Proceeding International Seminar on Islamic Studies Volume 4 Nomor 1 Tahun 2023

Medan, March 15th-16th, 2023 e-ISSN: 2722-7618

INCREASING ASEAN ECONOMIC GROWTH THROUGH

THE DIGITAL ECONOMY AS AN INITIATIVE IN THE
ASEAN INDONESIA CHAIRMANSHIP 2023

Ari Wibowo1
1
Secretariat General of the Ministry of Finance of the Republic of Indonesia
(e-mail: ari_wibowo@kemenkeu.go.id)

Abstract: The ASEAN Indonesia Chairmanship 2023 will observe a lot of opportunities and
challenges for the bloc in the area of economy. This chairmanship will gear toward
strengthening ASEAN’s institutional capacity and increasing its resilience towards
challenges. The ASEAN economic growth as well as the digital economy are challenging
since its determinants can be analyzed from different points of view in all ASEAN members.
This study attempts to explain how ASEAN economic growth relates to digital economy as an
initiative in the ASEAN Indonesia Chairmanship 2023. The study uses qualitative research
methods as well as empirical research methods with descriptive analysis techniques. The
main finding of this research is the growth of Southeast Asia can be attributed to many,
however, one of the largely stands out amongst the rest is its rise in the digital economy.
There has been a rapid change in digitalization across the 670 million people it holds. The
digital economy alone is set to generate over $1 trillion US Dollars by 2025 which is around
a quarter of the entire Southeast Asia’s gross domestic product. E-commerce, E-banking, and
E-education have all been rapidly accelerated and have named ASEAN as the world’s
fastest-growing internet market.

Keywords: ASEAN Indonesia Chairmanship 2023, ASEAN economic growth, digital

economy, Southeast Asia, ASEAN.

Introduction
The ASEAN Indonesia Chairmanship 2023 will observe a lot of opportunities and
challenges for the bloc in the area of economy. The ASEAN Institutional Capacity and
Resilience to Challenges will be strengthened during this Chairmanship. It is difficult to
predict the growth of the ASEAN economy and the digital economy because each ASEAN
member can assess its factors from a different perspective. This analysis makes an effort to
clarify how the digital economy initiative in the ASEAN Indonesia Chairmanship 2023
connects to the growth of the ASEAN economy.

Literature Review
According to the ASEAN Charter published by the ASEAN Secretariat Organization
(2008), ASEAN is an association of countries in the Southeast Asian region, which according
to geography, this region is characterized by covering ten countries, namely Indonesia,
Malaysia, Singapore, Brunei Darussalam, Vietnam, Thailand, Laos, Myanmar, the
Philippines and Cambodia. By the end of 2015, ASEAN established the ASEAN Economic
Community (AEC). Freer movement of capital is one of the objectives of the AEC, an
economic integration that aims to promote the free movement of skilled labor, investment,

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Medan, March 15th-16th, 2023 e-ISSN: 2722-7618

