Integration, interoperability and inclusion

Businesses are realizing the opportunity that e-commerce presents, mounting online stores and onboarding marketplaces to reach hundreds of millions of global buyers. In ASEAN countries two-thirds of micro and small firms use the online shopping platform Shopee, about half use Lazada, and over a quarter use Amazon. Midsize and larger firms are widely using global marketplaces like Amazon and Alibaba as well as direct-to-consumer platforms such as Shopify. This has translated to cross-border e-commerce and digital trade. More than 60% of microenterprises that sell on global online marketplaces now export, with half of them commencing export because of e-commerce. Online seller– exporters are also more likely than offline sellers to export to multiple ASEAN and extra-regional markets.

The adoption of policies and practices by regional governments that are conducive to e-commerce—such as e-payment laws, e-export promotion programs and financing for online small and medium-sized enterprises— have further bolstered the e-commerce surge. Governments in the region have long pursued regional e-commerce workstreams in the context of ASEAN and APEC alongside pathbreaking free trade agreements that unite regional economies with extra regional partners to promote digital trade. Some of these include the US–Japan Digital Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Singapore– Australia Digital Economy Agreement and the Digital Economy Partnership Agreement.

These obstacles point to the need for a clear regional policy agenda to promote digital trade. Regional economies need to promote greater convergence among national digital regulations to facilitate smaller firms’ compliance with national regulations in online markets. Further accessions of regional economies to the CPTPP and other trade agreements with binding e-commerce rules can promote regulatory convergence and lock each economy into standardized rules for digital trade. The intention of ASEAN economies to negotiate a Digital Economy Framework Agreement is a potentially positive step towards robust and binding rules that promote e-commerce.

East Asia’s prolific payments innovation is yet to be matched by payment system interoperability. About one-third of regional firms report losing online export sales as they are unable to accept payments from foreign customers. Elevated cross-border logistics costs, the orchestration of business-to-business logistics, accompanying paper-based trade documents and end to end payments also present significant challenges to firms.

Ongoing efforts to promote payments and logistics interoperability must be continued and regionalized further. Robust bilateral and multiparty real-time payment interoperability pilots already exist in the region. Payment interoperability initiatives and the ongoing adoption of ISO 20022 standards aim to streamline communications among national payment systems. Project Dunbar, a multi-central bank digital currency pilot, may herald a new era for low-cost and efficient cross-border payments.

In trade logistics, consortia that leverage blockchain ledgers to promote interoperability and lower end-to-end shipments times and costs can facilitate efficient, cost-effective and greener trade transactions. But this must be in parallel to accelerated government adoption of paperless trade practices.

Deeper integration of markets, implementation of digital trade commitments, and improved interoperability of payments and logistics services will all help East Asian online sellers to expand sales. Integrating small firms, remote sellers and a growing army of creators into new markets will enable more inclusive trade—and produce the greatest gains from digital commerce.