Bridging the Digital Divide in Southeast Asia

Technology and digital inclusivity are essential to bridge the digital divide; it can improve accessibility, level the playing field and reduce gaps between different social backgrounds.

Insights from Roland Berger's latest study "Bridging the digital divide: Improving digital inclusion in Southeast Asia" show that digital technology has been increasingly embedded in every part of the economy and individuals' livelihoods. This is especially apparent in the recent COVID-19 pandemic, with digital tools replacing physical interactions and transactions. 

"In Southeast Asia, however, there are approximately 150 million adult individuals or 31 per cent of the adult population that are still currently digitally excluded because they lack access to communication technologies or have low levels of digital literacy,” says Mr Damien Dujacquier, senior partner and co-author of the study. 

Disabilities, illiteracy, age, wealth, concentration of economic activity in urban areas and enterprise access to capital are common factors that create this digital divide.

Digitalisation, including the automation of factories (Industry 4.0), has transformed the economy and dynamics of global industries, including in Southeast Asia. Digital skills and capabilities are now fundamental to successful participation in societal and economic activities. If the digital divide is left unaddressed, large parts of the population will miss out on the opportunities that digital technology presents.

Digital inclusion is the way forward to enable more competitive societies.

Benefits of Digital Inclusion

"At least USD 15 billion of revenue and savings per year can be unlocked in Southeast Asia by bridging this digital divide,” states Mr John Low, senior partner and co-author of the study. Emerging nations cannot afford to ignore the digital sector if they aspire to increase their share of global trade. These impacts can be measured across three areas:

Economic: Improvements can be made by allowing individuals and businesses greater access to both local and global markets through online channels and digital transactions and increasing labour productivity through digital tools. In doing so, Roland Berger projections suggest digital inclusion in Southeast Asia has the potential to unlock USD 16 to 307 per capita in new revenue streams from the technology, media and telecom (TMT) sector and financial services, as well as increase labour productivity. This translates to USD 19 million to 2.9 billion revenue depending on the country.

Social: Digital technology can help level the playing field and close the gap between different social backgrounds. By allowing digitally included individuals and communities to take advantage of a wealth of online resources and expand their knowledge sources, this heightens social mobility through the development of new personal or professional skills.

Governmental: Digital inclusion increases civic outreach, greater efficiency and access to public services. E-government services that are optimised and automated benefit from greater efficiency and cost savings, which could, in turn, be allocated to other under-invested segments. Roland Berger projections suggest that digital inclusion in Southeast Asia has the potential to reduce government costs by USD 45 to 128 per capita. Depending on the country, this works out to be USD 7 million to 3.3 billion of taxpayer savings per year.

Digital education needs to be part of the curriculum from an early age and digital programs are vital to empower the workforce.

Key Findings in Southeast Asia and Malaysia

In Roland Berger's Digital Inclusion Index (RB DII) which measured the level of digital inclusion in countries based on four key levers; accessibility, affordability, ability and attitude, Southeast Asia ranked fifth out of seven global regions. This is due to low scores in the affordability and ability levers. The cost of data and telephony and Information & Communication Technologies (ICT) tools such as smartphones and computers, remains relatively expensive for the largely low-income populations of many of Southeast Asia's emerging nations. 

Similarly, levels of education and digital literacy in the emerging areas of Southeast Asia also lag behind the global average. But Southeast Asia is stronger when it comes to accessibility and attitude, where its scores are at or above the global average. Recent infrastructure developments have supported greater smartphone use in the region, for example, and a young demographic has driven enthusiasm for technology and hunger for greater digitalisation.

SEA Country Rankings 

Overall positions and scores for each of SEA’s 10 countries [max. Score = 100] 

Malaysia has sustained its digital growth by boosting accessibility. Its MYR 22 billion (USD 5.4 billion) National Fiberization and Connectivity Plan (NFCP), and the rollout of enhanced 4G connectivity by TMT companies, are expected to further increase this. However, quality remains an issue. While the policy and infrastructure dimensions score well at 96 and 73, respectively, the broadband quality score is still very low at 45. This poor performance is a drag on its efforts for greater digital inclusion.

Seven Catalysts to Close the Digital Gap

Roland Berger devised a framework to improve digital inclusion based on seven drivers to facilitate the four levers. Responsibility for these drivers is split across the key actors in digital inclusion, which is the private sector and governments.

