Digital start-ups, SMEs and ASEAN’S trade modernisation agenda

By Dr Deborah Elms

LAST WEEK, ASEAN leaders and economic ministers held a series of meetings in Southern California, USA, with one another and with a variety of cutting edge businesses.  These meetings ought to spur officials to redouble efforts to craft an appropriate trade modernization agenda for the region.  

A forward-thinking set of policy frameworks can help large and small businesses better capture potential gains from trade.

After the US-ASEAN Leader’s Summit in Sunnylands, officials moved to San Francisco and Silicon Valley. The USTR took economic ministers and trade delegations from ASEAN on a “road show” to highlight different types of companies and technologies at the forefront of innovation. 

These efforts were supplemented by a conference organized by the US-ASEAN Business Council that also discussed additional elements of an appropriate trade agenda, including creating new funding models to foster creative start-up companies and encourage entrepreneurs. 

One challenge for ASEAN is the tendency for officials to try to micromanage the business environment.  Perhaps the single most important take-away from the California experience may have been that government has a critically important role to play to setting in place broad, facilitating policies that foster growth in the private sector and allows companies to flourish.  But heavy-handed interventions or narrowly prescriptive policies are likely to lead in the wrong direction.    

In fast-moving sectors, government attempts to pick and choose appropriate policies, or to select the “right” sectors, firms or industries to support are more likely to backfire than ever before. 

While it is important for governments to encourage companies to take advantage of trade opportunities, officials might more usefully focus their attention on removing policy obstacles and allow firms to find their own pathways to success and failure.  In a world where companies can locate anywhere in the globe, governments simply cannot afford policy roadblocks and time consuming and expensive obstructions to doing business. 

Our own proposal, “The role of e-commerce in achieving AEC Blueprint 2025 goals,” can be downloaded here. We welcome suggestions from companies for specific items to flesh out the details.

SILICON VALLEY, of course, represents the current extreme end, perhaps, of innovation built up around the promise of digital connectivity.  However, in a very short period of time, many elements of what appears to be revolutionary today will spread to companies large and small in often far-flung locations. 

The smallest firms can provide services via mobile platforms.  Companies in remote locations will be able to create products using additive manufacturing techniques.  

Firms can use various types of platforms to manage everything from client relationships to human resource systems to inventory controls in the most complicated global companies and even across firms that are not directly connected.

Such innovations are not simply a distant prospect or likely to remain the preserve of well-financed major Western players.  These technologies will spread and costs will fall, just as smart phone technology has allowed more and more people to harness tremendous computing power in the palm of their hands today.

The trade agenda in ASEAN (and in most places) has simply not caught up with this rapidly evolving environment.  

While the AEC Blueprint 2025 nods in the direction of helping smaller firms, mentions the importance of e-commerce, and says that services are important, none of this is really sufficient for ASEAN member states to effectively harness the new trade modernization agenda that is needed to help businesses compete. 

Instead, ASEAN officials must seriously drill down and create practical policy frameworks to ensure that trade can continue to flourish across the region in the next decade.  This means, most critically, that ASEAN must work on policy areas that have traditionally been considered “off limits.”  For instance, it is no longer possible for a modern trade agenda to leave data, internet and information policy details to individual member states. 

Officials have to understand how globally connected firms do business today. Many of the ideas of how to provide privacy and security, as an example, do not match up with the way that firms actually move information around. 

The charming notion that police could walk into a room and “seize” data does not match the reality of how information actually flows.  No sensible firm would want to house important information in only one location, as it would be extremely vulnerable to disaster.  A fire, flood or earthquake could wipe out a whole firm.    

Companies—even small ones—would like to have multiple locations for data storage and seamlessly switch (or have their service provider switch) between them if needed to avoid disruptions in service.

This is not to suggest, of course, that privacy and security are not critically important ideas or that government and companies ought not be concerned with either notion.  It is simply to note here that officials responsible for crafting rules and regulations to ensure privacy and security need to understand how companies actually operate and how they might reasonably be expected to operate in the near term before trying to craft responsible policy solutions. 

ASEAN has got to do a much better job of reaching out directly to companies to determine which policies are creating obstacles and which areas need improvement.  This must include more than annual summit meetings with top level ministers and business councils (welcome though these meetings may be), but must include sustained and ongoing input to working committees at all levels within member states and at the ASEAN level. 

The practical consequence of a failure to create policy frameworks across ASEAN that are in harmony is that businesses will not grow in some member countries.  

Companies will not invest in locations that do not provide a facilitating environment. Innovation will not happen. Entrepreneurs will not develop, or they will leave and go to some other location to build up their new ideas.  

This would be a tremendous waste of the talent and energy found across Southeast Asia.

Dr Deborah Elms is Executive Director of the Asian Trade Centre, Singapore. She is also a senior fellow in the Singapore Ministry of Trade and Industry’s Trade Academy. Previously, she was head of the Temasek Foundation Centre for Trade & Negotiations and senior fellow of international political economy at the S. Rajaratnam School of International Studies at Nanyang Technological University, Singapore. She publishes the Talking Trade Blog.