Tuesday, September 19, 2017

The future of ASEAN’s digital economies

ASEAN countries are set to enter the top five global regions in terms of the application of digital technologies. By 2025, the manufacturing sector will have embraced fast evolving advanced technologies and its citizens will be increasingly using advanced digital communications in their personal lives as well as in the workplace.

A special pipe system for the laying of fiber optic cables. Thailand aims to provide 100Mbps fibre optic services to key cities by 2020. Photo - EPAA special pipe system for the laying of fiber optic cables. Thailand aims to provide 100Mbps fibre optic services to key cities by 2020. Photo - EPA

The internet, combined with advanced technology, represents the most essential modern element in social and material progress, as well as a bridge to global economies. The sector is also critical for providing services for growth in other sectors, including financial, business, utilities and logistics.

Broadband speeds are increasingly crucial to realising the possibilities of e-commerce and emerging technologies such as cloud computing. The latter is useful for SMEs since it allows them to reduce costs by subscribing to online solutions rather than having to invest in expensive hardware systems.

A report by consultancy firm A T Kearney predicts that Singapore, Malaysia and Thailand will be among the top 20 countries in the global digital rankings by 2025, while most of the other ASEAN countries should be positioned in the top 40 worldwide. The report adds that the implementation of a radical digital agenda could add US$1 trillion (K1.36 quadrillion) to the region’s GDP over the next ten years.

National identification systems have been introduced in the region to provide a gateway to access public services in Singapore and Malaysia. The Philippines has recently introduced legislation to start its own national ID system. Within the next decade most public services in the region should be digitally available.

A willingness to invest heavily in technology has been important in the development of digital economies in Singapore and Malaysia. The introduction of a national high-speed broadband network has been a priority in Malaysia, with the country committing $3.7 billion to install cable links to 1.3 million homes over the past four years.

In Malaysia, the Multimedia Development Corporation is encouraging the use of cloud services among SMEs in the country’s Multimedia Super Corridor, which is a Special Economic Zone extending 15km from central Kuala Lumpur to the city’s international airport.

Singapore leads the way

Malaysia has invested $2.6 billion in its high-speed broadband project to provide connectivity to 2.3 million homes, offices and businesses, under Malaysia’s Tenth Development Plan. Singapore has also invested heavily and now ranks as one of the world’s most advanced digital societies in the world when it comes to fast internet access, with average speeds of 61Mbps. Potential opportunities provided by broadband services extend beyond commerce to include education, transportation and healthcare.

Information communication technology ministers of the ten ASEAN member countries have drawn up a master plan to improve mobile applications for use in fields such as healthcare, transport as well as e-governance. Another aim is the provision of broadband internet access to every school in the ASEAN Community through the development of a policy framework and a national statistics portal.

Indonesia has established a National Broadband Network strategy under its Masterplan for Acceleration and Expansion of Indonesia’s Economic Development 2011-2025, which targets wired access over 20Mbps connections to rise from 21% to 75%.

Thailand aims to extend basic internet service to 95% of the population by 2020. The strategy also aims to provide 100Mbps fibre optic services to key cities by the same year.

The latest 4G technology offers download speeds three times faster than 3G connections, which are the most advanced available in the region at present. Swedish telecoms company Ericsson estimates that 4G technology usage will expand from around 15% to 60% by the end of 2019. Vietnam hopes to see 3G and 4G networks covering 95% of homes by 2020. Indonesia will need to start moving toward 4G, as cellular data traffic is expected to expand. A huge number of people have gained access to the internet in recent years through their mobile devices, and the trend is clear in every ASEAN member state.

Indonesia’s market largest

Smartphone supplies in the region reached just over 100 million units in 2015, representing a year-on-year growth of 22%, and 30 million of these handsets were capable of operating on advanced 4G networks. Indonesia remained the largest overall market, accounting for nearly 29%, followed by Thailand and the Philippines, with growth levels of 22% and 14% respectively.

In a short period, Cambodia has reaped the benefits of a successful rollout of mobile services. It has avoided a costly rebuilding of its fixed-line telecoms infrastructure by its launch of cellular services. This process is being replicated in Myanmar, where commercial cellular services have only been available since 2014. Reform of the sector is an integral part of lifting millions of people out of poverty, says Ulrich Zachau, the World Bank country director for Myanmar. Bold new investments are already helping to accelerate the process.

The transformation in Myanmar’s telecoms sector has included foreign operators joining the national operator, MPT, in the domestic cellular market. Since the arrival of Qatar owned Ooredoo and Norway’s Telenor, a fourth licence was also issued, in 2016, to Vietnam’s Viettel. The latter expects to invest $1.5 billion in the construction of a 3G network with its coverage due to reach 95% of the population within three years.

Japan’s mobile operator KDDI and the trading house Sumitomo Corporation, signed an agreement with MPT in July 2014 to invest $1.96 billion to jointly operate a new mobile phone business. KDDI Senior Vice President Yuzo Ishikawa said: “We have entered what could be called the last rapidly growing market. With our telecoms infrastructure expertise, we hope to greatly contribute to the development of Myanmar’s economy.”

Myanmar investment pays off

The initial foreign investors who recognised the potential of investing in the development of Myanmar’s mobile telecoms and their strategies have been vindicated. In 2016, Telenor Digital Businesses said it had secured more than 16 million subscriptions, giving it more than 30% of the market. The number of data users has also been much higher than expected, according to Petter Furberg, Telenor’s senior vice president.

“The biggest surprise is that 55% of our customers are data users on a monthly basis, most of them on smartphones. Voice traffic grew 93% from January to June, but data usage grew 196% over the same period,” he says.

Meanwhile Myanmar’s Ministry of Transport and Communications has entered into a leasing agreement with Intelsat for transponders to extend 2G and 3G mobile telecoms services beyond major cities, which will hasten the expansion of high-speed connectivity for businesses and communities in rural as well as urban areas.

Ericsson predicts that by 2020, smartphone subscriptions in the region will grow three times to almost 800 million, while 4G subscriptions will constitute almost 25% of mobile subscriptions, with the remainder mostly operating to internet-compatible 3G standards.

ASEAN has an opportunity to move to the forefront of the fast-growing global digital economy with many of the fundamentals already in place. These building blocks include robust and growing economies, a literate population, a rapidly growing smartphone penetration and well-developed information communication technology.


From “Investing in ASEAN 2017”, published in January 2017 by the ASEAN Secretariat.