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The Digital Silk Road and Southeast Asia Countries

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Chapter 5 The Digital Silk Road and Southeast Asian Countries

Zhou Taidong and Xue Qi

Introduction

A vital component of Chinese President Xi’s vision for Eurasian connectivity and

cooperation (Xi, 2014), the emerging Digital Silk Road (DSR) is the technological

arm of the Belt and Road Initiative (BRI). Also known as the New Silk Road, the BRI

was announced by the Chinese government in 2013 and includes a series of

international economic development projects (Tow, 2017) primarily financed through

low-interest loans from China’s policy banks, state-owned banks, and sovereign

wealth funds (Belt & Road News, 2019). The BRI and its massive infrastructure

projects in Southeast Asia (SEA),1 such as the Kyaukpyu port in Myanmar, the East

Coast Rail Link project in Malaysia, and the China-Laos Railway, have drawn

widespread attention, but China’s involvement in the region’s so-called “hard” and

“soft” digital infrastructure2 and the implications of the DSR for regional economies

have been examined far less. The DSR aims to supplement BRI terrestrial and

undersea or submarine infrastructure by linking countries through fiber-optic cables,

1
Southeast Asia, a subregion of Asia, consists of 11 countries geographically located south of China, east
of the Indian subcontinent, and north-west of Australia, including Brunei, Cambodia, Indonesia, Lao PDR,
Malaysia, Myanmar, the Philippines, Singapore, Thailand, Timor-Leste, and Vietnam.
2
The Asia Infrastructure Investment Bank (AIIB, 2020) uses the following definitions of hard and soft digital
infrastructure: “Hard” digital infrastructure includes transport and connectivity structures and facilities, such
as optical fiber networks, satellites, cellular towers, and processing and storage facilities, such as data
centers, cloud computing providers, content delivery network providers. “Soft” digital infrastructure includes
services and applications, such as building information systems (BIM), computer emergency response team
(CERT) and technology services such as fintech, digital identity, and e-platforms. Soft infrastructure also
includes terminals and devices, such as sensors, smart grids, smart meters, cellphones, and computers.
2
cellular towers, and widespread Internet and telecommunications connections. The

DSR also comprises soft digital infrastructure projects, such as the promulgation of

common technical standards among participating countries and associated

investments in so-called “smart-city” development, e-commerce platforms, cloud-

computing services, artificial intelligence (AI), the Internet of Things (IoT), 5G

cellular technologies, mobile-payment systems, and other digital-economy

applications. Under the banner of connectivity, Chinese technology companies join

Chinese government efforts to shape region-wide standards, connect markets, and

finance DSR projects, often playing a leading role in making equity investments.

Chinese technology companies also play an important role in bolstering technology

skills in some SEA countries and fostering connections between technology

professionals and policymakers. The DSR could have enormous economic,

technological, and social implications, and it is likely to have far-reaching impacts on

SEA economies and workers.

This chapter discusses the cross-country, bi- and multi-lateral collaboration taking

place between China, Chinese technology companies, and SEA countries under the

DSR framework and the potential opportunities and challenges that rapid

digitalization poses, especially regarding the future of work. Despite the fact that the

DSR is in its early stages and limited in actual size and scope in the region, by

accelerating digital connectivity and upgrading technology infrastructure and

applications, the DSR will likely reduce the number of low-skill jobs as it creates new

or altered jobs that require new digital skills, specifically jobs in the technology
2
sector, virtual reality design and development, and through a newly developed online

“gig” platform-labor market. Consequently, China and participating countries, in

consultation with stakeholders, need to develop a DSR economic and social policy

roadmap to bridge the region’s digital divides and to deal with the tension likely to

arise between the advantages of adopting digital technologies and the disadvantages

of displacing less digitally-literate workers. The first section of this chapter briefly

outlines the current state of the digital economy in the region. The second section

describes the genesis of the DSR and provides an overview of DSR cooperation

between China, Chinese companies, and SEA countries. The third section describes

how the DSR connectivity facilitates digital applications, trade, and financial

integration across the region. The final section discusses China’s opportunities to

create closer ties with its neighbors through Chinese technology companies’ social

responsibility, policy, and outreach initiatives. The conclusion highlights challenges

presented by the DSR and puts forward some recommendations about how China,

Chinese companies, and SEA countries can jointly improve SEA workforces through

the DSR, including through the enhancement of human capital across the region.

A Snapshot of the Digital Economy in SEA

The “digital economy” refers to economic activities that use digitized information and

knowledge as key factors of production, transnational data networks as the important

activity space, and information and communication technology (ICT) to drive

efficient and optimized economies (G20China.org, 2016). With 640,000,000

2
consumers, a growing middle class, and deepening smartphone penetration, the

digitalization of SEA economies presents huge opportunities for technology and

ancillary companies. In fact, the region’s digital economy has already seen dramatic

changes within a short period. The number of SEA Internet users has tripled over the

past five years, from 127,000,000 in 2011 to 390,000,000 by the end of 2017 (World

Bank, 2019a), amounting to half of the population in the region.

