Digital trade in Southeast Asia: How perceptions of data risks shape policymaking

By Karishma Banga

The digital economy in Southeast Asia is rapidly expanding and full of opportunity – but digital growth requires digital safety. With a rapidly expanding digital economy and increasing internet penetration, Southeast Asia can leverage digital trade to access global markets and foster innovation. Digital trade can transform the region by strengthening links between countries and enhancing the competitiveness of businesses.

However, threats such as fraud and data breaches pose significant risks that undermine consumer trust.

When consumers feel insecure about the protection of their personal information and financial data, their willingness to engage in digital trade diminishes. As these threats continue to rise, they not only jeopardise individual transactions but also have broader implications for businesses and the overall economy. A lack of trust can deter consumers from making online purchases or sharing sensitive information, ultimately limiting the growth and potential of digital commerce. Over 80% of the population of Malaysia, Indonesia, Philippines, Thailand and Vietnam are worried about their data being stolen, according to the Lloyd’s Register Foundation World Risk Poll.

There is a relationship between public perception of data risks and policy development. As the perception of data risks increases, countries tend to enter into more trade agreements that include digital trade provisions (see Chart 1). The most common provisions focus on data privacy and the facilitation of e-commerce or online consumer protection.

Although countries with higher perceived data risks may enter into more digital trade agreements, they tend to preserve policy space on cross-border data flows. These countries often avoid committing to free cross-border data flows or banning data localisation. This aligns with concerns around data sovereignty, national interests, and economic security.

A lack of harmonised data protection laws across countries exacerbates these issues, creating regulatory uncertainty for businesses operating in the region. High-income countries with high perceived data risks tend to impose more restrictions on digital trade. In contrast, in low and middle-income countries, higher data risks are actually associated with fewer restrictions on digital trade.

Through the project Policy making for a more resilient world: leveraging the World Risk Poll for more effective digital, labour, and industrial policies, funded by Lloyd’s Register Foundation, Cambridge Industrial Innovation Policy (IfM Engage), will examine recent trends in data privacy and security, as well as the role of digital trade policy, with a particular focus on Southeast Asia.

A policy brief will be published summarising these findings and providing policy recommendations that will outline how digital trade governance can reduce risks related to data privacy and security for Southeast Asian countries and beyond.

Findings will be shared through a mix of activities designed to reach key stakeholders. These include in-person and online workshops with representatives from national governments and regional or international bodies. Accessible materials such as short video explainers and infographics will be used to raise awareness of risk and enhance understanding of how policymaking can play a vital role in keeping people safe.

The project began in September 2024 and will run until December 2025. It was selected as part of Lloyd’s Register Foundation’s ‘World Risk Poll into action’ funding call. Three other policy briefs will be produced as part of this project. These will cover the following topics:

• AI frameworks and regulations for safe and inclusive AI use,
• Labour policies to mitigate workplace risks,
• The role of industrial policy in enhancing socio-economic resilience.

Find out more about the project