and goods. Through the AEC, ASEAN strengthened its economic integration after the
creation of the ASEAN Free Trade Area.
With a population of about 600 million, ASEAN has a land area of 4.46 million km2.
The sea area of ASEAN is three times that of its land area. In 2010, the combined nominal
GDP of Coal has grown to US$1.8 trillion. After China, Japan, the United States, Germany,
France, Brazil, the United Kingdom, and Italy, ASEAN would have the ninth-largest GDP if
it were a single country. Being a leader in East Asia's economic integration, ASEAN is
crucial to interregional cooperation. The organization was founded in August 1967 by the
founding five ASEAN members, Indonesia, Malaysia, the Philippines, Singapore, and
Thailand. (Tkachenko et. al., 2022).
Moreover, ASEAN is a leader in East Asia's economic integration and is important to
regional cooperation. When ASEAN was established, Southeast Asia was still embroiled in
the Vietnam War, which made political collaboration and regional security top priorities.
With the inaugural summit's approval of the Declaration of ASEAN Concord in 1976,
economic cooperation between ASEAN member states was established. The ASEAN
Industrial Project (AIP), the ASEAN Industrial Complementation (AIC), and the ASEAN
Preferential Trade Agreement were the three programs that were executed to promote
economic cooperation (APTA).
The establishment of the ASEAN Economic Community in 2015 was a significant
turning point in these efforts. When it comes to its hopes for development, ASEAN has
shocked the world with both Singapore's success and the recent waves of reforms in its
member countries, from Vietnam and Myanmar to Indonesia and the Philippines. Being an
economic bloc that embraces global integration, ASEAN is one of the top locations for FDI
globally, and its trade-to-GDP ratio is higher than 100%. (Vu, 2020).
According to Bukht & Heek (2019), Tapscott coined the term "digital economy" for the
first time. The digital economy is viewed as a social phenomenon influenced by technological
advancements. The advancement of communication technology has an impact on the
economic system. The existence of the information and communication technology industry,
electronic trading activities, and digital distribution of goods or services define the digital
economy. In addition, Aniqoh (2020) described that the digital economy is characterized by
the existence of the information and communication technology industry, electronic trading
activities and digital distribution of goods or services.
The era of the digital economy first emerged in the 1980s. The technologies used for
business efficiency during this period were personal computers and the internet. Electronic
commerce is also growing through the use of personal computers and the internet. After that
came a new economic era. The introduction of cloud computing technologies, the
advancement of cellular technology, and unrestricted internet access are the hallmarks of this
new era. The digital economic processes of the new century then make use of these three
forms of technology. (Tian, 2008)
According to Benjamin Ang (2020), the Digital ASEAN program was created in
response to requests from the public and business regional forum partners in ASEAN. In
order to fully realize the benefits of the Fourth Industrial Revolution and make it a force for
regional economic inclusion, the initiative aims to focus on the challenges that will support a
regional digital economy in ASEAN.

Method
The study uses qualitative research methods as well as empirical research methods with
descriptive analysis techniques.

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Medan, March 15th-16th, 2023 e-ISSN: 2722-7618

Result and Discussion

The main finding of this research is the growth of Southeast Asia can be attributed to
many, however, one of the largely stands out amongst the rest is its rise in the digital
economy. There has been a rapid change in digitalization across the 670 million people it
holds. The digital economy alone is set to generate over $1 trillion US Dollars by 2025 which
is around a quarter of the entire Southeast Asia’s gross domestic product. E-commerce, E-
banking, and E-education have all been rapidly accelerated and have named ASEAN as the
world’s fastest-growing internet market. In addition, there is a positive relationship between
the digital economy and openness to the GDP growth of ASEAN countries.
Year 2023 marks the start of Indonesia’s ASEAN Chairmanship. This chairmanship
will observe a lot of opportunities and challenges for the bloc in the areas of diplomacy,
climate change, economy, and peace, also security. Upholding the theme “ASEAN Matters:
Epicentrum of Growth” Indonesia’s ASEAN chairmanship will gear towards strengthening
ASEAN’s institutional capacity and increasing its resilience towards challenges with digital
economy as one of the main drivers of economic growth in the region. (Hojeghan &
Esfangareh. 2011)
The development of banking services carried out via the internet is increasing lively
along with the rapid growth of information technology. Innovation factor products and
technological developments are an inseparable part of the development of the banking
industry to improve service quality. Based on the table above, we can see that the highest
digital banking index in ASEAN is in Thailand, with a digital banking index of 9.5%.

Table 1. Index Digital Banking in ASEAN

No. Country Index Digital Banking
1 Indonesia 8.0192%
2 Singapore 7.6815%
3 Thailand 9.5005%
4 Philippines 6.4315%
5 Malaysia 6.1403%
Source: ASEAN Digital Masterplan 2025.
Online education is a brand-new way for people to learn. It serves as a substitute for
traditional classroom instruction, a long-term learning tool, and a platform for self-promotion.
Massive Open Online Course (MOOC) and Educational Technology Business are two
categories among the many online education platforms that exist. A MOOC is a massive open
online course that offers top-notch lectures and is designed for unrestricted participation.
(Srinuan, 2012)
Based on Table 2, we can see that the highest internet penetration in ASEAN is in
Brunei, which is 95%, followed by Singapore at 88%, and then by Malaysia at 81%.
Table 2. Internet Penetration in ASEAN
No. Country Internet Penetration
1 Indonesia 40%