Beyond the breadth of Internet connectivity, digitalization has transformed business

practices and shaped consumer habits. In the Philippines, Indonesia, and Malaysia,

those who were connected to the Internet via their mobile phone in 2019 spent an

average of four hours per day online. Thai mobile phone users, strikingly, even hit

five hours and 13 minutes of Internet use per day, while the global average was

roughly three hours daily (Google et al., 2020). During their time spent online, people

are engaging in various activities, ranging from using or creating social media to

shopping or selling online. Billions of dollars have been generated from online

activities. The gross value of the Internet economy in SEA, including online travel, e-

commerce, online media, and ride-hailing services, accounted for 3.7 percent of 2019

GDP and is expected to rise to 8 percent by 2025 (Google et al., 2019). A recent study

estimates that digitalization will contribute up to USD 1,000,000,000,000 (1 trillion)

of GDP to Association of Southeast Asian Nations (ASEAN) member-countries by

2025, which is a 20-30 percent increase over the region’s current output (Kearney,

2019). The total gross merchandise value of e-commerce sales in the region is

expected to rise from USD 20,500,000,000 (billion) in 2017 to USD 65,500,000,000

2
in 2021 (Cadell and Aravindan, 2018).

To unleash the potential of the digital economy, all Southeast Asian countries except

Cambodia and Timor-Leste have formulated stand-alone national broadband plans

that specifically focus on digital connectivity. All but four countries have also issued

national ICT and/or digital strategies that set up targets and agendas in their national

policies. Table 1 gives a glimpse of the principal digital policy frameworks in the

region.

Table 1 SEA National Broadband Plans and ICT/Digital Agendas

2
 Country National Broadband Plan Development/ICT/Digital
Strategy
Brunei National Broadband Policy (2014- Digital Government Strategy
Darussalam 2017) (2016-2020)
Cambodia N/A Telecommunication and ICT
Development Policy (2016-
2020)
Indonesia Indonesia Broadband Plan (2014- N/A
2019)
Lao PDR Draft of National Broadband Plan N/A
(2015-2025)
Malaysia National Fiberization and 11th Malaysia Development
Connectivity Plan (2019-2023) Plan (2016-2020)
Myanmar Telecommunications Masterplan N/A
(2017-2020)
Philippines National Broadband Plan (2017-2020) N/A
Singapore Next Gen NBN (2015-2025) Smart Nation (2014-2020)
Thailand National Broadband Policy (2014- National Digital Economy
2020) Policy and Plan (2016-2020)
Timor-Leste N/A National Policy for ICT (2017-
2019)
Vietnam Development of Broadband Strategy on ICT Development
Telecommunications Infrastructure till 2010 and Orientations
through 2020 toward 2020
Wireless Broadband Master Plan
(2016)

Source: OECD, 2019; UNESCAP, 2019

However, sharp differences divide SEA countries’ ability to exploit the digital

economy, and the region has not yet been able to create a digital equivalent of the

ASEAN Economic Community. Among ASEAN countries, Singapore stands out as

2
the global leader in digital development, ranking top in numerous indicators, such as

digital readiness, 4G speed, and economic innovation (Infocomm Media Development

Authority, 2020). Singapore’s Development/ICT/Digital strategy, The Smart Nation

Initiative, is a comprehensive national plan to transform Singapore through three

pillars: digital government (using data, connectivity, and computing to serve citizens

and businesses and to enable public officers to work more efficiently), digital

economy (digitalizing industries to increase business efficacy and create new jobs and

opportunities), and digital society (ensuring inclusive access to technology and

equipping people with the skills and know-how to use technology) (Govtech, 2019).

Furthermore, while the digital economy in the SEA region has seen an average growth

rate of 33 percent per year since 2015, Indonesia and Vietnam have seen the fastest

growth. Both the largest and quickest growing digital economy in the region,

Indonesia has more than quadrupled its digital economy size since 2015, growing 49

percent per year on average (Google et al., 2019, p.18). Vietnam’s digital economy

reached USD 12,000,000,000 in 2019 after growing 38 percent annually since 2015

(Google et al., 2020, p.18). Vietnam is emerging as the most digital economy in the

region; it intends to increase the digital share of its GDP to 20 percent by 2025 and 30

percent by 2030 (Dione, 2020). Other SEA countries, including Malaysia, the

Philippines, and Thailand, also outperform many other countries across the globe,

with annual digital-economy growth rates averaging between 20 and 30 percent since

2015 (Google et al., 2020).

