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ASEAN Takes a Stride Towards a Regional Digital Economy with DEFA Negotiations

by Surya Narayan
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ASEAN Economic Ministers (AEM) are making remarkable progress towards establishing the ASEAN Digital Economy Framework Agreement (DEFA), a groundbreaking initiative that aims to create the first major region-wide digital economy agreement in the world. This landmark agreement has the potential to revolutionise digital trade and digital payments within the region.

During the ASEAN Economic Community Council (AECC) meeting held in Jakarta, the Framework for Negotiating DEFA was endorsed, providing guidance for the upcoming discussions. This comprehensive framework sets out the objectives, principles, areas to be negotiated, and the negotiation process and timeline.

Cham Nimul, Cambodia’s Minister of Commerce, represented Cambodia at the meeting, emphasising their commitment to this significant endeavour. The launch of negotiations follows the endorsement of the ASEAN DEFA study, which identified nine core elements covering various aspects of the digital economy, including digital trade, cross-border e-commerce, cybersecurity, digital ID, digital payments, and cross-border data flows. The agreement will also address emerging topics in the rapidly evolving digital landscape.

Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, expressed the region’s determination to conclude the DEFA negotiations by 2025. He highlighted the potential transformative impact of DEFA, stating that its implementation could elevate ASEAN’s digital economy value to an impressive $2 trillion by 2030.

The finalisation and implementation of the agreement are poised to foster collaboration among ASEAN countries, driving trade growth, creating a conducive digital economic ecosystem, and promoting the active participation of micro, small, and medium enterprises (MSMEs) in the region’s economy. Hartarto, as the chair of the 23rd AECC Meeting, believes that DEFA will provide significant support for MSMEs, as the region is concurrently developing regulations to bolster their growth and success.

Furthermore, recent data cited by Hartarto highlighted Indonesia’s strong position in ASEAN’s digital economy market, acquiring nearly 40 percent of the market share. With the total value of ASEAN’s gross domestic product recorded at $3.6 trillion last year, the region holds vast potential for digital economic development and expansion.

The Secretary-General of ASEAN, Kao Kim Hourn, acknowledged the launch of the DEFA negotiations as a significant achievement during Indonesia’s chairmanship. He emphasised that a robust, forward-looking DEFA could contribute up to $2 trillion to the regional digital economy by 2030, solidifying ASEAN’s dynamism and competitiveness on the global stage.

Moving forward, the ASEAN DEFA Negotiating Committee (NC), chaired by Thailand, comprising Lead Negotiators from all 10 ASEAN Member States, will be at the forefront of the negotiation process. The committee carries the responsibility of negotiating the DEFA provisions based on the principles, process, and timeline outlined in the Framework for Negotiating DEFA.

The Negotiating Committee is scheduled to convene its first meeting by the end of 2023, with subsequent meetings taking place in 2024 and 2025. The aim is to conclude the negotiations within the set timeframe, laying the foundation for a prosperous and interconnected digital economy in ASEAN.

The ASEAN region is embarking on an extraordinary journey towards integrating digital trade and digital payments, creating an inclusive and sustainable digital ecosystem, and empowering MSMEs. The DEFA negotiations signify a significant stride towards enhancing the region’s potential and positioning ASEAN as a vibrant force in the global digital economy.

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