In part two of the roundtable discussion "Vietnam's Opportunity for ASEAN Digital Economy Cooperation," held on the occasion of the National Digital Transformation Day (October 10), the speakers delved into Vietnam's opportunity to integrate into the ASEAN digital economy through this highly anticipated future milestone. The ASEAN Digital Economy Framework Agreement (DEFA) is expected to be finalized by the end of 2025, potentially making it the first regional digital economy agreement in the world.

I’d like to dedicate part of this discussion to addressing a highly anticipated milestone: the ASEAN Framework Agreement on Digital Economy (DEFA), which is projected to be finalized by the end of 2025. If achieved, it would mark the world’s first regional digital economy agreement. I invite our esteemed guests to share their thoughts on the opportunities DEFA offers for individual countries and the overall potential for digital economic integration in the region.

Ambassador Pham Quang Vinh: To me, the most important thing is for ASEAN to achieve consensus and work together on DEFA, a framework agreement for the digital economy. Reaching an agreement on a roadmap is already a critical step forward. Since December last year, we’ve had two years to work towards this roadmap, and I am hopeful that by the end of next year, we will have a comprehensive DEFA roadmap, laying the groundwork for our efforts.

Key points of focus:  

1. Collaboration: The first priority is to work together.  

2. Capacity Building: Developing skills and infrastructure to support digital transformation.  

3. Mutual Support: Providing assistance to one another during the transition to a digital economy, which is crucial.

Starting this process now will lead to concrete outcomes, as it allows stakeholders to see this as an opportunity. Not only governments but also businesses will recognize the benefits of preparing for deeper regional integration in the digital economy.

A roadmap for action: If we achieve a well-defined roadmap by the end of next year, it will be a significant milestone and the basis for action plans to move forward. Governments must outline regulatory frameworks and policies addressing issues like electronic payments, data flows, and data centers. Concurrently, businesses should proactively prepare themselves.

The economic potential: Current projections estimate that ASEAN’s digital economy, valued at $300 billion, could grow to $1 trillion by 2030 under natural progression. However, starting now could double that to $2 trillion. The potential is massive.

During the pandemic, we recognized the immense potential of the digital economy. Now, we’re taking the next step to harness and capitalize on this potential for the future.

Jason Bay – Country Director (Vietnam), Sea Limited: The Ambassador just mentioned the gap between digital and physical aspects. I completely agree. While digitization is highly appealing nowadays, we still need to ensure the basics are done right. In fact, I might shift the perspective slightly, from viewing the two aspects side by side to considering digitization as a layer overlaying the physical foundation.

When we survey users and ask what would encourage them to use e-commerce - more or less - or try other platforms, one of the common factors mentioned is trust. Trust can stem from the reliability of electronic payment methods. If I pay on a platform, will I receive the product I ordered?

If you promise that the product will arrive in four days or two days, but it only comes after a week, why should I buy from you? Why not just go to the store and purchase it faster? This is where logistics plays a crucial role. Delays can occur because we need more investment in logistics. Delays can also result from the need for greater investment in areas such as customs clearance or minimizing non-tariff barriers that obstruct the free flow of goods, as Keng Phang mentioned.

While we always aim to promote exports, we must remember that at the end of every export transaction is a consumer receiving a better deal. Therefore, these two elements must balance each other. Companies like us need to collaborate with governments to make greater efforts to facilitate this entire exchange process.

Goh Keng Phang – Economic Counselor, Singapore Embassy in Vietnam: I will answer this question more broadly, as I believe DEFA is just one of many ways we are collaborating between the two countries. In fact, there are numerous other avenues through which we are jointly advancing in the digital economy. In short, the future of digital connectivity between the two nations is very bright. Regionally, DEFA is merely the latest step in our journey to strengthen the digital economy in the region.

Previously, we have worked through other agreements and collaborative frameworks within ASEAN to establish progressive digital rules and move toward harmonized regulatory frameworks. Examples include the ASEAN e-Commerce Agreement as well as e-commerce and digital economy chapters in ASEAN free trade agreements, such as the RCEP and the upgraded ASEAN-Australia-New Zealand FTA.

When Singapore held the ASEAN Chairmanship in 2018, we also completed the ASEAN Digital Integration Framework Action Plan, or DEFI, which truly guides ASEAN’s digital journey. Thus, DEFA is merely the latest step in a series of incremental advancements we have made over the years.

