Responsive regulation key to Asean’s digital revolution

Digital transformation is already having profound societal implications for the Association of South-east Asian Nations (“Asean can be a winner in the digital revolution”; May 27).

However, organisations in the region do not always understand what impact their digital initiatives will have on different aspects of society, from employment to the environment and beyond, or what responsibility they should bear for any unintended consequences of digitalisation.

Regulation can play a critical role in creating the incentives for Asean businesses to realise the value of the fourth industrial revolution to society.

The introduction of usage-based insurance for cars illustrates how unaligned incentives can derail societal gains. The World Economic Forum’s Digital Transformation of Industries project estimates that usage-based insurance will save more than 150,000 lives by 2025. But it is not being widely rolled out in many Asean countries because the profits and costs of the service are being distributed unevenly.

In a low-margin environment, it is not mandatory for car manufacturers to install the telematics equipment needed for usage-based insurance. This is because the cost cannot be passed on easily to consumers, so insurers are reaping the benefits with optional add-ons.

Accurately-priced insurance means lower costs for consumers, fewer accidents and reduced crash costs for all stakeholders — a win-win situation for customers, industry and society that is not in place, much like how seat belts were not mandatory in cars originally.

Regulations exist to protect consumers and businesses, correct market failures and make aspects of life safer and easier.

The role of policy and regulation continues to be essential; the basic principles are fundamental to uphold in an increasingly digital world, for citizens and organisations across geographies — cross-industry and within sectors.

The speed of innovation in digital technologies stands in contrast to the pace of regulation. Alibaba CEO Jack Ma has mentioned that “seven- to 12-year regulatory policy timelines do not reflect the speed of the Internet.”

The digital world’s challenges require the ability to respond faster than classical regulatory instruments allow.

The key question for governments and regulators is: What can they do to increase the relevance of regulatory and policy frameworks to foster innovation while protecting customer interests?