Why does ASEAN need an Institute for Innovation, Technology and Industry (AITII)?

By How Yong Yang

ASEAN, or the Association of the Southeast Asian Nations, has made countless headlines in recent years for different reasons: political, economic, and security. Professor Kishore Mahbubani, former President of the United Nations Security Council, has said that ASEAN should be given the Nobel Peace Prize for its capacity to maintain peace, which was the organization’s initial raison d’etre. After more than five decades, ASEAN has found its new raison d’etre. That is, to achieve sustainable growth and development, which seems insurmountable given Southeast Asia’s immense diversity. But Southeast Asia can inch closer to this goal with an ASEAN Institute for Innovation, Technology and Industry (AIITI). This article will explain the importance of establishing the institute and the role it would play in ASEAN’s future.

Why is the ASEAN Institute for Innovation, Technology, and Industry important?

First, establishing the ASEAN Institute for Innovation, Technology, and Industry (AIITI) helps build a common and inclusive Epicentrum of Growth, as proposed by Indonesia’s 2023 Chairmanship. To achieve sustainable growth, it has to be innovative and inclusive. The late Austrian economist Joseph Schumpeter developed the theory of “creative destruction”, and argued that innovation and entrepreneurship is the key to achieving higher total factor productivity and long-term economic growth. Although a few Southeast Asian countries have built their manufacturing capabilities through foreign direct investments, they remain incomparable to their East Asian counterparts in their local “capacity to design, to innovate, and to diversify into new and more profitable areas with good long-run prospects”. The East Asian economies have homegrown yet regional, if not global, firms such as Samsung, Toyota, Huawei, and Alibaba, that are innovative.

It is crucial to recognize that most advanced economies have claimed the technological high ground and reside at the higher end of the global value chain. Nonetheless, ASEAN countries need not be resigned by this fact because technologies and industries rise and fall. In the words of Adam Smith, “the mere possession of … fortune does not necessarily” confer any power on anyone, despite the Hobbesian saying that wealth equals power. Power gravitates towards the more creative people who possess the capabilities to innovate. ASEAN countries should strive for high-quality economic transformation rather than adhering to the simplistic notion of becoming high-income countries. While some ASEAN countries have ridden on the crest of China’s Covid “Exit Wave” during which many foreign companies relocated their manufacturing operations from China to Southeast Asia, they still occupy the value chain’s lower ends. To escape from getting locked into low-value-adding activities, Southeast Asian countries must strengthen their innovation capabilities. This prevents unbalanced development across the region as no country wants to be a shoe manufacturer forever.

The ability to innovate is present in ASEAN. Nevertheless, ASEAN should leap from adaptive innovation to “frontier innovation”, a term coined by James Liang, co-founder of Trip.com Group. The former refers to assimilating ideas and technologies, and adapting them to the local markets, whereas the latter enables one to create ideas, technologies, business models, and content that are unique.

Second, ASEAN should take advantage of its demographics to achieve great innovations before its demographic bonuses disappear. With its youth population expected to “peak over 220 million” by the end of the next decade, younger ASEAN citizens, armed with better ability to acquire new skills, or the willingness to venture, would be more productive than their older counterparts. Although human life expectancy has been increasing, humans are more physically capable, innovative, and vibrant when they are younger. General Electric’s Thomas Edison and ByteDance’s Zhang Yiming led the world in new technology and business organization not only because of their ability to innovate but also the ability to sell their products and services to huge markets in the United States and China respectively.

Third, techno-geopolitics has called upon ASEAN countries to strengthen technological and industrial cooperation. Catalyzed by the COVID-19 pandemic, the US-China rivalry has ushered in an age of techno-nationalism. Speaking at the 2023 China Qianhai Entrepreneurs Summit, Professor Yan Xuetong, Dean of The Institute of International Relations at Tsinghua University, noted that the China-US strategic competition is more cyberspace-oriented unlike the US-Soviet Union Competition, of which the focus was the natural space – land, sea, air and space. Given the uncertain global security situation, ASEAN needs to build an intra-ASEAN supply chain resilience to prepare for crises. ASEAN countries need to wake up to the fact that strategic and emerging technologies have long been dominated by developed countries, and this will only persist if ASEAN continues to be reactive. Establishing the AIITI enhances ASEAN countries’ capacity building, thereby increasing its strategic autonomy and reducing concerns about certain ASEAN countries being overreliant on other big powers outside the region. While continued calls for peace and rationality to prevail are encouraged, recognizing that it is ultimately easiest to change oneself than to change others is more important. ASEAN can ride on the wave by creating its strategic technologies, a more reliable move than seeking to change the big power behaviors by simply expressing frustrations. A paradigm shift from setting out medium- and long-term plans to employing strategic thinking against the backdrop of the complex global environment is required.

