The prospects for developing economies in Asia and the Pacific to take part in digital services trade are promising, requiring them to evaluate their competitiveness and formulate strategies to develop opportunities in the digital economy.
A book titled “Unlocking the Potential of Digital Services Trade in Asia and the Pacific” published by the Asian Development Bank said growth in digital services trade in Asia and the Pacific has outpaced other regions for more than a decade.
“Opportunities are likely to intensify in the post-pandemic period as consumers and producers continue to embrace online purchasing, digital transactions, and remote delivery of services,” it said.
In a book chapter, authors Jong Woo Kang, Rolando Avendano, Pramila Crivelli, Dominique Hannah Sy and Won Hee Cho said one benchmark to assess a country’s competitiveness in digital services is their export performance given that competitiveness reflected into high
productivity could translate into larger outputs and further into better export performance.
Kang is a principal economist while Avendano and Crivelli are economists at the Regional Cooperation and Integration Division, Economic Research and Cooperation Department of the ADB.
Sy is a cofounder of a social enterprise based in the Philippines and a former economic analyst (consultant) on financial integration, while Cho is former senior economics research associate (consultant) in the same department of ADB.
Based on an earlier paper, they identified factor endowments such as human and physical capital, and country institutions and policies in explaining trade flows based on comparative advantage.
“Among the inputs affecting competitiveness, traditional factors of production, digital infrastructure, and the policy environment are the most important,” it said.
They added that assessment of competitiveness in digital services must examine the factors of human capital, digital connectivity, investment in information and communication technology (ICT), and the policy and regulatory environment.
As the ecosystem for digital services trade requires a conducive overall business and regulatory environment, they said stakeholders typically highlight the importance of transparency in regulations, the ease of data transfers, an open trade and investment regime and
supporting incentives for innovation.
“Many countries are also making efforts to build trust in supporting data flows. Creating trust should come with regulatory cooperation between countries and developing trade agreements or other arrangements that bolster privacy and consumer protection,” they added.
Albert Park, chief economist and Director General at ADB’s Economicm Research and Regional Cooperation Department, said online-based services are helping to raise incomes by not only lowering trade costs by cutting out intermediary agents between buyers and sellers, but also spreading benefits to manufacturing industries and stimulating participation of businesses in global value chains.
“To maximize gains, economies should equip workers with digital skills and knowledge, invest in information and communication technology infrastructure, and cultivate enabling environments through policy and regulatory reforms,” he said.
Park said freer access to the internet is the bedrock for nurturing an enabling environment for digital services trade.
“Indeed, deregulation of cross-border digital services is shown to boost real incomes more than trade liberalization. Allowing data to flow freely across borders and easing burdensome data localization requirements is important for realizing the development potential of
digital services trade,” he said.
Park said appropriate data protection and privacy measures could improve the security and usability of cross-border digital
transactions.
“Making digital trade laws more business friendly across the plethora of trade agreements in Asia and the Pacific is another crucial step toward freeing up the income generating potential of the digital economy,” he added.