, this approach may paradoxically counter all the good intentions of bridging the digital divide altogether, leaving countries even more polarized as digitally developed economies get a head start on reaping the benefits of convergence. That said, another permutation that could be considered is a hybrid approach – capacity-building for digitally backward AMS is subject to a phase-out period, while some concessions are made over time to accept the full terms of the agreement.

Note that some AMS already have existing bilateral arrangements with each other aimed at strengthening digital capabilities. In January 2023, Singapore and Malaysia have concluded a Framework of Cooperation (FoC). On the Digital Economy. In this partnership arrangement, both sides agreed to cooperate in the areas of personal data protection and cyber security – two of the fundamental safeguards for digital trade flows. Apart from that, projects on national and corporate digital identities were presented, which reinforced the importance of digital trust in the bigger picture of digital integration. Singapore and Indonesia signed a Memorandum of Understanding In March this year, the Tech:X program was established in the digital economy, a cross-border work program for young technologists to deepen their digital skills through knowledge exchanges. Targeting digital skills development is a key aspect of digital integration, as it is the area with the lowest scores among the six ADII pillars in the region. These bilateral agreements could be pilot projects or future models for ASEAN-wide agreements that could be linked to DEFA.

In addition to their respective digital capabilities and digital ecosystem maturity, individual countries’ idiosyncrasies around the importance of aspects such as data sovereignty may also hinder ambitions for deeper digital integration within the region. Indonesia, Thailand And Vietnam Contains data localization terms at various scales. Recently, talks on digital trade aspects under the US-led Indo-Pacific Economic Framework (IPEF) initiative Suspended After a change in the proposed treatment of cross-border data flows prohibiting national requirements for data localization. Beyond more conventional capacity-building approaches, some barriers to integration can only be overcome if there is a change in government attitudes, particularly the degree of risk aversion related to emotional issues and political preferences.

A critical driver to help mitigate risk aversion to facilitate seamless digital commerce is creating an environment of digital trust. Expanding the scope of an initiative like Singapore Digital Trust Center A regional initiative can be considered to further develop trust technologies for protecting digital information and systems through targeted research and sandboxing activities. In some cases where gaps in capabilities and sovereign positions on certain critical issues are more challenging, it may be practical to adopt a looser approach. under Digital Trade Principles of the European Union (EU) Digital Partnership Aiming to facilitate trade with partner countries, the EU is adopting a 'common understanding’ approach to relevant digital trade issues rather than using binding instruments such as harmonized data protection standards to promote digital integration. This includes a 'whitelist’ approach to data transfer, where countries have common basic standards, establishing a level of confidence that data transfer will be protected in a cross-border setting.

The ideal scenario is to strike a balance between making meaningful progress toward greater integration while ensuring that no AMS is left behind in this effort. Achieving this may require a degree of pragmatism. Any initiative like DEFA should aim for something more progressive than the status quo. The most important factors to consider when entering negotiations are the diversity of the ASEAN region and the importance of bridging the digital divide using traditional capacity-building mechanisms, as well as strengthening digital trust as an enabler and digital security.

Editor’s note:
ASEAN Focus+ Articles are timely critical insight pieces published by the Center for ASEAN Studies.