Southeast Asia is one of the world's most dynamic regions, with vast endowments of natural resources, an increasingly diversified economy, an expanding middle class and growing global influence. With the launch of the ASEAN Economic Community in 2015, the bloc is generating even more opportunities for growth and employment. If the Association of Southeast Asian Nations were a single country, it would already be the world's seventh-largest economy, with a gross domestic product of $2.4 trillion in 2015.
Perhaps most importantly, it is a region with promising prospects. Not only does it have a sustained growth rate, averaging 5% over the past 15 years, but almost 60% of total growth since 1990 has come from productivity gains. With a literate population of more than 600 million people, and 40% under the age of 30, it is further investing in education. Singapore topped the Organisation for Economic Co-operation and Development (OECD) 2015 Programme for International Student Assessment ranking in science, which measures the knowledge and skills of 15-year-old students, while Vietnam scored above the OECD average. In addition, the region possesses a well-developed information and communications technology cluster.
Against this favorable background, policymakers and the private sector in Southeast Asia are facing the challenge of how to cope with the digital age. The ongoing digital transformation of the region's economies and societies promises to spur innovation, boost efficiency and improve services, and by so doing boost living standards and foster integration into the world economy.
The digital shift could enhance the region's capacity to upgrade its activities in global value chains, increase investment in knowledge-based assets and reduce dependency on exports of manufactured goods. It could also limit the region's exposure to the risk of investment withdrawal and relocation to advanced economies because of progress in automation.
In addition, beyond economics, digital technologies could help Southeast Asian societies find new ways to meet their energy, food and water needs, and improve the delivery of health and education services. For all these reasons, innovation and digitalization are an integral part of the ASEAN Economic Community Blueprint 2025.
With fewer legacy systems to slow innovation, and a vibrant entrepreneurial spirit, ASEAN economies have shown they can leapfrog old generations of technology and rapidly adopt new ones. From essentially zero uptake in the early 2000s, fixed broadband subscriptions are heading toward 10% penetration in Malaysia, Thailand and Vietnam. More than 80% of individuals use the internet in Singapore, and over 70% do so in Malaysia and Brunei, although the figure remains below 20% in Laos and Cambodia.
Nonetheless, while digital technology continues to spread quickly, there are wide gaps, both between ASEAN members and with regional neighbors and peers. The cost of access to digital networks remains too high in some countries. There is also typically a gap between small and large companies in internet use, with a higher proportion of large businesses operating websites, selling online and accessing broadband, regardless of a country's level of income.
Given the great potential ICT holds for small companies -- notably in connecting with global value chains -- and the predominant role that small and medium-sized enterprises play in Southeast Asia's economy, ensuring smaller companies can reap the benefits is critical.
Similarly, there are significant digital divides between urban and rural areas. In Indonesia, for instance, a 2014 survey revealed that only Jakarta and Yogyakarta had internet penetration exceeding 50%, while in parts of Papua and Kalimantan it was just 20% to 23%.
To make the most of digital innovations, and ensure that their development benefits all, a number of core conditions need to be in place. All individuals, businesses and governments need reliable and affordable access to digital networks and services. The priorities should be wide digital coverage and targeted measures to help disadvantaged people, companies and regions.
But mere access to networks does not ensure effective use. Policy will need to help equip people across Southeast Asia with the skills they need -- not just specific information technology skills but also basic literacy, numeracy, problem-solving and socio-emotional skills. Complementary investments that help companies adjust their internal processes, and sound macroeconomic and regulatory conditions that support healthy business dynamics, are other critical ingredients.
Proactive vs. reactive
The OECD, through its Southeast Asia Regional Programme (SEARP), is supporting countries' policy reform priorities in these areas, as well as regional integration efforts. The SEARP carries out a broad range of activities relevant to the digital transformation, with its regional policy network initiatives on good regulatory practices, investment, education and skills, SMEs, tax policies and sustainable infrastructure, along with initiatives on trade, innovation and gender.
The SEARP also offers the opportunity to tap into insights from wider OECD work, such as the new multidisciplinary, cross-cutting project Going Digital: Making the Transformation Work for Growth and Well-being.
This project is of strong relevance to Southeast Asian economies. It aims to help policymakers better understand the digital revolution that is taking place across different sectors of the economy and society and help them adopt proactive -- rather than reactive -- policies to address the challenges of slow productivity growth, high unemployment and growing inequality.
Southeast Asian countries could also benefit from enhanced participation in OECD committees and legal instruments, which would allow them to anticipate challenges faced by advanced economies. Country programs -- like that which has been developed for Thailand -- offer structured approaches to gradually involve countries more and more in the OECD's work.
The OECD is an influential ally for its members and partners -- not just in providing expertise and best practices to help design, develop and deliver the most appropriate policy solutions for domestic reforms, but also in helping countries build the domestic support necessary for their successful implementation.
In this way, the OECD helps economies realize the benefits of innovative new developments in economic and social policy, while providing a forum for countries to engage in global policy debates.
Angel Gurria is Secretary-General of the Organisation for Economic Co-operation and Development.