ASEAN, explained.
The ASEAN Business and Investment Summit 2023 (Yasuyoshi Chiba/AFP via Getty Images)
Australia has an opportunity to help shape the implementation and the next phase of digital growth in the region.
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ASEAN’s digital economy rulebook is nearly writtenASEAN’s digital economy rulebook is nearly written
Southeast Asian countries have started to bridge the digital divides. To facilitate cross-border trade, QR payment (Opens in new window) systems show how regional cooperation can deliver practical results. What began as bilateral arrangements is becoming an interoperable network, making cross-border transactions faster, cheaper and more convenient while supporting local currency settlement. Home-grown SuperApps (Opens in new window) have reshaped ride-hailing, payments, financial services and e-commerce, creating jobs while giving companies better access to customers and finance.
These developments are being formalised into a new rulebook by the Association of Southeast Asian Nations – known as the Digital Economy Framework Agreement (DEFA).
But the hardest part still to come.
Designed as a binding treaty, DEFA seeks to harmonise member states’ digital regulations and promote interoperability, reducing the regulatory friction that impedes cross-border digital trade. With negotiations complete, the agreement is now undergoing legal review ahead of a planned signing at the ASEAN Summit in November 2026.
Once in force, it will be the world’s first region-wide digital economy agreement (Opens in new window), setting the foundation for deeper digital integration across Southeast Asia.
The real test will be implementation.
DEFA should be more than a regional integration exercise – it should become the platform for a deeper ASEAN–Australia digital partnership.
The promise of a US$2 trillion digital economy by 2030 (Opens in new window) will remain out of reach unless digital transformation extends beyond major cities and large corporations to rural communities, low-income households, and micro, small and medium enterprises (MSMEs). That requires more than market access. It depends on affordable connectivity (Opens in new window), stronger digital skills, and wider access to e-commerce, digital payments and online public services.
The second test is whether no ASEAN member state is left behind. Wide disparities remain across the region in digital infrastructure, regulatory capacity and workforce skills. Common rules alone will not close those gaps. They will require political commitment, sustained investment and practical cooperation to strengthen institutions, build capability and ensure every member state can participate fully in the region’s digital economy.
The Initiative for ASEAN Integration (IAI) Work Plan V (2026–2030) (Opens in new window) can support that effort. By directing support to Cambodia, Laos, Myanmar, Vietnam and Timor-Leste, it provides a targeted mechanism to strengthen digital capability, narrow development gaps and ensure ASEAN’s digital integration is genuinely regionwide.
Applicants to the China-ASEAN Innovation and Entrepreneurship Competition in June (China-ASEAN Technology Transfer Center via ASEAN Secretariat)
For Australia, DEFA marks the beginning of a new phase of engagement.
Research and innovation are an obvious starting point. Australian universities, research institutes and businesses are well placed to partner with counterparts across Southeast Asia to develop, test and commercialise emerging digital technologies. ASEAN’s diverse markets provide an environment to refine new solutions at scale, while giving Australian firms access to one of the world’s fastest-growing digital economies.
Australia can also contribute through digital governance. Its experience in cybersecurity, regulation and consumer protection is increasingly relevant as ASEAN members grapple with data governance, online safety and platform regulation. Australia’s move to set a minimum age of 16 for social media users (Opens in new window) has drawn interest across the region, with countries including Indonesia and Malaysia considering similar approaches. Sharing regulatory experience in these areas would complement DEFA’s ambition to build a trusted and resilient digital economy.
This is the larger opportunity. DEFA should be more than a regional integration exercise – it should become the platform for a deeper ASEAN–Australia digital partnership. If implemented well, it will strengthen regional integration and create new opportunities for businesses – including MSMEs – on both sides to innovate, invest and trade.
Ultimately, DEFA will not be judged by the agreement governments sign, but by what businesses and individuals build with it. If it enables the next generation to collaborate, innovate and scale across borders, it will become more than a trade agreement. It will provide the foundation for a more integrated, competitive and inclusive digital economy across Southeast Asia – and a stronger digital partnership with Australia.
That responsibility will increasingly fall to the next generation of entrepreneurs, developers and digital creators across Southeast Asia and Australia. They are already driving the region’s fastest-growing sectors – from e-commerce and fintech to AI, gaming and the creative economy. Their success will determine whether common rules are turned into practical innovations that create jobs, expand markets and improve services.
Australia has an opportunity to invest in these connections. The Australia for ASEAN Futures Initiative (Aus4ASEAN (Opens in new window)), including its scholarships and fellowships, together with alumni networks from the New Colombo Plan (Opens in new window), can help build enduring links between young innovators, researchers and entrepreneurs. These networks are well placed to develop locally relevant digital solutions while strengthening the long-term ties that underpin regional cooperation.
Hilman Palaon travelled as a guest of the Foreign Policy Community of Indonesia (FPCI) and the Australian Mission to ASEAN to be a panellist in the ASEAN-Australia Track 1.5 Dialogue, held at the ASEAN Secretariat in Jakarta.
About the author
Hilman Palaon
Dr Hilman Palaon is a Research Fellow at the Lowy Institute’s Indo-Pacific Development Centre. His work focuses on digital economy issues in the Indo-Pacific region, including financial inclusion, economic empowerment, and technology innovation.
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