Keynote presentation on the launch of ASEAN Vision 2040, ERIA’s project in support of the Government of Thailand who is ASEAN Chair in 2019. The event was held in Jakarta on 30 August 2019 with the theme ‘Integration, Transformation and ASEAN Centrality’. The presentation was made and delivered by Prof Fukunari Kimura, Chief Economist of the Economic Research Institute for ASEAN and East Asia. Prof Kimura is also Professor at the Faculty of Economics, Keio University. http://www.eria.org/research/researcher_profiles/fukunari-kimura.html

1. How to take advantage
of new technologies
for economic development in ASEAN?
Fukunari Kimura
Chief Economist, Economic Research Institute for ASEAN and East Asia (ERIA)
Professor, Faculty of Economics, Keio University
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2. 1. A view from the international division
of labor and international trade
• Capture a large value added with good dynamic
impacts in the global value chains.
• Production networks in the manufacturing sector
(or the second unbundling)
• Still ample room for further widening and deepening the
involvement in ASEAN.
• Forthcoming cross-border services outsourcing (or
the third unbundling)
• May become one of the major channels for the
international division of labor.
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3. Trade costs
Communication costs
Face-to-face costs
What starts moving?
International division of
labor
Dominant years
Pre-
globalized
world (0)
High
High
High
None
Autarky
- 1820
The 1st
unbundling
(1)
Lower
High
High
Goods
Industry-wise
(Production and
consumption are
fragmented)
1820-1990
The 2nd
unbundling
(2)
Lower
Lower
High
Ideas
Task-wise
(An industry is
fragmented)
1990-2015
The 3rd
unbundling
(3)
Lower
Lower
Lower
People
Person-wise
(A task is
fragmented)
2015-
“Unbundlings” to overcome distance a la Baldwin (2016)
Source: Kimura (2018).
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4. 2. Utilize new technologies for
economic development
• Engage in new technologies. Do not be afraid of
possible backlash too much.
• For organizing our perception on new technologies,
the concept of IT (information technology) and CT
(communication technology) would be useful.
• Should seek good combination of IT and CT for
sustainable and inclusive growth.
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5. Perception on new technologies
In developed economies
• Technologies often
perceived as “disruptive”;
why?
• Mature economy, slow
economic growth, old
shrinking population, ...
• Substitutability b/w
machines and labor
emphasized.
• Industrial adjustments with
friction; scraping and
replacing jobs painful.
• Must compete at the
frontier of developing new
technologies.
In AMSs
• Technologies should be
embraced as engines of
economic development.
• Economies ready to be
transformed, rapid economic
growth, (mostly) young
vigorous population, ...
• Complementarity b/w
machines and labor must be
pursued.
• Dynamic economies, new jobs
created, people willing to
switch to better jobs.
• Can avoid redundant R&D;
concentrate on “imitative
innovation” and applications.
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6. Two faces of digital revolution for AMSs
IT (e.g., AI, robotics, big data)
• Faster data processing, reduce # of tasks =>
generate “concentration forces,” however,…
• Focus on applications
• Need innovation hubs as a window to
follow up new technologies.
• Utilize complementarity of machines and
human beings to deepen/upgrade roles in
international production networks; recent
study on robots and network trade
• Policies
• Introduction of IT such as robotics to be
mildly promoted.
• Human capital
• Demand for programmers, computer
engineers, obvious.
• Shift from manual, routine jobs to
cognitive, flexible, multi-task jobs.
• Effects at the individual level,
unpredictable.
CT (e.g., internet, smartphones, 5G)
• Overcome distance, encourage dom./cross-
border division of labor => generate
“dispersion forces”
• Lower matching costs for B-to-C and C-to-C
already make new businesses mushrooming.
• Social media, transport, tourism, e-commerce,
e-payments, fin-tech, ...
• Domestic and cross-border
• Policies
• Digital connectivity to avoid digital divide
• Can be achieved with private incentives and
proper regulation/modest public expenditure.
• Human capital
• Platform providers
• Programmers, computer engineers,
entrepreneurs for start-ups
• Platform users
• Ordinary people with entrepreneurship
• Regulatory framework for “almost free flow of
data”
• Principles
• Back-up policies (so far fragmented)
• Consumer protection, privacy, cyber-
security
• IPR protection, competition policy, taxation
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7. Benchmar
k: free
flow of
data
(i) Policies
for
liberalizatio
n and
facilitation
(ii) Policies
to mitigate
market
failures
(iii) Policies
to reconcile
values or
social
concerns
(iv) Policies to
accommodate
data flows and
data-related
businesses
(v) Industrial
policy and
strategic trade
and investment
policies
Free flow of data as a benchmark and supporting policies (T20, TF8, Policy Brief #4)
(i) Policies for further liberalization and facilitation
Non-discrimination for digital content, customs
duties on electronic transmissions, customs duties
on parcels, Electronic authentication and signatures
(ii) Policies to correct or mitigate market failures
Competition policy, consumer protection, IPR
protection
(iii) Policies to reconcile values or social concerns with
economic efficiency
Data and privacy protection, cybersecurity, other
general exceptions
(iv) Policies to accommodate data flows and data-related
businesses in the domestic policy regime
Taxation, e-payments/fintech/other industrial
regulations, AI, information disclosure of firms and
statistics, due process for government access to
privacy/industry data
(v) Industrial policy and strategic trade and investment
policies
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8. Implication for inclusive growth
• IT
• Middle-range human capital seems to be affected first,
rather than low or high human capital.
• Need to make human capital complement to IT.
• CT
• Platform users can be anybody; room for the
participation by MSMEs and individuals.
• Although taxation for giant platformers in discussion, it
seems to be a lot of room for inclusive growth.
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