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Medan, March 15th-16th, 2023 e-ISSN: 2722-7618

2 Malaysia 81%
3 Singapore 88%
4 Brunei 95%
5 Philippines 60%
6 Vietnam 70%
7 Cambodia 40%
8 Thailand 57%
9 Myanmar 31%
10 Laos No Data
Source: ASEAN Digital Masterplan 2025
We can see the ASEAN Member States Selected Basic Indicators in 2021 Table 3
below.
Table 3. ASEAN Member States Selected Basic Indicators, 2021

Total Annual Gross Gross International Merchandise Trade Foreign

Population Population Domestic Domestic Direct
Growth Product at Product Investments
Current Per Capita Inflow
Prices at Current
Prices
Thousand Percent US$ US$ US$ million US$ US$ US$
million million million million
BRN 430.0 -5.2 13,925 32,383.1 11,456 7,230 18,686 205
KHM 16,592.1 1.6 27,165 1,603.0 16,950 25,491 42,440 3,484
IDN 272,248.4 0.8 1,185,777 4,348.6 231,610 196,190 427,800 20,081
LAO 7,337.8 1.1 19,635 2,693.3 7,700 5,885 13,585 1,072
MYS 32,576.3 0.4 372,770 11,399.7 299,334 238,168 537,502 11,594
MMR 55,295.0 0.9 72,863 1,314.4 14,157 14,307 28,464 1,005
PHL 110,198.0 1.4 393,612 3,552.5 67,929 134,008 201,937 12,413
SGP 5,453.6 -4.1 394,579 72,399.7 456,805 406,041 862,846 99,062
THA 65,213.0 -0.3 505,890 7,645.3 271,315 269,004 540,318 14,641
VNM 98,506.2 0.9 361,962 3,674.4 335,793 330,752 666,545 15,660
663,850.3 0.8 3,348,177 5,024.2 1,713,047 1,627,075 3,340,122 179,215
Source: World Bank

Moreover, we also can see the ASEAN Countries Development Ambition in Table 4 below.
Table 4. ASEAN Countries Development Ambition
Countries Development Ambition Document (Year of Issue)
Brunei Joining the world’s top10 in quality of life Vision 2035 (2004)
and per capita income in 2035
Cambodia Aiming to become an upper-middle- Prime Minister Hun Sen’s statement (2013)
income nstion by 2030 and a developed
country by 2050.
Indonesia Becoming an advanced and prosperous The Vision of Indonesia 2045 (2019)*
nation among the world’s largest five
economies by 2045.
Laos Becoming an upper-middle-income The 8th Five-Year National Socioeconomic
country by 2035. Development Plan, 2016-2020 (2016).
Malaysia Elevating the country’s status to a The 11th Malaysia Plan (2015).

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developed economy by 2020.

Myanmar People working together to build a The Myanmar Sustainable Development Plan,
brighter future in a pluralistic and 2018-2030 (2018).
prosperous nation.
Philippines Becoming a prosperous middle-class Our Ambition 2040 (2015).
society free of poverty by 2040.
. Envisioning a “Smart Nation” that is a Singapore’s Smart Nation Initiative (2014)
leading economy powered by digital
innovation, and a world-class city.
Thailand Turning Thailand into a developed country National strategy Thailand 4.0 (2018).
by 2037.
Vietnam Becoming among the top three ASEAN The Political Bureau Resolution No. 23-
countries in industry by 2030, with some NQ/TW (2018).
of its industries being globally
competitive; becoming a modern
industrialized country by 2045.
Source: World Bank