Since the digital economy has not grown at an equal pace throughout SEA, obstacles
2
to a common digital market and economic growth, such as a lack of digital skills and

broadband Internet access, must be overcome by suitable policies and adequate

financing. Notably, in Malaysia, one of the high-performing countries, the Ministry of

Education in 2017 integrated coding and other digital skills into national primary and

secondary school curricula. This focus on digital skills manifests not only in

computer-science classes, but is incorporated into teaching pedagogy, especially in

science and math classes. The Malaysian education ministry is also looking to

introduce courses on AI, robotics, and computer programming into school education

(Aizyl, 2016; Sharon, 2019). Yet even before learning to code, populations need to

have access to ICT; inadequate Internet connectivity currently constitutes a barrier to

digital transformation in many SEA countries. Although Internet-access infrastructure

has increased dramatically and covers half of the population, rural and remote areas

are more likely to lack connectivity infrastructure, such as fixed lines, fiber optic

cables, cellular or satellite coverage, and therefore remain unconnected (Facebook,

2016). For example, Lao PDR (Laos) and Myanmar have the fewest urban residents

in SEA, accounting for 35 percent and 30.58 percent in their total population,

respectively (Statista, 2019). Accordingly, compared to their counterparts in the

region, Laos and Myanmar perform least well in terms of digital connections when

measured by, for example, fixed telephone and broadband coverage per 100

inhabitants or Internet coverage for households that own a computer (ITU, 2018).

This indicates that workers in these and other agriculture-dominated regions might be

further isolated from and less adaptable to digitalized labor markets.

2
Geographical divides impede SEA from integrating into a common digital market for

investments, goods, or labor. Although observers exalt the region for having “the most

engaged mobile Internet users in the world” (Google et al. 2020), each country’s

capacity to compete in the digital economy varies greatly in terms of technology,

people, governance, and impact. For example, according to the 2019 Network

Readiness Index, which measures how well countries exploit ICT to boost

competitiveness and well-being, Singapore led all SEA and most other countries,

ranking second globally, and Malaysia followed, ranking third. In the second tier of

SEA countries, Thailand (56th) slightly outperformed Vietnam (63rd) and Indonesia

(76th), while Cambodia (107th), Lao PDR (108th) and Myanmar (138th) ranked at the

bottom of the global and SEA list (World Economic Forum, 2019).

Geographic divides also appear in terms of each SEA country’s attractiveness for

private sector investment. The majority of e-commerce investment, dominated by

Internet-based retail platforms such as online travel, online media, business-to-

consumer (B2C) retail e-commerce, and ride hailing, went to firms based in Singapore

and Indonesia; they attracted 58 percent and 34 percent of recent investment deals,

respectively, while Malaysia, Thailand, and Vietnam collectively captured less than 10

percent of the investment flow (World Bank, 2019a, p.30). Overcoming these divides

and creating a common digital market would require ubiquitous Internet and

affordable digital tools, additional seamless cross-border payment options, and

consistent digital regulations across the region’s countries (Hoppe et al., 2018).

However, universal Internet access and affordable ICT devices and applications alone
2
will not allow SEA to realize the full extent of the digital economy’s added value

unless the population is equipped with adequate digital skills. Although SEA citizens

enjoy a generally good standard education level, with the exception of countries like

Malaysia, the teaching of digital skills and other so-called “soft skills” such as

interpersonal communication and cooperation, remains limited and insufficiently

diffused, especially given the levels needed to respond to rapid digital changes. The

World Bank’s Human Capital Index, which quantifies the potential contribution of an

individual’s “human capital” – the health, resilience, knowledge, and skills he or she

can expect to accumulate during the first 18 years of life – to their productivity as

workers, shows tremendous variations among SEA countries (Table 2).

Correspondingly, more than 40 percent of small-and-medium sized enterprises

(SMEs) in the region see gaps in workforce digital skills (Hoppe, et al. 2018).

Furthermore, in Cambodia, Laos, Malaysia, where ITC access and use lags, or in fast-

growing digital economies like the Philippines and Vietnam, more than half of all

firms report shortages of workers with specific socio-behavioral skills, such as a

commitment to work (World Bank, 2019b). This means that some lagging countries,

such as Cambodia, will find it hard to capture a large share of the digital economy’s

value added and will have more difficulty integrating into a common digital market. It

also means that almost all SEA countries’ labor markets remain unprepared to absorb

the potentially destabilizing impact of new technologies due to insufficiently digital

education systems and limited opportunities for workers to improve their skills (The

Asia Foundation, 2020).

2
Table 2: Human Capital Index Ranking of SEA Countries and China

World Rank Economy HCI Score*

1 Singapore 0.88

46 China 0.67

48 Vietnam 0.67

55 Malaysia 0.62

65 Thailand 0.60

84 Philippines 0.55

87 Indonesia 0.53

100 Cambodia 0.49

107 Myanmar 0.47

111 Lao PDR 0.45

*Note: The HCI score ranges between 0 and 1. A country in which a child born today
can expect to achieve both full health (no stunting and 100 percent adult survival) and
full education potential (14 years of high-quality school by age 18) will score a value
of 1 on the index. If a country has a score of 0.50, then the gross domestic product
(GDP) per worker could be twice as high if the country reached the benchmark of
complete education and full health.