Of course, ASEAN’s DEFA is currently underway, and we expect it to be completed next year. This will help us improve rules in key elements of the digital economy, including cross-border e-commerce, electronic platforms, electronic payments, digital identity standards, cross-border data flows, and data protection, while addressing emerging trends such as artificial intelligence.

The ultimate goal here is to fully harness the potential of the digital economy, a rapidly growing sector, and enable our companies to reap the full benefits of all these advancements. DEFA will bring us one step closer to unlocking the full potential of ASEAN’s digital economy. Prior to initiating DEFA negotiations, we conducted a study by Boston Consulting Group, which revealed that DEFA could generate benefits of up to USD 2 trillion if we think big and ambitiously pursue the best digital trade rules.

Regionally, I believe there are also many bilateral initiatives underway. One example is the Innovation Talent Exchange (ITX) program. In fact, this Memorandum of Understanding (MOU) was signed last year during Prime Minister Lee Hsien Loong’s visit to Vietnam, and we are now working on its implementation. This MOU facilitates two-way talent exchanges between the two countries in innovation-related fields, marking a significant step through the ITX program.

Additionally, a comprehensive cooperation framework named the Green Digital Economy Partnership (GDP) has also been signed to guide collaborative initiatives between the two nations in the green and digital spaces. All these bilateral initiatives are built on the foundation of regional frameworks and systems. With both bilateral initiatives and active regional cooperation frameworks in place, I believe that digital connectivity between Vietnam and Singapore will only continue to grow stronger.

One of the core elements of DEFA currently under discussion is digital trade and cross-border e-commerce. It will take time to see how leaders approve mechanisms to connect this key digital economic sector. But let’s discuss: based on your understanding of the Vietnamese market, what are the strengths and challenges of Vietnam's e-commerce in a regional connected playing field, considering the internal capacities of Vietnamese businesses operating on Shopee?

Jason Bay: This is an excellent and timely question. Following the COVID-19 pandemic, Vietnam has emerged as one of the most dynamic and promising economies, not only in Asia but also globally.

Many multinational companies are considering shifting parts of their production and supply chains to Vietnam as part of their “China + 1” strategy. Vietnam’s e-commerce landscape has seen significant growth, thanks to several factors we discussed earlier, such as its resilience after COVID and the necessity for effective collaboration within ASEAN.

I believe that when evaluating the strengths and challenges, a few key points come to mind. One of Vietnam’s strengths is its rapidly growing digital economy. Vietnam boasts a young, dynamic, and tech-savvy population capable of engaging in online transactions, creating a strong demand base that we can leverage to drive further economic activities.

I believe the second area where Vietnam holds a competitive advantage is its highly efficient manufacturing and sourcing sector. Local e-commerce sellers truly benefit from cost advantages when bringing products to international markets, particularly for price-sensitive customers in the region. Vietnam still has room to foster export growth.

The final point I want to emphasize about Vietnam is the strong government support for digital transformation and the development of the digital economy. General Secretary and President To Lam has written about the importance of digital transformation as a key tool for Vietnam's economic development. This vision is truly meaningful.

Prime Minister Pham Minh Chinh also issued a new directive (Directive 29 on boosting domestic consumption, supporting production and business, and developing the domestic market), emphasizing the importance of digital transformation. This directive aims to drive local production and exports through the use of digital technology and e-commerce as distribution channels.

Thus, with all this robust support, Vietnam needs to continue implementing more trade and digital trade policies that favor businesses, especially small and medium enterprises (SMEs), to bolster their ongoing efforts.

On challenges, I previously touched upon logistics in Vietnam, which can be expanded further. Vietnam's geographical layout, with its considerable length, presents logistical difficulties in transporting goods. The costs remain somewhat higher than in other regions, but there is still significant room for improvement in this area. Companies, postal operators, and logistics providers are investing to address these physical challenges, which could later enable the digital layer to capitalize on these enhancements.

I’d like to reference a study by a research company called Parcel Monitor. In e-commerce, parcel delivery logistics is crucial. About 91% of online consumers stated they would switch to competitors if they experienced poor service or delays in the delivery of their purchases. Most sellers are highly concerned about the quality of their delivery services. Moreover, 80% of buyers are more likely to use e-commerce if the estimated delivery date is accurate and reliable. If you promise me delivery on Monday, I expect it on Monday, not Wednesday or Thursday.

