But these businesses still face roadblocks dealing with persistent non-tariff barriers to exports, as well as infrastructure constraints on getting online sales out to customers within some ASEAN countries. The ASEAN e-commerce agreement did not provide South-East Asian businesses with any significant reform of non-tariff barriers, infrastructure constraints or regulation of where data must be stored. What the agreement has done, however, is put the e-commerce trade regime formally on the region’s economic integration agenda. This means businesses can now push for more unified business registration rules and reduced requirements for local storage of data so cloud computing can be used more effectively.
Cross-border banking will boost trade
While the agreement is very broad, Joseph Incalcaterra, Chief Economist, ASEAN at HSBC, says it has created the framework for some countries to start harmonising their approach to e-commerce—just as they have successfully done with trans-border banking.
Incalcaterra cites the ASEAN Banking Integration Framework as delivering a practical approach to regionalised banking by allowing countries such as Malaysia, the Philippines and Thailand to integrate their systems ahead of other countries. The integrated banking framework is scheduled to arrive as early as 2020, and is likely to be followed by a more unified approach to electronic payments systems across the region, which will be a very positive development for e-commerce. The financial arm of Grab, the Singapore-based transport, delivery and payments company, has already announced that it plans to launch an ASEAN multi-currency e-wallet this year, which will allow both banked and unbanked users to remit money instantly.
Unblocking the borders
Nevertheless, trade between ASEAN countries and the rest of the world has grown faster than their trade with each other in recent years. This only underlines how e-commerce is being held back by a rise in non-tariff barriers, even though tariffs themselves have been slashed. E-commerce is often still easier within a country, rather than across the region. These impediments to cross-border e-commerce have made Indonesia, the biggest domestic market in ASEAN, a particular growth opportunity. The 2018 Google-Temasek report on the digital economy says Indonesia’s internet economy has grown at an average rate of 49% in the past three years.
Improved logistics and successful capital-raising by e-commerce platforms suggests the growth will continue, as the more remote areas of the Indonesian archipelago are drawn into digital commerce. South-East Asian e-commerce firm Lazada is investing heavily in its own warehouses across the country to gain more control over its distribution. In a move to increase business for its fleet of motorcycle couriers and its payments system, Grab has bought Kudo, an online platform that aims to bring small traders without their own e-commerce sites into the digital marketplace.
ASEAN is taking steps to improve trade between its members and advances have been made in several areas. These include single-window customs facilities, the digitisation of customs procedures, harmonised tariff nomenclature, and a single programme for self-certification of certificates of origin, though this is not yet fully implemented. These all mean smaller businesses will be able to export at lower cost.