Demystifying DEFA: Policy and Political Drivers Across ASEAN

ASEAN’s Digital Economy Framework Agreement is inseparable from ASEAN’s own modern history of self-determination amid great-power competition. Like ASEAN itself, DEFA is likely to matter less for what it does, and more for what it is: a member-state driven attempt to transform Southeast Asia from a site of great-power rivalry into a centre in its own right. DEFA’s signal of self-determination will be seen if not felt across the global digital policy landscape, a battleground where Southeast Asian governments are generally price-takers yet govern some of the world’s fastest-growing digital economies.

This report comprises a briefing on the regional positioning of DEFA, insights into the negotiating process, and an analysis of the political and policy drivers for leading digital economies in the region.

Read the full report here.

As a first-order dynamic, DEFA’s ambition will be constrained by the ASEAN way: measures to enhance economic and policy integration must achieve consensus and not threaten regulatory sovereignty. DEFA’s fate will be determined by a number of dynamics that may lead to a lowest-common denominator agreement. First, the broad spectrum of digital development across ASEAN members and digital regulatory capacity. Second, scepticism for various reasons by significant economies — such as Vietnam — and differences in the level of importance of digital policy across markets. Third, the breadth of the agreement – nine chapters spanning almost every aspect of tech policy – and the sequential nature of the negotiations seem to provide adequate space for negotiating capital for various parties, but in reality, may mean the agreement collapses under its own weight or lack of real progress. Finally, the relatively short timelines to chew through nine significant policy areas may not be able to produce an in-depth agreement. Disappointment may also be a result of hyped expectations around what is fundamentally not the same kind of agreement as digital chapters in modern FTAs, or even Digital Partnership Agreements.

Member states will first focus on established areas of regional alignment, before tackling more challenging topics where there is a lack of preceding regional coordination. DEFA will cement regional integration on familiar issues such as paperless trade, e-commerce and payments connectivity, where there are already ongoing cooperation mechanisms and initiatives. Notably, cross-border data flows will be a contentious issue given the differing positions and openness of member states, particularly in light of data localization regulations in Indonesia and Vietnam. On the whole, Singapore and Malaysia are clear regional leaders in digital policymaking and standards harmonization, although their ambitions will be tempered by neighbours with less capacity (Cambodia, Laos) or interest in ceding policy stewardship to regional dynamics at this point (Vietnam, Indonesia). 

While there are low expectations for DEFA to break significant policy ground, all is not lost. The acceptance of a lowest common denominator outcome in some areas may make room for more progress in the 2-3 chapters of lower hanging fruit; digital/paperless trade for example, where there are existing agreements and global standards to reference. Furthermore, even a set of bland commitments enshrined in DEFA softens the ground for groups of committed ASEAN members to develop multi-party ‘mini-lateral’ agreements, future ASEAN-level binding agreements, and commitments to international standards across the policy areas.

In addition, the process of negotiating such a wide-ranging and innovative agreement will have been a major capacity-building exercise in itself for both governments and stakeholders who may exit with a clearer idea of their own policy priorities and those of their peers. Finally, it is worth acknowledging that even minor progress on thorny issues still creates a signal to global investors that ASEAN is moving in the right direction and that they should maintain commitment to the region.