More than a third of e-commerce consumers mentioned they would abandon their shopping cart if delivery time wasn’t fast enough. As I said earlier, if I can buy shampoo by going to the supermarket today, why should I wait three days just to save 5,000 VND? I might as well head to the supermarket myself. This issue affects both domestic e-commerce and exports. However, if we can address this problem and truly invest in enhancing logistics efficiency in Vietnam, we will undoubtedly unlock the full potential of e-commerce.

Do you think DEFA adds value to bilateral cooperation on the digital economy between Vietnam and Singapore? What could future digital connections in government, the economy, and society between the two countries look like?

Counselor Goh Keng Phang: I will answer this question more broadly, as I believe DEFA is just one of many ways we are collaborating between the two countries. In fact, there are numerous other avenues through which we are jointly advancing in the digital economy. In short, the future of digital connectivity between the two nations is very bright. Regionally, DEFA is merely the latest step in our journey to strengthen the digital economy in the region.

Previously, we have worked through other agreements and collaborative frameworks within ASEAN to establish progressive digital rules and move toward harmonized regulatory frameworks. Examples include the ASEAN e-Commerce Agreement as well as e-commerce and digital economy chapters in ASEAN free trade agreements, such as the RCEP and the upgraded ASEAN-Australia-New Zealand FTA.

When Singapore held the ASEAN Chairmanship in 2018, we also completed the ASEAN Digital Integration Framework Action Plan, or DEFI, which truly guides ASEAN’s digital journey. Thus, DEFA is merely the latest step in a series of incremental advancements we have made over the years.

Of course, ASEAN’s DEFA is currently underway, and we expect it to be completed next year. This will help us improve rules in key elements of the digital economy, including cross-border e-commerce, electronic platforms, electronic payments, digital identity standards, cross-border data flows, and data protection, while addressing emerging trends such as artificial intelligence.

The ultimate goal here is to fully harness the potential of the digital economy, a rapidly growing sector, and enable our companies to reap the full benefits of all these advancements. DEFA will bring us one step closer to unlocking the full potential of ASEAN’s digital economy. Prior to initiating DEFA negotiations, we conducted a study by Boston Consulting Group, which revealed that DEFA could generate benefits of up to USD 2 trillion if we think big and ambitiously pursue the best digital trade rules.

Regionally, I believe there are also many bilateral initiatives underway. One example is the Innovation Talent Exchange (ITX) program. In fact, this Memorandum of Understanding (MOU) was signed last year during Prime Minister Lee Hsien Loong’s visit to Vietnam, and we are now working on its implementation. This MOU facilitates two-way talent exchanges between the two countries in innovation-related fields, marking a significant step through the ITX program.

Additionally, a comprehensive cooperation framework named the Green Digital Economy Partnership (GDP) has also been signed to guide collaborative initiatives between the two nations in the green and digital spaces. All these bilateral initiatives are built on the foundation of regional frameworks and systems. With both bilateral initiatives and active regional cooperation frameworks in place, I believe that digital connectivity between Vietnam and Singapore will only continue to grow stronger.

Ambassador Pham Quang Vinh: So, let’s not think that we’ve been discussing just one aspect. All economies in the region support trade and business to develop themselves and drive their economies forward. We need to rely on trade, business, and production because all of these are crucial.

The next stage of our development, alongside the traditional economy, is to expand cooperation in the digital economy. We’ve talked about all the benefits of the digital economy, such as cost efficiency, higher productivity, and bridging gaps - both physical and logical - to boost the economy and regional interaction.

Vietnam is one of the ASEAN countries that has focused on and promoted efforts toward the digital economy, which is crucial. We’ve achieved a certain level of development. Undoubtedly, we will benefit as the entire region shifts to the digital economy. Combining the physical economy with the digital economy will create more opportunities for cooperation and interaction in trade and business - this is the first point.

The second point is that costs will certainly be lower if we can conduct business through the digital space. This is vital. I believe that within Vietnam, businesses will also transform themselves to adapt to the new circumstances as the country moves forward with the region in the digital economy. This is absolutely critical.

The starting point may be e-commerce, but eventually, we’ll encompass the entire spectrum of the digital economy. The third point is that connecting with the world in the digital space will be crucial. How we integrate the physical and digital spaces will define the next steps for us.

However, I want to talk more about how we can contribute to regional transformation efforts. I think Vietnam, Singapore, and Malaysia are well-positioned to contribute significantly. Each of us has our own experiences. For instance, in Vietnam, during the digital economic transformation, we need to adopt a dual approach: top-down and bottom-up.

