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Minako Morita Jaeger

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The Association of Southeast Asian Nations (ASEAN) is one of the world’s fastest-growing digital markets, with around 125,000 new users coming online every day. According to the ASEAN secretariat, the region’s digital economy is projected to generate more than US$1 trillion in Gross Merchandise Value (GMV), a measure of the total value of transactions conducted through the platform, by 2030. To put this ambition in perspective, ASEAN’s combined nominal GDP was around US$4.3 trillion in 2025, meaning that the projected digital-economy GMV would be equivalent to roughly one-quarter of the region’s current economic output, although GMV and GDP measure different aspects of economic activity. The ASEAN Secretariat further predicts that the ASEAN Digital Economy Framework Agreement (DEFA), which is expected to be signed in November 2026, could potentially double this figure to US$2 trillion. However, some ASEAN and digital trade experts have expressed scepticism about whether this projection is achievable.

As the legal text of the DEFA has yet to be finalised, it is not possible to assess its precise provisions. Nevertheless, according to the ASEAN secretariat, the Agreement is expected to be the most comprehensive and ambitious digital economy agreement among ASEAN member states, covering areas such as digital trade, cross-border e-commerce, cybersecurity, personal data protection, online safety, digital identity, digital payments, cross-border data flows, and emerging technologies including AI.

The real test begins with implementation

Integrating ASEAN’s fragmented digital market could create a more seamless regional market for businesses, reducing regulatory barriers and opening up new opportunities across ASEAN. Expectations for DEFA are therefore high, but the real test will begin after the agreement is signed. The UK-ASEAN Business Council has identified the agreement as a major opportunity for UK digital and technology firms and has called for its accelerated implementation to deliver seamless digital trade, interoperability and facilitation of SME businesses. Yet, whether these expectations will be realised depends critically on the extent to which ASEAN implements the agreement.

Since the late 1990s, ASEAN has built an increasingly extensive institutional architecture for regional digital integration beginning with the e-ASEAN Framework Agreement in 2000 and followed by a series of initiatives, including the latest ASEAN Digital Masterplan 2030. These have sought to advance regional digital integration through interoperable digital systems, paperless trade, digital identity, cross-border data flows, cybersecurity and digital skills.

Despite these ambitions, the implementation of these regional initiatives has lagged behind commitment. The challenge for DEFA, therefore, is not simply to establish another ambitious regional framework, but to translate regional commitments into consistent regulatory practices across ten diverse national jurisdictions in the way businesses and consumers trade, share data and use digital services across borders.

Three fundamental challenges to making DEFA work

Although a swift implementation is the key for DEFA, there are three challenges. The first challenge is the “ASEAN Way” – a set of norms and decision-making practices that have historically governed ASEAN cooperation.1 The “ASEAN Way” has enabled ASEAN to reach consensus among highly diverse sovereign states (Figure 1). However, these norms and practices make implementation, monitoring and enforcement of regional commitments difficult.2

Unlike the European Union model, ASEAN is not a supranational institution which can impose common rules on member states. Instead, national governments remain the principal decision-makers and implementers within the ASEAN framework. The institutional consequence is that an agreement negotiated at the regional level ultimately depends on the willingness, capacity and policy choices of individual national governments. This can make implementation, monitoring and enforcement slower, less uniform and more dependent on national coordination than the negotiation of the agreement itself. The “ASEAN Way” is therefore not simply a description of how ASEAN cooperates; it is an institutional factor that shapes how effectively regional commitments can be implemented.

Figure 1: The ASEAN Way – Core principles and practices

Source: Image generated by the author using artificial intelligence.

A second challenge is regulatory fragmentation, reflecting differences in political systems, levels of development, national security priorities and regulatory cultures. Regulations governing cross-border data flows provide a good illustration. According to the OECD, ASEAN Member States’ approaches can be categorised into four types (Figure 2). The Philippines, Singapore and Malaysia adopt an open safeguards approach, while Thailand follows a pre-authorised safeguards approach; both seek to balance openness with policy safeguards in a transparent manner. In contrast, Brunei, Cambodia, Indonesia and Viet Nam require prior approval from national authorities on a case-by-case basis. Myanmar and Lao PDR do not yet have a comprehensive regulatory framework governing cross-border data flows.

Figure 2: ASEAN Member States’ regulations governing cross-border data flows

Note: The image created by the author updating information from Table 3.1 and Figure3.1, p100 in the OECD (2026), Digital Trade Review of the Association of Southeast Asian Nations, OECD Publishing, Paris, https://doi.org/10.1787/abd6f44a-en.

