ASEAN MSME Ecommerce | Alliance for eTrade

ASEAN Ecommerce Work Program 2017–25 at Midpoint: State of MSME Ecommerce and Path Forward

Kati Suominen, Founder and CEO, Nextrade Group and Technical Director, Alliance for eTrade Development

The COVID-19 crisis has severely impacted trade and micro, small, and medium-sized enterprises (MSMEs) in the Association of Southeast Asian Nations (ASEAN) region. At the same time, ecommerce—the sale and purchase of goods and services online—is booming in the ASEAN economies and their export markets. This is bringing new opportunities for the region’s MSMEs to grow their sales and exports and recover from COVID.

ASEAN economies have a long-standing commitment to ecommerce development, most specifically through the 2017–25 ASEAN Work Program on Ecommerce and the 2019 ASEAN Agreement on Ecommerce, which will be reviewed in 2022. Some ASEAN members also participate in deep trade agreements with binding ecommerce provisions, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), to open new ecommerce opportunities for firms in their economies.

Furthemore, in September 2021, ASEAN adopted a Work Plan on the Implementation of the ASEAN Ecommerce Agreement 2021-2025, and a commitment to launch a study on an ASEAN digital economy framework agreement whose negotiations are expected to be launched before 2025.

The purpose of this report is to support the implementation of the ASEAN Work Program on Ecommerce and the forthcoming study on the digital economy framework agreement. This report will:

Present new survey data on how 1,300 different types of ASEAN MSMEs engage in ecommerce, how they benefit from ecommerce, and what challenges they face in growing their domestic, regional, and global online sales;

Review ASEAN economies’ adoption of regional and domestic policies and regulations that are conducive to MSME ecommerce;

Discuss frictions and challenges as well as opportunities for ASEAN digital integration and MSMEs’ cross-border commerce; and

Put forth ideas on policy and technology solutions for enabling ASEAN MSMEs’ trade and growth through ecommerce.

The data indicates that:

While most ASEAN MSMEs are still social sellers, MSMEs in the region are also rapidly onboarding local, regional, and global marketplaces that enable them to reach hundreds of millions of customers around the world. Firms are also increasingly “born digital”—young firms are more likely to use marketplaces than firms that are 6 or more years old.

MSMEs report that they particularly benefit from their ecommerce business in terms of new domestic sales and customers, improved profit margins, and greater exports. The best-performing online seller-exporters tend to be metropolitan firms that stand out for their use of numerous complementary digital technologies to scale and streamline their operations and for their human capital and skills to leverage technologies.

However, social and marketplace sellers share certain challenges, typically related to logistics, internet connectivity, and payments acceptance, and, increasingly, cybersecurity and the proliferation of disparate national data privacy, consumer protection, online copyright, and other digital regulations.
- For mature online sellers that engage in trade, customs procedures, market access issues, international delivery costs, and attracting talent are among the top challenges.
- Social sellers, in contrast, report challenges with customs procedures for inbound trade, as well as with cybersecurity, cross-border payments, and funding their digital transformation.
- Firms report that high delivery costs, currency exchange fees, and challenges with payment acceptance are issues that have at some point made it unfeasible to complete an online transaction.

The report proposes specific solutions to these challenges in logistics, payments, MSME ecommerce skills development, and finance, and discussed ways for the region to bridge geographic disparities in ecommerce use, especially between rural and urban areas.

Mechanisms such as (1) public-private partnerships that support MSMEs’ ecommerce use and digital transformation; (2) engaging local governments in ecommerce promotion; (3) and using trade agreements with binding, high-quality ecommerce provisions for ASEAN MSMEs to transact easily across markets are some of the additional tools that will enable ASEAN MSMEs to connect with and transact at home and beyond borders.

The author’s views do not necessarily reflect the views of the United States Agency for International Development or the United States Government or any of the eTrade Alliance members.