• TMT infrastructure development to enable universal access 

Digital inclusion begins with the availability of internet access and ownership of a digital device. Increasing investments in and development of TMT infrastructure is a necessary first step, particularly in rural and underserved urban areas where digital connectivity is unavailable or unaffordable. 

Devising a sustainable investment model is key, especially for SEA countries in the early stages of digitalisation, such as Cambodia and Laos. This would lift the barrier, alleviate cost concerns associated with infrastructure development, and allow incumbent and new network operators to enter the markets.

The building of telecommunication towers and lines may be challenging especially for archipelagic nations like Indonesia and the Philippines. New technologies, such as floating solar-powered networking rigs, can help here. 

• Digital content creation to support greater engagement 

Establishing network accessibility is not enough to improve digital inclusion – relevant content must also be created to encourage user engagement. 

A robust user-focused content ecosystem drives traffic by generating material that is relevant and value-adding to people's lives, for example, locally-focused entertainment, weather and traffic updates, or government services such as tax forms. 

Governments can encourage such content by updating policies and regulations for the digital age. For example, in banking/finance, new policies and modification of regulations are required to enable fintech players to roll out services such as e-payments or blockchain. In addition, governments can stimulate digital startups through programs such as digital clusters, funding and incubators.

Language also plays an important role and is especially applicable to SEA countries, where English is not widely spoken. The low volume of content in local languages is a key barrier to digital inclusion. Artificial intelligence (AI) software can play a vital role here as it offers immediate and relatively high-quality translations of content at low cost. 

• Regulation reform and wholesale open access to promote competitive pricing 

Encouraging competitive pricing can ensure digital inclusion becomes more affordable. For example, a pro-competition regulatory framework that incentivises investments, innovation and ultimately greater digital inclusion can make broadband offerings more competitive. 

Wholesale open access networks (WOAN) may also be a viable solution in countries with low availability of connectivity, and in highly consolidated markets that require more substantive changes in their broadband market. WOANs offer more equitable and less costly access to backhaul infrastructure. Such policies can help improve rural networks that are less attractive to private investors. 

Digital inclusion in Southeast Asia has the potential to unlock USD 16 to 307 per capita in new revenue streams.

• Public access to connect and assist the financially challenged 

Public access has been an integral part of many national digital strategies for decades in achieving universal access, especially in bridging the digital divide for communities frequently underserved by the private market.

Investing in public access diversifies broadband markets and expands connectivity in underserved areas that are of little interest to commercial providers. This is executed by purchasing bulk wholesale data connections from providers and channelling the capacity to users at a very low, or no, cost. 

Requisite policies and facilities are key to improving connectivity, such as prioritising the underserved groups and offering free WiFi hotspots or computers in public spaces. These must go hand in hand with digital skills training. 

• Active learning support to build digital literacy and skills 

Empowering the digitally excluded to use digital services is highly important for sustained digital inclusion. Adoption, however, can be intimidating for new users, highlighting the need for programs that actively support the building of digital literacy, skills and confidence. 

There are two critical areas to prioritise. First, digital education needs to be added to national curriculums from an early age, and second, there should be programs that empower existing workforces, particularly within traditional industries, to upskill so they can continue to be relevant in an increasingly digital economy. 

Ensuring that programs account for technological changes, are flexible to meet a diversity of needs, and empathise with learner challenges will be keys to success. 

• Awareness and usage campaigning to enhance enthusiasm for digital 

A digitally inclusive society embraces technology through enthusiasm for digital tools and services. As such, developing campaigns that promote awareness and usage of ICTs is a useful driver to promote digital inclusion. 

• Campaigns are not simply about creating awareness of digital's applications and benefits. They help people build digital confidence in areas such as: 
• Understanding and applying basic cybersecurity knowledge; for example, recognising fake news and cybercriminal activity 
• Appreciating the convenience and benefits of digital services such as e-commerce, mobile money and internet banking 
• Registering personal information for accessing online services such as e-government services 
• Managing information and communication such as search engines, social media and collaboration tools like e-mail and chat applications.

Various forms of outreach via traditional marketing strategies and community engagement programs tailored to different communities can be used to engage and enthuse audiences, as well as new technologies such as augmented and virtual reality, smart systems and the Internet of Things (IoT). 