Regulation, such as personal data protection and cybersecurity and regulatory measures for new technologies such as AI may create another challenge, as economic, industrial, security and societal considerations may lead to different regulatory approaches to risk and accountability among ASEAN members. Implementation of DEFA requires continuous regulatory coordination across the region to tackle existing regulatory fragmentation. But such a mechanism doesn’t exist.

Policy fragmentation can be seen at the international level as well. Singapore is known as an entrepreneur, championing innovative digital economy agreements with its trade partners across the world3 and promoting the WTO E-commerce Agreement as one of three co-convenors. Other ASEAN members, however, including Indonesia, Vietnam, Thailand and Cambodia, did not even participate in the WTO Agreement on E-commerce negotiations. Given the Agreement’s development-oriented approach, broader ASEAN participation in the Agreement could provide a useful foundation for strengthening digital regulatory interoperability within the region and beyond.

The third is a lack of trust. ASEAN consumers remain deeply concerned about the security and use of their personal data. A survey shows that 97% of people expressed concern about privacy and 98% about companies disclosing the data they share with others. Meanwhile, the share of consumers reporting that they had been scammed rose from 31% in 2024 to 45% in 2025. These concerns matter for DEFA because cross-border digital trade ultimately depends on consumers’ confidence that their data, payments and digital transactions are secure. The strength of DEFA’s regional commitments will matter, but trust will ultimately depend on whether these commitments are translated into effective domestic laws, regulations and regulatory institutions, supported by adequate financial and human resources. A regulatory gap between regional commitments and domestic implementation can therefore undermine trust even where the regional agreement itself establishes strong safeguards. Building trust at the domestic level will therefore be essential to turning DEFA’s commitments into meaningful regional digital integration.

How can the UK help make DEFA work?

Turning DEFA’s ambitious vision into a functioning regional digital market will require sustained implementation, regulatory cooperation and capacity building across ASEAN.

The UK is well positioned to contribute. It has already launched the ASEAN-UK Digital Innovation Partnership and an Asia Pacific Digital Trade Network, while the UK-ASEAN Plan of Action (2027-2031) committed to cooperation on the digital economy, artificial intelligence and supply-chain resilience.

The UK can contribute in two complementary ways. Top-down support can help ASEAN members strengthen regulatory frameworks and institutions. Digital trade and digital economy agreements, such as the WTO Agreement on E-commerce, can provide a framework and, potentially, a catalyst for domestic regulatory and institutional reform. The UK can share its experience in digital trade regulation, data governance, AI governance, cybersecurity and regulatory cooperation, helping ASEAN members develop transparent and interoperable rules.

However, top-down regulatory alignment alone has its limits. Effective digital integration ultimately depends on domestic capabilities and trust. The UK’s support should therefore also address the bottom-up foundations of DEFA implementation: strengthening regulatory and technical capacity, improving transparency and participation in policymaking, building societal trust in digital technologies and data governance, enhancing cybersecurity and resilience, and ensuring that SMEs and less digitally developed economies can participate in the regional digital economy.

In this way, the UK can help ASEAN bridge the gap between regional commitments and domestic implementation, taking account of the region’s diverse levels of development and regulatory approaches. Ultimately, the UK’s contribution should be measured not by how many new digital agreements it promotes, but by whether it helps ASEAN create a trusted, resilient and inclusive digital market that works in practice.

Disclaimer: This article has benefited from discussions at a Konrad Adenauer Stiftung Seminar on “The ASEAN Digital Economy Framework Agreement (DEFA): Implications for Asia and Europe” (June 2026) in which the author participated. Some of the issues and perspectives discussed in this blog reflect observations and opinions shared by participants during the seminar. References to these views are presented in a generalized form and should not be attributed to any specific participant. The conclusions and interpretations expressed in this blog are solely those of the author.

Footnotes

1. The ASEAN Way emerged from post-colonial Southeast Asian diplomacy and the Bandung principles of sovereignty and non-interference, was institutionalised through ASEAN’s founding in 1967 and the 1976 Treaty of Amity and Cooperation, and became widely known as the “ASEAN Way” in the early 1990s. See Yukawa, T. (2018). The ASEAN Way as a symbol: an analysis of discourses on the ASEAN Norms. The Pacific Review, 31(3), 298–314. https://doi.org/10.1080/09512748.2017.1371211.
2. For example, see Chalermpalanupap, T. (2016). From Community to Compliance? The Evolution of Monitoring Obligations in ASEAN by Simon Chesterman (review). Journal of Southeast Asian Economies, 33(2), 267–268.
3. Jones, E., Kira, B., & Tavengerwei, R. (2024). Norm Entrepreneurship in Digital Trade: The Singapore-led Wave of Digital Trade Agreements. World Trade Review, 23(2), 208–241. https://doi.org/10.1017/S1474745624000089