A New Digital Order: How Asia-Pacific is Defining Rules for the Digital Economy

The Asian Development Bank’s May 2025 publication, The Role and Future of Digital Economy Agreements in Developing Asia and the Pacific, edited by Pramila Crivelli and Rolando Avendaño, offers a powerful lens into the evolving regulatory and trade landscape of the Asia-Pacific digital economy. Drawing on insights from respected research institutions such as the Peterson Institute for International Economics, Yonsei University, the City University of Hong Kong, the National University of Singapore, and Honey Consulting, the report builds on ADB’s broader efforts to understand and support digital integration. It highlights the critical role of digital economy agreements (DEAs) in accelerating trade, modernizing regulations, and narrowing the digital divide across a region characterized by its economic and policy diversity. The COVID-19 pandemic served as a catalyst, pushing countries into digitalization at an unprecedented speed. But while digital adoption soared, the gap in regulatory preparedness became starkly apparent.

Digital Inequality: Three Faces of Regulation

A central argument of the report is that digital regulatory maturity in the Asia-Pacific is uneven and fragmented. Some nations, like Singapore, Japan, Australia, and Korea, have advanced and coherent digital policy frameworks and are active participants in international digital trade negotiations. Others, especially in South Asia and the Pacific Islands, either lack foundational laws or operate under dated regulatory systems. The report classifies these nations into three broad categories: economies with comprehensive and open digital frameworks; those with developing but incomplete regulations; and those with restrictive or rudimentary systems that pose barriers to international trade. This fragmentation not only hampers interoperability but also affects competitiveness, particularly for small and medium-sized enterprises (SMEs) and microenterprises seeking to scale digitally.

Underlying these disparities are a complex blend of economic priorities, institutional capabilities, geopolitical strategies, and market size. For example, while India and China possess large, self-sustaining digital economies and prioritize national control over data, smaller economies rely heavily on external trade integration and seek regulatory interoperability to gain access to larger markets. The report points out that many restrictive policies, such as mandatory data localization, may have legitimate national security motivations, but they also risk isolating domestic firms from global value chains.

DEPA and the Rise of Modular Digital Trade Deals

The Digital Economy Partnership Agreement (DEPA), signed by Singapore, Chile, and New Zealand and later joined by Korea, stands out in the report as a trailblazer in modern digital trade design. DEPA is celebrated for its modular architecture, which enables signatories to selectively adopt and implement chapters based on their domestic capacities and policy objectives. This flexibility allows developing countries to engage in digital trade governance incrementally, rather than being overwhelmed by comprehensive obligations.

Compared to traditional trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or the Regional Comprehensive Economic Partnership (RCEP), DEPA represents a new generation of digital pacts. These focus not only on trade facilitation but also on emergent issues such as digital inclusion, fintech regulation, digital identity systems, cybersecurity, and the governance of artificial intelligence. Through DEPA, countries have begun to develop institutional channels for regulatory cooperation, technical exchange, and harmonization of data standards. The report notes that this approach is particularly suited to fast-moving technological domains, where legal certainty is hard to maintain but mutual understanding and transparency are critical.

The Missing Link: Digital Standards and Seamless Payments

Standardization is presented in the report as both a foundational requirement and a persistent challenge for digital trade. With technologies such as artificial intelligence, blockchain, and quantum computing advancing rapidly, setting universal definitions and interoperability protocols is becoming increasingly difficult. While certain domains like 5G and electronic signatures have seen some convergence, the report warns that areas such as generative AI still lack clear regulatory direction. This not only risks market fragmentation but also raises serious concerns about consumer safety and data integrity.

Cross-border payments form another critical bottleneck in digital trade. High transaction costs, slow processing speeds, and lack of transparency disproportionately affect small businesses and lower-income economies. The report emphasizes the growing interest in central bank digital currencies (CBDCs) as a tool to modernize international payments, increase financial inclusion, and reduce reliance on traditional correspondent banking networks. Countries such as China, Singapore, and India are already piloting CBDC frameworks, though significant challenges remain in harmonizing regulatory and technical standards across jurisdictions.

Taxing the Borderless: Rethinking Revenue in the Digital Age

As digital transactions grow in scale and complexity, the question of how to tax cross-border digital services becomes ever more pressing. The report outlines the limitations of current international tax frameworks, many of which were designed in the pre-digital era and are ill-equipped to handle intangible transactions that cross borders instantaneously. It calls for simpler, more transparent rules that allow countries, especially developing ones, to collect fair revenues from global tech firms without creating undue regulatory burdens.

ADB supports ongoing negotiations within the OECD and WTO, particularly through initiatives like the Joint Statement Initiative on E-Commerce, which aims to develop shared global standards for digital taxation, consumer protection, and cross-border data flows. However, the report cautions that the implementation of these global norms must be accompanied by capacity-building and technical support for developing countries, lest they be left behind or overwhelmed by complex compliance requirements.