The top-down approach means that the government must be serious and committed to transforming itself to facilitate the digital economy. At the same time, businesses will play their part in our transformation. We need to identify what is necessary to enable trade and business. This is a process where we will share our experiences with other countries - not only in developing a roadmap under the DEFA framework but also in building an action plan to implement that roadmap.

DEFA can be seen as an advanced economic agreement (given its connection to digital technology) that promotes the dynamism and competitiveness of economies in the ASEAN region. In your opinion, for Vietnam's e-commerce market, which is guided by the comprehensive vision of the National Digital Economy Strategy, how can dynamism and competitiveness be measured? Shopee, although an FDI enterprise, appears to have strong "localization" in the markets it invests in. So, what can Shopee do to support Vietnamese businesses in establishing themselves and enhancing their competitiveness within ASEAN markets?

Jason Bay: I believe that for Vietnam, when we look at the progress of digitization and the development of the digital economy, it can clearly be measured through GDP figures. However, more importantly, for a diverse country like Vietnam - and indeed, for a region as diverse as ASEAN, which may be the most diverse in the world in terms of language, stages of development, and culture - we must consider inclusivity alongside this diversity. Sustainability and inclusivity become two sides of the same coin.

What does this mean for Vietnam?

In Vietnam, we have major cities like Hanoi and Ho Chi Minh City, but we must ensure that the benefits of e-commerce and the digital economy extend beyond these urban centers to all 63 provinces. Each province is at a different stage of development, supported by initiatives like the "One Commune One Product" (OCOP) program. Various industries are located across different parts of the country.

When we view digitization as a horizontal enabler, we must ask how to leverage it across industries and regions. For local businesses in Vietnam, one way Shopee can assist—and we already have, given that we see this as vital to the sustainability of e-commerce and our investments in Vietnam—is by supporting local businesses. Ultimately, this benefits the company, but we hope the benefits will ripple out to the broader society.

Currently, local businesses in Vietnam account for about 90% of total sales revenue on the platform, which is a significant proportion. This underscores our commitment to helping local businesses succeed. However, it also highlights a critical challenge: while larger businesses have the resources to expand and take advantage of e-commerce, the key issue lies with small and medium enterprises (SMEs), which are the backbone of Vietnam’s economy. We need to ensure they have the expertise, skills, training, knowledge, and resources to thrive in the online environment through e-commerce.

As a platform, we generate a wealth of resources through initiatives like 'Shopee University', designed to help sellers understand how to not only utilize e-commerce but also optimize their operations on the platform to boost revenue. I mentioned the 'Shopee International Platform' earlier, which aims to help businesses expand beyond Vietnam into other ASEAN markets and even further in the coming years.

We’ve engaged approximately 10,000 potential local sellers through e-commerce training programs in collaboration with various provincial Departments of Industry and Trade to help them scale their businesses. This year, in 2024, we’re rolling out the "Shopee Enables SMEs" program, as Keng Phang mentioned earlier. This initiative aims to train and reach 100,000 micro, small, and medium enterprises (MSMEs) over the next few years.

Despite being an FDI company, we have a long-standing presence in Vietnam and are deeply committed to localizing our operations to ensure that what we do ultimately benefits Vietnamese businesses and those across ASEAN. With a holistic approach - from training, talent development, and export support to branding assistance - I hope to enhance the dynamism and competitiveness of Vietnam’s e-commerce market and digital economy in the long term. I believe this aligns perfectly with the National Digital Economy Strategy outlined by the Vietnamese government.

Ambassador Pham Quang Vinh: Businesses in the digital economy, like Shopee, bear not only economic but also social responsibilities. Inclusivity, in this context, extends beyond supporting small and medium enterprises (SMEs) to expanding operations in a way that benefits all localities, not just major urban centers. This is critically important.

At the macro and regional levels, companies like Shopee and others will undoubtedly foster government-to-government relationships to build what we call an ecosystem for digital transformation and the future development of the digital economy.

Jason Bay – Country Director (Vietnam Market), Sea Limited: I think this is a partnership between government and businesses. Having previously worked in the Singapore government, I realized that as a policymaker, the ability to influence what happens on the ground is limited. For example, you only pay taxes once a year, but you might visit a bank multiple times a month or shop online several times a week. 

If the ultimate goal is to drive digital transformation across society, we must work together. I believe partnerships are incredibly important to ensure everyone benefits.

VietNamNet