Source: World Bank, 2019b

The Digital Silk Road and its Development in SEA

2
The DSR conceptualization can be traced back to March 2015, when the Chinese

government published Vision and Actions on Jointly Building Silk Road Economic

Belt and 21st-Century Maritime Silk Road (NDRC et al. 2015). In this document,

China first proposed an “Information Silk Road” to spur the construction of cross-

border fiber-optic cables, other communications trunks, and satellite networks that

would improve international communications connectivity. The proposed agenda for

what would later become known as the “Digital Silk Road” included strengthening

Internet infrastructure, deepening space cooperation, and developing common

technology standards. China’s President Xi Jinping emphasized what he then termed

the “Silk Road Economic Belt and the 21st Century Maritime Silk Road” during his

speech at the 2015 Hangzhou G20 Summit, where Group of 20 members agreed that

the digital economy had great potential for delivering positive development outcomes

(G20China.org 2016). China’s 13th Five Year Plan included a section on improving

Internet and telecommunications links across BRI countries; the Plan included the

construction of terrestrial and submarine cables and the creation of a China-ASEAN

“Information Harbor” (National Development and Reform Commission 2016). The

moniker “Digital Silk Road”, first coined at the first BRI Forum (Xi, 2017), was

picked up at other China-hosted international conferences such as the second BRI

Forum and the 4th and the 5th World Internet Conference at Wuzhen, China. These

events helped to bring the DSR concept into the mainstream and gain buy-in from

companies and interested countries along the BRI.

The Chinese government has played a pivotal role in forming the DSR initiative and
2
Chinese technology companies have played the major role in shaping its contours.

The great achievements of the digital economy in China, which accounted for 34.8

percent of the country’s GDP in 2018 (China Daily, 2019), inspired the Chinese

government to push forward international cooperation in this field. As the world’s

second largest digital economy after the United States, China benefited greatly from

its advanced digital infrastructure during its own rise, especially for the development

of inland and impoverished regions (Turvey and Xiong, 2017). Meanwhile, as is the

case for traditional sectors, the maturation of China’s domestic digital economy

results in stiffer competition and many Chinese companies will likely see a declining

market share in domestic demand in the near future. Therefore, China-based ICT

companies see the DSR as an opportunity to seek financial and political support from

the Chinese government to enter new markets in order to continue their sales and

profit growth. They have a strong interest in pushing forward the DSR agenda to

secure access to untapped markets abroad. Moreover, in contrast with the BRI’s large-

scale physical infrastructure, which China and partner countries tend to find

expensive, long-term, and disruptive, DSR projects remain feasible in a resource-

constrained environment because they are lower in cost, easier to deliver, and more

environmentally-friendly. As a result, the less risky DSR projects attract the majority

of their financing from Chinese private sector ICT companies. In addition, as shown

above, SEA countries have a strong demand and large potential for improved digital

infrastructure, including support for digital economies, expansion of Internet

connectivity, and the reduction of geographical divides. Since its conception, the DSR

2
has gained great momentum in SEA in terms of the BRI’s so-called “five pillars”:

policy coordination, infrastructure connectivity, unimpeded trade, financial

integration, and people-to-people bonds.

DSR Bi- and Multi-lateral Policy Coordination

To facilitate policy coordination regarding the DSR, China and SEA partner countries,

in consultation with ITC companies, are working on developing multilateral, regional,

and bilateral cooperation mechanisms by hosting meetings, negotiating memorandum

of understandings (MoU), and advocating for a shared digital framework. As early as

2014, China’s Ministry of Industry and Information Technology (MIIT) promulgated

the Infrastructure Construction Plan for Neighboring Countries, which proposed

standards for information highways between China and SEA (The State Council

Information Office, 2015). In 2016, the Chinese central government approved The

Construction Plan of China-ASEAN Information Harbor, followed in 2019 by The

Masterplan of China-ASEAN Information Harbor (China-ASEAN Free Trade Area,

2019). The Information Harbor aims to become a pivotal hub that enhances SEA’s

Internet network and information interconnection and includes five cooperation

platforms that mirror the BRI’s five pillars: infrastructure development, technological

cooperation, economic and trade services, information sharing, and people-to-people

exchanges (China-ASEAN Free Trade Area, 2019).

Recently, the DSR has almost been completely mainstreamed into dialogues between

2
China and ASEAN. For example, an ASEAN-China Foreign Ministers’ Meeting in

July 2019 discussed and agreed that digital economy cooperation should be a new

focus for both China and ASEAN. At the subsequent 22nd ASEAN-China Summit,

China and ASEAN discussed issues affecting standards, key fields of application, and

integrated solutions for so-called “smart city”3 technologies (Xinhua, 2019). The

ongoing China-ASEAN Strategic Partnership Vision 2030 also prioritizes digital

connectivity (China-ASEAN Free Trade Area, 2019).