A resilient cybersecurity framework directly creates protection mechanisms within digital environments.

• Safe digital environment to ease security fears 

Fear is a major hurdle in ensuring long-term digital inclusion. The proliferation of cybercrime and fake news discourage those who feel unprepared and unprotected when it comes to engaging with the digital world. Thus, building a safe digital environment is integral for achieving greater digital inclusion. 

A safe digital environment has four hallmarks:

Firstly, a resilient cybersecurity framework directly creates protection mechanisms within digital environments. Through robust and systematic cyber risk management processes, digital space can better withstand cyberattacks and recover more quickly after a disruption. 

Secondly, a strong legislative structure equips regulators with the necessary powers to address the growing sophistication of threats and create a safe online environment. Instruments such as a Cybersecurity Act provide frameworks for preventing, managing and governing cyber incidents. 

Thirdly, a highly-skilled cybersecurity unit and a swift action plan that combats cybercrime with speed and scale is vital for administering criminal justice efficiently. Having such capabilities provides a greater sense of security for users.

Lastly, international partnerships are crucial as cybersecurity is a global issue. Disruption to one country can have significant spillover effects on others, such as on interdependent services and financial markets. Therefore, collaboration and cooperation through international partnerships are vital.

Synergetic Endeavours between Private Sectors and Governments a Must

Whether with network providers, e-commerce retailers, digital banking services or social media, most end-user engagement involves commercial players. Therefore, the private sector needs to play its part in offering services that are viable and secure for underserved markets if digital inclusion is to be enhanced. For example, service startup apps demonstrate their ability to promote digital inclusion by integrating individual service providers and SMEs into their platform, thus expanding digital inclusion.

Expanding digital inclusion often requires governments to take the role of chief initiator. Some countries have set up a national agency to oversee the management of digital initiatives involving multiple facets, from land development, community development, education and manpower development to economic development. This could be in the form of a digital inclusion council. Over time, as digital inclusion grows, the council's purpose may evolve into achieving the next step in the ongoing process of digitisation such as digital readiness or Smart Nation. 

Governments can also take the lead in driving digital inclusiveness. A popular strategy is to do this through e-government programs, in which government services are digitalised. By exposing the population to digital interactions as a byproduct of consuming government services, e-government can build greater accessibility, ability and attitude. Examples of countries with strong e-government programs include Singapore, Sweden and Estonia.

Digital inclusion is the way forward to creating more enabling and competitive societies, propelling them to greater heights in the future.

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Damien Dujacquier is Senior Partner at Roland Berger and is a Co-Managing Partner of Roland Berger's South-East Asia offices. He has decades-long experience in South-East Asia, in countries such as Indonesia, Malaysia, Myanmar, Philippines, Singapore and Thailand. Based in Singapore, Mr Dujacquier leads the Telecom, Media and Technology competence center in the region.

John Low is Senior Partner at Roland Berger and is a Co-Managing Partner of Roland Berger's South-East Asia offices. He has a total of over 25 years of working experience of which 20 years were spent on consulting and over five years in the industry and public sector. Based in Malaysia, he is currently leading the Public Services Competence Center for South-East Asia.

Sulina Kaur is a Principal with Roland Berger Malaysia. She has spent 8+ years focusing on civil economics, during which time she has honed her expertise in economic development, including tourism-led development, smart city and urban planning, and, more recently, digitalisation for government entities. Sulina is also passionate about talent development and supports regional expansion through recruiting efforts and she is also supporting projects in Civil Economics across South-East Asia.

Chua Thian Rui is a Consultant with Roland Berger Singapore, where he focuses on Telecom, Media and Technology and digital. He also has experience in product management and strategy and done work across the Asia region.

Daniel Lim is a Consultant with Roland Berger Singapore. He has a background in digital marketing and has conducted projects in the healthcare, consumer goods, Telecom, Media and Technology and civil economics sectors in Singapore, Malaysia, Thailand, Vietnam and Philippines.

He Wanxin is a Consultant with Roland Berger Hong Kong. She specialises in Telecom, Media and Technology with experience covering corporate strategy, market study and investor support. She is especially keen in telecom, digital and cloud relevant areas.