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ERIA Participates in the 1st Roundtable of the OECD Digital for SMEs Global Initiative

29 November 2019

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Paris, 29 November 2019: The Economic Research Institute for ASEAN and East Asia (ERIA), represented by the Chief Operating Officer Mr Koji Hachiyama accompanied by Director for Strategy and Partnerships Dr Giulia Ajmone Marsan participated in the 1st Roundtable for the OED Digital for SMEs Global Initiative, held at the OECD Headquarters in Paris.

Opening remarks were delivered by the OECD Secretary General Mr Angel Gurria. The Roundtable was chaired by Minister for Small Business of New Zealand H.E. Stuart Nash, who was also Chair of the OECD Digital for SME initiative. Minister of SMEs and Startups for the Republic of Korea H.E. Young Sun Park and Minister of State for Trade, Employment, Business, EU Digital Single Market and Data Protection of Ireland H.E. Pat Breen served as co-chairs.

MSMEs are the backbone of ASEAN's diverse and dynamic economy, accounting for 95%–99% of all business establishments and more than half of the total employment in all ASEAN Member States. The digitalisation of the SME sector is therefore of great importance for individual AMSs as well as economic integration in the entire region, as recent ERIA analysis suggests.

Mr Hachiyama intervened in the Second Session on Artificial Intelligence for SMEs. He explained how ASEAN offers great opportunities for AI developments across firms, including SMEs. According to ERIA research, 56% of the MSMEs are at Basic level with minimal digital adoption, mostly to facilitate communication and operations. Around 34% use digital tools more meaningfully to aid sales and marketing. Only 10% of the MSMEs are in the Advanced category, with sophisticated digitalisation applied in various aspects of their business. Even amongst the minority of MSMEs that are digitalised, most do not utilise digital tools to their fullest. This means that most ASEAN SMEs still need to catch up with respect to more advanced digital tech like AI or blockchain.

Mr Hachiyama presented the following key initiatives necessary for the adoption of AI technology within ASEAN SMEs:

  1. The importance to collect a large amount of high-quality and homogeneous data, which at the moment are not yet fully available in the region but as digital technology adoption is moving fast they can be available in the near future. Initiatives supporting open government data can also important factor in this respect;
  2. The potential to aim towards an ASEAN Digital Single Market, which will be an important foundation for AI businesses. Important aspects of a potential Digital Single Market include free flow of data with trust, inter-operability, common standards, cyber-security, and privacy protection;
  3. The importance to develop skills for the digital economy in general and AI technologies in particular. This requires not only knowledge of computer sciences and IT but also the understanding of the core features of AI. Human-centered AI technologies is also important as highlighted in the OECD principles on AI.

Other sessions of the roundtable discussed the following topics: SMEs access to digital infrastructure and platforms, blockchain technologies, and fintech.

According to ERIA research, digitalisation in ASEAN is facilitated by improvements in the digital infrastructure, especially a rapid rise in mobile broadband coverage. The mobile broadband penetration rate (per 100 people) in Singapore was close to 150% in 2016 and those of Malaysia and Thailand were close to 100%. In Cambodia, Indonesia, the Philippines, Viet Nam, and Myanmar this figure is almost 50%. Although the mobile broadband penetration rate in Brunei Darussalam and Lao PDR is still low, overall digital connectivity in ASEAN is improving quickly. Mobile coverage also provides cheaper access to broadband networks. In general, the cost of mobile broadband access is about one fourth of the cost of access to fixed networks. 

The Fintech eco-system is ASEAN is diverse: from Fintech hubs like Singapore to less digitised rural areas in less developed countries. At the same time, Fintech is an area of great and fast development in ASEAN. Digital platforms provided of digital wallets and digital payment methods are gaining traction also thanks to the high-level of mobile usage, rising internet penetration, rapid urbanisation and a large young population. They are also providing services to consumers that are disconnected from the traditional banking sectors such as population in rural areas as well those SMEs that are underserved by traditional banking services.

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