In addition, China has led bilateral initiatives for coordination and cooperation on

taxation, goods inspection and quarantine, logistics, network security, and data storage

and transmission (MOFCOM, 2019). For example, China and Cambodia have signed

a MoU on advancing the DSR across Cambodia (Cyberspace Administration of

China, 2019). China and Thailand have established a Ministerial-level Dialogue for

Digital Economic Cooperation; its first meeting took place in March 2019 to discuss

smart cities, 5G technology, Internet security, and AI (Ministry of Commerce, 2019).

China and Myanmar held an initial science and technology cooperation meeting in

Yangon in late 2018, where the two countries established a joint radar and satellite

communications laboratory. China has also signed MoUs with multiple ASEAN

member states, including Vietnam, Cambodia, and Malaysia, to facilitate cross-border

e-commerce cooperation. As a pan-regional effort, in May 2018 in Jakarta, China

3
While the exact definition varies, a “smart city” usually refers to a municipality that uses ICT and data
analysis to increase operational efficiency, share information with the public and improve both the quality
of government services and citizen welfare. Smart city industries include traffic management, energy
efficiency, pollution prevention and control etc.
2
hosted The Silk Road E-commerce Cooperation Dialogues with ASEAN countries.

Currently, however, policy coordination largely happens bilaterally and regionally at

the national-government level, while private sector involvement and input remains

quite limited. In fact, many transnational companies still run up against significant

obstacles when navigating foreign business ecosystems in the digital age, from the

difficulty of starting a business to that of complying with digital regulations. In the

future, governments committed to the DSR should encourage more dialogues and

knowledge-sharing about what companies need in order to do digital business.

Expanding DSR Connectivity

The DSR prioritizes hard infrastructure such as cables and communication networks,

but also soft infrastructure such as AI-enabled traffic-management solutions, drawing

on the expertise and financing of the Chinese government and technology giants.

The Chinese government has financed and launched several notable cross-border and

multilateral hard digital infrastructure projects under the DSR. China facilitated the

building of more than 30 cross-border land cables and over ten international

submarine cables (The Economist Corporate Network, 2019). The government

contracted Huawei Marine to complete over a dozen undersea cable projects, with 20

more projects ongoing in SEA (Harding, 2019). These submarine cable projects,

located in the Philippines and Indonesia, aim to integrate these geographically divided

islands through enhanced digital connections. A China-Myanmar cross-border fiber-

2
optic cable for data transmission project has also achieved significant progress (Office

of the Leading Group for the BRI, 2019). Although lagging behind China’s public and

private sector spending on BRI energy projects, total Chinese foreign direct

investment (FDI) and loans from the public sector for the DSR have grown quickly

(Eder et al. 2019). From 2013-2017, Chinese overseas direct investment (ODI) flows

to ASEAN for data transmission, software, and information-technology services

registered an average annual growth of about 70 percent (Ministry of Commerce,

2019).

Private Chinese companies, such as Huawei, Alibaba and SenseTime, are

spearheading the construction of ICT infrastructure and laying out business hubs

across SEA. For example, in Thailand, in 2017, Huawei, which manufactures

telecommunications equipment and smartphones, established an OpenLab (its seventh

one) at its regional headquarters in Bangkok as part of the “Thailand 4.0” initiative.4

The OpenLab offers data-center resources for the IoT, Big Data, and cloud computing,

plus an open platform to help test solutions and speed up innovations, and provides

ICT training services for customers and independent entrepreneurs in Thailand and

SEA (The Nation, 2017). Huawei also launched the first 5G testbed in Thailand in

February 2020. In addition, the company, together with other China-based ICT firms,

such as Alibaba, JD.com, and Tencent, has expressed a strong interest in investing in

4
Thailand 4.0 is an economic model that attempts to transform the country from several economic
challenges from past economic development models which emphasize agriculture (Thailand 1.0), light
industry (Thailand 2.0), and advanced industry (Thailand 3.0), including “a middle income trap”, “an
inequality trap”, and “an imbalanced trap”. Thailand 4.0 intends to overcome these traps through the use of
“new growth engines” (CEBIT, 2020)
2
the Eastern Economic Corridor (EEC), a flagship megaproject of the Thai government

that aims to turn most of the land in Chachoengsao, Chon Buri and Rayong Provinces

into industrial zones for technological manufacturing and services (Dunseith, 2018).

Alibaba Holding Ltd., a Chinese multinational technology company specializing in e-

commerce, retail, and the Internet, has brought its leading-edge smart city know-how

to Malaysia. Kuala Lumpur has become the first city outside of China to adopt

AliCloud’s smart-city system. It is an integrated AI-enabled system that utilizes

Alibaba’s Apsara cloud-computing platform (AliCloud) to conduct real-time data

collection and integration of traffic and emergency-response data from hundreds of

traffic cameras and other sources. It aims to improve the efficiency of traffic flow and

influences traffic-signal timing to allow for emergency vehicle passage (Szewcow and

Andrews, 2018). The Malaysian government is making plans to implement this

system in other cities in the country. Huawei, too, is involved in developing smart-city

technologies and building ICT infrastructure in Malaysia; the company has signed

MoUs with the Malaysian government and the Sabah State government to develop

smart-city solutions (Huawei, 2016; Huawei, 2017; Bernama, 2017).

