Study on MSMEs Participation in the digital Economy in ASEAN: Nurturing ASEAN MSMEs to embrace Digital Adoption
The study by Economic Research Institute for ASEAN and East Asia seeks to gain a fundamental understanding of the status of the adoption of digital technology by MSMEs, the common digital tools used, and how deeply embedded digitalisation is in their business operations. Subsequently, the study explains the key challenges faced by MSMEs in their digitalisation process. It also examines current approaches adopted by existing digital platformers and ASEAN Member States (AMS) governments to support the adoption of digital technologies by MSMEs and assesses the overall effectiveness of such efforts. Finally, the study suggests possible policy programmes to effectively support MSMEs to overcome such challenges. It is important to understand the different challenges faced by MSMEs at different levels of digital adoption, and how these challenges differ across AMS.
According to the study, Association of Southeast Asian Nations (ASEAN) is advancing to become the world’s fourth largest economy by 2030, it is undergoing a transition marked by a demographic shift to a younger population, a rising middle class, and rapid adoption of technology. With many ‘mobile-first’ markets in the region, ASEAN is expected to see rapid increase in the use of technology which would contribute to the growth of its digital economy by 6.4 times, from $31 billion in 2015 to $197 billion by 2025. The digital economy, therefore, is a key factor driving the growth of the region’s economy. When promoting the development of the digital economy, ASEAN needs to ensure that micro, small, and medium-sized enterprises (MSMEs) are also able to function in the digital economy, for inclusive growth. MSMEs are undoubtedly the backbone of ASEAN’s diverse and dynamic economy, accounting for 95%–99% of all business establishments and more than half of the total employment in all ASEAN Member States (AMS). Despite the ubiquity of MSMEs and their significant contribution to employment, MSMEs only account for 30%–53% of gross domestic product (GDP) and 10%–30% of exports in AMS.