Most people in the ASEAN region are able to locate digital content, create it
successfully, use it, evaluate its authenticity, manage the flow of media information, and
modify technology to certain situations. (Dwianto, 2021). In addition, according to Wibowo
(2018), although the GDP growth of ASEAN nations is already good, there is a correlation
between digital economic variables and that growth, and management of internet users must
be improved. It is envisioned that internet users will act as both customers and business
opportunity creators to launch start-ups, so boosting economic growth in each nation.
The expansion of the actors involved in the industrial activity of the digital economy
itself must come after the continuation of its development. Otherwise, there would be a
decline in the caliber of workers who are unable to adapt to the current circumstances. The
digital economy must become more competent as it expands. in order for employees to
always be able to follow or adjust to the economic development that is taking place. Never
stop learning is the important thing to keep in mind. (International Labour Organization,
2021).
The recent trend of technological growth has created a creative route to the digital
economy for sustainable development in China and ASEAN. The adoption of digital
technologies in both established and emergent digital industries is fostering the development
of fresh and creative approaches to business organization. China and ASEAN are working to
improve connectivity by combining common priorities in the Master Plan on ASEAN
Connectivity 2025 and the Belt and Road Initiative with the aim of high standard, people-
oriented, and people-centered development, with the establishment of the China-ASEAN
digital economy partnership and the designation of 2020 as the China-ASEAN Year of
Digital Economy Cooperation. (Yang, 2022).
The United Overseas Bank, the third-largest bank in Southeast Asia, predicts that the
ASEAN region will have the fourth-largest economy in the world. By 2025, the digital
economy alone is projected to produce more than $1 trillion in US dollars, or almost one-
fourth of the overall GDP. ASEAN has been identified as the region with the fastest-growing
internet market due to the tremendous acceleration of e-commerce, e-banking, e-education,
and other related industries. (United Overseas Bank Annual Report 2021).
The epidemic has spurred the growth of the digital economy, but it has also brought to
light hundreds of problems that require reform. Fortunately, Southeast Asians appear to be
quite resilient and change-resistant. The inhabitants of this country adopted the digital

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Medan, March 15th-16th, 2023 e-ISSN: 2722-7618

economy far more quickly than people in other parts of the world, which suggests that they
are open to change. We believe Southeast Asia has succeeded because of its small- to
medium-sized enterprise, or SME, business model. The region's economy relies heavily on
these SMEs, which, in a nutshell, signifies entrepreneurship. (Hossain, 2020).
Southeast Asians' daily lives are made more innovative, swift, and flexible by
entrepreneurship. As there are many entrepreneurs in every nation, we might observe
flexibility in the years to come. SME enterprises employ 70% of the labor force in nations
like Vietnam and Thailand, according to statistics, and 99% of all businesses are legally
registered. In conclusion, the growth of Southeast Asia's digital economy and the region's
vast drive-in infrastructure development will force it to grow into one of the world's major
economic unions within the next ten years. (Kai Li, et. al., 2020).
We can see that the disruption we are all currently experiencing is the digitalization of
economic activities. There are billions of connections made every day between individuals,
businesses, institutions, gadgets, data, and processes online. In the previous 5-8 years,
Southeast Asia's digital economy has grown at an exponential rate. (Schreckling & Steiger,
2016).
The disruption that we are all currently experiencing is the digital economy or the
digitalization of economic activity. It entails billions of regular, online interactions between
individuals, organizations, enterprises, gadgets, data, and processes. In the previous 5-8 years,
Southeast Asia's digital economy has grown at an exponential rate. In terms of pace and
scope, the current technology disruption is unprecedented. It is altering how things are made,
including new consumption trends, fixed capital development, cross-border financial flows,
and how we live. (Bukht & Heeks, 2019).
ASEAN has been one of the grandest economic success stories during the past decades.
It went from a relatively poor region to becoming one of the most exciting emerging markets,
that manufactures innovative products and services and exports them globally. It’s a nation
that once had a $29 billion US dollars Gross Domestic Products in 1970, making it one of the
world’s poorest regions, but by 2021, it is now estimated to be about $3.6 trillion dollars.
(Asian Development Bank).
Between 2000 and 2017, and notably from 2005 to 2017, mobile penetration has
tripled. Just over the past twelve years, it has tripled for ASEAN, going from 37 to 124 per
hundred persons (Philipp Rode, et. al., 2017). In addition, ASEAN as being the seventh
largest economy in the world if we put all their GDP together. Similarly, they are going to be
maybe number two or number three in terms of the size of the e-commerce market. The
major investor, like Softbank, they’re also in this space. It shows that ASEAN is growing,
and ASEAN is going to be the next big growth area. And a lot of that is going to be coming
from ride hailing as well as online media, online travel, and e-commerce. (Rahadi, 2016).
This is typical pattern for the development of the internet economy in most countries
when they start. The ride sharing platform was this notion of platform economy where
economists call it a two-sided market because it gains more value. The more you have two
sides of the market, more Uber drivers, more consumers will use Uber. More consumers,
more Uber drivers, and the value of the platform comes from the scale and the data that is
built up on that platform and these platforms then earn money from the data. (Carl Dahlman,
et. al., 2016).
Regulations are scrambling to keep up with the digital economy. The speed is very
high. So high that a lot of regulators are kind of scrambling to catch up with the next thing
that’s happening. How do we get the benefit but manage the risks? We don’t necessarily
understand enough about the way the digital dividends for development are delivered and we
probably should learn from each other from other developing countries and pick which best