Meanwhile, SenseTime, a Chinese AI company and “unicorn,”5 is supporting the

country’s first AI industrial park with total investment of around USD 1,000,000,000

(billion). SenseTime will help Malaysian technology companies to develop robots and

speech-recognition systems and to foster technology talent. The park is being jointly

built by G3 Global, a Malaysian tech company, and China Harbor Engineering

5
A unicorn refers to a privately held startup company valued at over USD 1 billion.
2
Company, an engineering contractor and subsidiary of China Communications

Construction Company (CCCC) (Wang and Lahiri, 2019).

In other countries around the region, similar projects emerge. In Myanmar, the

country’s Ministry of Transport and Communications has been working with Huawei

to develop 5G broadband services since 2018 (Gong et al., 2019). Huawei has also

launched its Cloud and AI Innovation Lab in April 2019 in Singapore, as part of

Singapore’s Smart Nation Strategy (Huawei, 2019). Alibaba’s AliCloud is involved in

Singapore, providing data analysis of the EZ-Link Card, a contactless multi-purpose

stored value card introduced for transit payments on public bases and on the mass

rapid transit (MRT) networks (McSpadden, 2017). Alibaba also has 22 data centers

located outside of China, including one in Indonesia (Alibaba Cloud, 2020). Notably,

AliCloud does not always build its own facilities in foreign countries, preferring in

some cases to collocate via partnerships with local data-center operators.

It is highly likely that Chinese technology firms’ presence in the SEA region will

continue to grow, and with it the amount of Chinese-built smart-cities infrastructure,

5G networks, and cross-border terrestrial and submarine cables. Overall,

infrastructure connectivity under the DSR is helping address some gaps in access to

ubiquitous Internet and affordable digital tools as well as technological innovations.

This will likely encourage more SEA business entrepreneurs to start up or expand

their companies, creating more job opportunities, especially for young people, and

should help SEA countries capture more value from the digital economy, drawing

them closer to a common digital market.

2
Unimpeded DSR Trade

Greater digital connectivity also means links within and between SEA and other BRI

economies and the Chinese market. In addition to investing in network infrastructure

or smart-city sensors, Alibaba and Huawei have also invested substantially in SEA

startups to develop e-commerce while other Chinese companies invest in digital and

physical logistics and telecommunications infrastructure and operations.

Alibaba has been thriving by bringing companies into the digital world and trade. It

has helped foreign companies, particularly small and medium enterprises (SMEs), to

tap into the vast Chinese domestic market (AliResearch, 2019). Malaysia was the first

country to host the Electronic World Trade Platform (eWTP) rolled out by Alibaba to

support SMEs to take part in global trade (Brennan, 2017). The eWTP’s Malaysian

hub hosted 2,600 small or medium-size Malaysian businesses in March 2018 (Gong et

al., 2019) and was estimated to have created 60,000 jobs and contributed billions of

USD revenues in trade (Seoane, 2020). Alibaba also established a smart digital hub in

Thailand’s EEC as an important platform to help SMEs achieve digital

transformation, facilitate trade in goods and tourism, and train e-commerce talents. In

February 2019, Thailand’s EEC Office established agreements with Alibaba to use e-

commerce and digital technology to promote Thai products to Chinese customers

(Eastern Economic Corridor, 2019). Even before that, a critical Chinese network for

smart logistics controlled by Alibaba established a fast track for fresh agricultural

products, including durian, to reach China from Thailand’s production bases within
2
120 hours (Fu, 2018). Furthermore, Alibaba’s “Taobao Village Model”6 was

introduced to Thailand to help tackle poverty and raise community income via e-

commerce and digital technology; the Thai government is in the process of

implementing the model (Arunmas, 2018).

Alibaba’s AliCloud has also created private-sector synergies with its Singaporean

public-transit EZ-Link card by providing timely information on card usage patterns to

more than 50,000 SMEs in Singapore. Since 2016, Alibaba has been the largest

shareholder in Lazada, a leading e-commerce platform in SEA that provides logistics,

online-retailing and payment services for more than 400,000 SMEs in Indonesia,

Malaysia, Philippines, Singapore, Thailand, and Vietnam; it more than doubled its

business in 2018 (Cadell and Aravindan, 2018). Alibaba also led a USD

1,100,000,000 investment in the Indonesian e-commerce firm, Tokopedia, in 2018

(Russell 2018).7

Other Chinese technology companies have also made significant investments in SEA

platform, logistics, and communications companies. For example, Didi Chuxing, a

Chinese ride-hailing platform, and Softbank, a Japanese multinational conglomerate

holding company, invested USD 2,000,000,000 in the Grab ride-hailing platform in

2017. Tencent Holdings, a Chinese multinational technology company engaged in

Internet-related services and products and JD.com, China’s leading transnational retail

