ASEAN urged to gear up for a digital pact

As the Association of Southeast Asian Nations prepares to ink a landmark digital pact in November, analysts say the real measure of success will be found not in its potential economic gains but in whether member states can respond to the risks posed by emerging technologies like artificial intelligence.

Once signed, the Digital Economy Framework Agreement would become the world's first region-wide agreement on digital economy governance and have the potential to unlock a $2 trillion online economy. The agreement, Southeast Asia's most ambitious digital pact yet, will cover areas such as digital trade, cross-border e-commerce, data governance and privacy, AI and digital talent mobility.

Josua Pardede, chief economist of Permata Bank in Jakarta, has estimated that DEFA would raise digital penetration in the region from 14-15 percent to 26-28 percent.

Catherine Setiawan, an Indonesia-based coordinator and researcher for The Global Index on Responsible AI, said that DEFA can promote regional economic integration and regulatory certainty, which can attract investors to the region's digital economy.

But Setiawan noted that in implementing DEFA, Southeast Asian governments need to ensure that digital governance is "inclusive, rights-based, and responsive to emerging risks". She said this can be done through measures like developing robust data protection and cybersecurity regimes, establishing clear accountability mechanisms for digital platforms and strengthening consumer protection.

A thriving digital economy will not only boost business and investments in the region, but it can also help advance inclusive growth.

Luhut Tampubolon, a senior sales director at HCLTech, an India-based information technology services company, noted that an AI-driven governance system can help authorities monitor how national policies and programs are implemented in the most remote areas of any country.

Nearly three years after talks began in September 2023, ASEAN wrapped up negotiations on DEFA at the 57th Senior Economic Officials Meeting held in May. The pact is expected to be signed by Southeast Asian leaders at an ASEAN summit scheduled in Manila in November.

ASEAN's digital economy surpassed $300 billion in 2025 in gross merchandise value, according to a report published jointly by Google, Temasek and Bain & Company.

ASEAN's senior economic officials, in a joint statement released after their meeting in May, noted that ASEAN's digital economy is projected to reach approximately $1 trillion by 2030 under current growth trends. With the implementation of DEFA, the region's digital economy could potentially double in value to $2 trillion by that year.

AI's rapid expansion

An expanding digital economy, however, is also presenting challenges. The rise of AI, for example, has led to rapid expansion of data centers that can consume too many resources like water and energy.

Michael Gryseels, founder and managing partner at Antares Ventures, a Singapore-based venture capital fund, said he is very bullish on ASEAN's digital economy as the region has a large young population that has grown up with mobile phones and the internet. But he hopes the region's renewable energy sector can expand so that it can support the AI systems and data centers that require large amounts of electricity.

Deepraj Emmanuel Datt, a senior director at HCLTech, said that in implementing DEFA, ASEAN governments need to consider how to reduce the carbon footprint of data centers.

"Otherwise, the same AI that will benefit all of us will actually be disastrous to the environment," Datt told China Daily.

Setiawan of The Global Index on Responsible AI said ASEAN governments can include sustainability principles in the region's digital transformation agenda. She said the region can mobilize green investment, encourage sustainable AI development, and harmonize sustainability standards to address environmental implications.

Leonardus Jegho is a freelance journalist for China Daily.

Contact the writers at prime@chinadailyapac.com