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practices would work for us nationally and which we should also look for regional
cooperation.
The biggest fear is of course job losses and data actually show that ten percent of jobs
in ASEAN will be lost in the next 10 years due to automation robotisation. By 2020, 10.2%
of ASEAN e-commerce workforce will be displaced by automation. It could happen faster
depending on how the technology evolves so and a lot of, that is in agriculture sector as can
be expected. In the unskilled, medium skill, routine work, repetitive work, kind of jobs and it
is going to hit the younger people more. (ASEAN Digital Masterplan 2025)
The epidemic has spurred the growth of the digital economy, but it has also brought to
light hundreds of problems that require reform. Fortunately, Southeast Asians appear to be
quite resilient and change resistant. The inhabitants of this country adopted the digital
economy far more quickly than people in other parts of the world, which suggests that they
are open to change. We believe Southeast Asia has succeeded in this way because of its
Small-Medium Enterprise (SME) business model. The region's economy relies heavily on
these SMEs, which, in a nutshell, signifies entrepreneurship. Southeast Asians' daily lives are
made more innovative, swift, and flexible by entrepreneurship. Since entrepreneurs are
prevalent worldwide, we might observe flexibility in the upcoming years. (World Bank
Group).

Conclusion
The fundamental conclusion of this study is that although numerous factors have
contributed to Southeast Asia's prosperity, the region's booming digital economy stands out
among the others. The internet market in ASEAN is expanding at the quickest rate
worldwide. To overcome these obstacles, ASEAN has established significant policy
frameworks and measures, such as the e-ASEAN Framework Agreement, the Masterplan on
ASEAN Connectivity 2025, and the AEC Blueprint 2025. The 670 million people it holds
have experienced a fast transition in digitalization. By 2025, the digital economy alone is
projected to produce more than $1 trillion US dollars, or almost one-fourth of Southeast
Asia's overall GDP. As the world's fastest-growing internet market, ASEAN has experienced
significant growth in e-commerce, e-banking, and e-education. The ASEAN economy, which
is home to more than 650 million people, is sizable. The 10 ASEAN nations, however, range
widely in terms of income and degree of development, from Singapore and Brunei, two of the
richest countries, to Myanmar and Cambodia, which are among the poorest. The ASEAN
Chairmanship of Indonesia will begin in 2023. The bloc will face several chances and
difficulties under this leadership in the fields of diplomacy, the economics, peace, and
security. In keeping with the theme "ASEAN Matters: Epicentrum of Growth," Indonesia's
ASEAN chairmanship will focus on enhancing ASEAN's institutional capacity and boosting
its resistance to threats as the digital economy becomes one of the primary forces driving the
region's economic growth. Indonesia encourages the acceleration of digital economic
transformation in the ASEAN region. This mission will be the main agenda carried out when
holding the chairmanship of ASEAN 2023.

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