6
The Taobao Village Model refers to rural e-commerce hubs that feature Alibaba’s logistics, service, and
training to encourage farmers to engage in online sales of farm produce and local specialties.
7
Indonesia e-commerce leader Tokopedia raises $1.1 B from Alibaba and Softbank’s Vision Fund,
https://techcrunch.com/2018/12/11/tokopedia-raises-1-1b/
2
e-commerce and logistic platform, along with Google, an American multinational

search and other services provider, led a new USD 1,000,000,000 investment round in

Indonesia’s Go-Jek ride-hailing firm in early 2019. JD.com has also built a logistics

network in Indonesia for Indonesian companies and those on the JD.com platform and

invested in Vietnamese online retailer Tiki.vn. In the telecommunications sector,

China Mobile Communications Corporation, China Unicom, and China Telecom

invested about USD 800,000,000 in overseas markets and started business operations

in many countries and regions, including Thailand and Singapore (China News

Agency, 2017). The list can go on. By facilitating cross-border trade and logistics,

DSR-related investments and expansions by Chinese companies are contributing to

the SEA gig economy as well as the steady increase of trade between China and

ASEAN member states.

DSR Financial Integration

High level e-payment systems penetration can greatly reduce the transaction costs and

risks of digital business. Online payments account for roughly 3 percent consumer

expenditure in ASEAN, whereas digital payments account for up to 30 percent in

China (Hoppe et al., 2018). Given their experience with online and mobile payment

systems, Chinese companies also promote their payment systems in SEA.

Alibaba has led major investments in payment companies in SEA. Its Ant Financial

subsidiary, a financial technology (fintech) firm that runs China’s dominant digital

2
payment platform, is targeting investments in banks, insurance, and payment systems

and has taken a share of foreign fintech markets through mergers, acquisitions, and

partnerships (Harding, 2019). For example, Ant Financial has invested in Thailand’s

Ascend Money, a subsidiary of Thai conglomerate Charoen Pokphand that offers e-

payment services and micro-loans (Saheli, 2016). Ant Financial and Emtek, an

Indonesia media and diversified digital company, set up a joint venture to launch a

new mobile platform for payment and other financial services (Digital News Asia,

2017). In the Philippines, PayMaya, an online payment application, also received

USD 120,000,000 investment from the World Bank’s private sector arm, International

Finance Cooperation (IFC), the IFC Emerging Asia Fund, and Tencent Holdings in

order to expand its online and mobile financial services offerings (Ministry of

Commerce, 2019).

WeChat, a Chinese multi-purpose messaging, social media and mobile payment app

developed by the Tencent company, is also being adopted and adapted in SEA

countries. WeChat’s payment system is widely used by small businesses and larger

traders for domestic and international bank transfers and credit and debit card

transactions. In Myanmar, WeChat has helped establish relationships between

suppliers and buyers and has proved particularly popular with people who trade

agricultural products and natural resources (Oreglia, 2019).

DSR Promotes People-to-People Bonds

2
Chinese companies implementing aspects of the DSR also help build connections

between Chinese and other peoples through exchange programs and talent training

schemes. Given their economic influence and attraction, many Chinese companies

fulfill their corporate social responsibility aims by offering talent training programs at

no cost to regional youth to connect and bond with the next generation of

entrepreneurs. This dynamic is seen with Alibaba, which, building on its unique

strengths, has channeled its business operations experience in the Chinese market into

its work throughout SEA, helping young businesses to grow and expand. For

example, in 2018, 30 Malaysian college-age students selected by the Malaysia

Ministry of High Education participated in an Alibaba-sponsored Youth E-commerce

Program to meet with business unit leaders at Alibaba to understand innovative

strategies (Hsu, 2018). Alibaba also held a “Train the Trainers” course for business

college professors in Malaysia on the latest innovations and best business practices in

online retail. As part of its foreign-government outreach efforts, Alibaba organizers

invited ministerial-level officials from the SEA region to the company’s Hangzhou

headquarters to discuss how to craft sound digital policies to better accommodate and

navigate the growth of e-commerce in their respective countries (Hsu, 2018). Alibaba

also joined with the United Nations Conference on Aid and Development (UNCTAD)

to create the eFounders Fellowship; it aims to support 1000 entrepreneurs in

developing countries and consists of sharing first-hand experiences about the

transformative impact of e-commerce and technology. The eFounders Fellowship

includes a two-week stay at the Alibaba Business School campus with site visits,

2
providing essential opportunities for the “champions for the new economy” (Alibaba,

2020).

Similarly, Huawei has since 2012 established training centers abroad for young talents

in the telecommunications industry. In addition, starting from 2011, its “Seeds for the

Future” program has invited more than 30,000 engineering students selected from

over 108 countries for training in China in the telecommunication sector and in

Huawei’s operations (Gong et al., 2019). By the end of March 2018, more than 40,000

technicians and experts from SEA had participated in the Seeds for the Future

program at the center (Fu, 2018).

Discussion and Conclusion

The DSR has the potential to enhance connectivity and complement physical

infrastructure throughout Southeast Asia. The growing acceptance of the DSR by SEA

countries illustrates its potential to increase productivity and improve the delivery of

public services. Alibaba’s and Tencent’s involvement in the ASEAN market is

empowering smaller e-commerce players through technological transfers,

partnerships, investments, logistics value-chain integration, and e-payment systems.

Smart-city programs will provide much needed future-proofing, resilience-building,

and better governance to the region’s growing urban centers, especially those at risk

of overpopulation and climate change. The COVID-19 pandemic may further

reinforce these trends. In fighting and containing COVID-19 and through work

2
resumption, China and many other countries have widely used digital technology,

particularly Big Data-enabled cloud computing systems. The relative success in using

AI and other technologies to identify and monitor virus carriers propels interest in

deploying these and other technologies across SEA, especially in countries such as

Thailand and Malaysia, where smart city initiatives are ongoing and China’s

technology companies are already heavily involved. The sudden dependence of so

many on the ability to work remotely indicates that a significant and inclusive

expansion of Wi-Fi, broadband, and other hard and soft infrastructure will be

necessary to accelerate digitalized economic activity and increase employment.

Therefore, SEA companies will likely express an interest in having deeper and

broader collaboration with Chinese technology companies around their proven

technologies and business implementation models.

Although it is in early stages, limited in size and scope, and hard to quantify, by

accelerating digital infrastructure and facilitating technological progress the DSR has

the potential to have a strong impact on the future of work in the region. For example,

jobs are directly created in the technology sector as e-commerce, e-payments, and

other digital operations need workers to create online interfaces and mobile

applications. The DSR also facilitates the creation of jobs in virtual reality and other

technology-driven design and industrial fields, while also facilitating online labor

platforms and the so-called “gig” labor market. More widespread access to affordable

digital infrastructure will provide an enabling environment in which on-demand and

other services can thrive. Examples range from grocery delivery and ride-hailing
2
services to more sophisticated tasks, such as accounting, editing, and music

production. In addition, by increasing proximity to markets, especially to the massive

Chinese market, DSR infrastructure also facilitates the creation of new and efficient

value chains by creating new channels and modes for global trade and reducing cross-

border logistics friction. In these ways, broad-based economic growth and

employment are made possible by the shift to digital trade for the private sector,

especially for SMEs, where they can better compete and operate in niche markets

(ASEAN, 2020).

Nevertheless, this positive economic trajectory is not a given; without properly

designed policies, the forces of change could lead in the opposite direction or increase

income inequality. The same efficiency gains offered by the DSR threaten to further

displace workers and exacerbate inequality between high-skilled workers and low-

skilled ones. The digital work generated by new technologies requires Internet access

and is subject to education and skill biases; this may disadvantage less connected, less

digitally literate, and less educated workers, often located in rural or impoverished

areas (World Bank 2016; Chang and Huynh, 2016). While the proponents of the DSR

are committed to improving digital infrastructure connectivity, participating countries

will need to create a roadmap to deal with tensions between uneven technology

adoption and the introduction of digital technologies in the workplace.

As many future jobs will look different from today’s occupations and require specific

skills, it is important for the public and private sectors participating in the DSR to put

more emphasis on human capital to address gaps in the region’s educational and
2
skilling programs. This requires the governments cooperating under the DSR and BRI

to shift the policy agenda from “hardware” to “human-ware,” making substantial

investments in human capital and enhancing digital skills for the next generation

workers (Ben et al., 2017). In addition to sharing and enabling new technologies,

China can also share its experience and practices in enhancing upskilling resources for

the labor force and in improving availability and accessibility of on-the-job training.

Public-private partnerships should also be leveraged to facilitate technology transfers

and training, as shown by the efforts of Alibaba. Participating DSR governments and

companies should also pay more attention to making access to the Internet more

affordable for people who remain unconnected because they lack means. If all these

recommendations can be achieved and expanded, it is possible that the DSR will be

able to play a role in addressing the issue of a lack of skilled digital workers and

reduce tensions between those who can take advantage of the economy’s

digitalization and those who cannot.

The increase of DSR activities will also bring more frequent cross-border data flows,

posing new policy challenges in the fields of privacy, security, competition, and

taxation. This will require collaboration between the Chinese government and SEA

governments to work together in terms of legislation concerning cross-border data

transfers, dispute settlement mechanisms, risk warnings and network security, and the

unification of technical standards. National and transnational regulations, tax laws,

and consumer-protection laws will also need to be enacted to rein in and keep

governments and private firms in check in order to build mutual trust and share
2
benefits, thus ensuring sustainable digital economies (World Bank, 2019a). Despite

these challenges, the DSR framework promises significant positive impacts for the

future of work in SEA, particularly through the promotion of technologically

advanced fields, and, ultimately, hopes to work toward improved international

cooperation between China and SEA countries.

2
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