Fourth, the exponential growth of technologies requires ASEAN countries to respond cohesively and effectively to the former’s impact on societies. Azeem Azhar, author of Exponential, argued that the gap between technology and society is widening exponentially. Unlike technological changes that are accelerating, societies are evolving at a gradual, incremental pace. This also reinforces the previous factor and could affect Southeast Asian countries’ sustainable growth if left unattended. Although a few East Asian countries have grown significantly due to their export orientation decades ago, ASEAN economies may not be able to enjoy such an advantage in the long run. Because production costs are progressively reduced by Artificial Intelligence (AI) and robotics, a trend that is being accelerated by the rise of technological sovereignty, known as the state’s capacity to “provide the technologies it deems critical to its welfare and competitiveness” without practicing autarky. This reduces the need for multinationals to outsource production overseas. More importantly, ASEAN needs to have a regional strategy to at least prepare for, if not manage, the rise of critical technologies. Barring artificial intelligence, other technologies including quantum computing, nuclear fusion, and genetic engineering demand more effective policy and regulatory coordination from ASEAN.

What is new about the ASEAN Institute for Innovation, Technology and Industry?

The ASEAN Institute for Innovation Innovation, Technology and Industry (AIITI) would be an independent advisory body dedicated to research and strategic facilitation of the region’s innovation, technological and industrial developments. AIITI’s role would be three-fold: strategic intelligence hub, policy advisory, and system steward.

As the region’s Strategic Intelligence Hub, AIITI would adopt a holistic approach to understanding innovation, technological revolution, and advanced industrialization. It seeks to understand the paths taken by many others to explore future technological revolutions and study the reinforcing and balancing effects of politics, economics, technology, and cultures on innovation. In other words, we need to adopt an interdisciplinary to reach greater heights. Instead of digging deeper into our trench, we should stand up to look into other trenches, in this case, the different disciplines and countries, even though the solution to our problems happens to reside there. Research has shown that innovative capacities can only be increased through cross-disciplinary cooperation, which applies to both researchers and successful entrepreneurs who need to have broad knowledge, diverse skills, and experience. Studying the histories of economic development, scientific revolutions, science and technology policy, educational reforms, and other relevant institutional reforms increases the ability to better anticipate possible technological developments. ASEAN can find its path as it learns the lessons and experiences of other countries.

Moreover, the Institute would be where scientists, engineers, entrepreneurs, regulators, policymakers, and academics converge to discuss ways to manage the impact of emerging technologies on ASEAN citizens and leverage these technologies in addressing non-traditional security challenges. This humanistic approach goes beyond the existing ASEAN Permanent Committee on Science, Technology, and Innovation (COSTI) and ASEAN Ministerial Meeting on Science, Technology, and Innovation, which only function at the government level and remain restricted to individuals from a few disciplines. The Institute, on the other hand, could provide an avenue for more frequent exchanges on relevant issues.

Besides, the Institute would offer policy advice to ASEAN governments on their national innovation, science and technology, and industrial strategies. A possible reason why some ASEAN countries delayed releasing their national AI strategies could be that they lack the necessary resources to deploy research for informed policymaking. It can help to facilitate industrial transformation in the respective countries that align with the regional strategic plan. AIITI could identify emerging technological areas that different ASEAN countries can venture into depending on the countries’ potential capabilities and comparative advantages. ASEAN countries can complement each other in various technologies creating a network of regional resilience as their national technological resilience is strengthened and offering the opportunity to grow ASEAN’s homegrown companies which can compete with the existing players. If ASEAN wants to maintain its centrality and evolve into a global pillar of strength, as it builds a multipolar world, strengthening the countries’ capabilities is critical to staying in the driver’s seat.

Lastly, the Institute would be a system steward for the future of policymaking lies in the ability to see the interrelationships among the different systems and actors involved. AIITI should engage country representatives from different sectors to jointly develop a vision for ASEAN, and uncover the opportunities and challenges. To effect change, the Institute can employ systems thinking to deepen key stakeholders’ awareness of the challenges at hand helping them to better achieve their goals through jointly developing new alternatives. AIITI would then facilitate the integration of emerging technologies strategies and industrial policies. With greater manpower than a committee, it can better foster the development of a regional innovation ecosystem, enhance enterprises’ innovative capabilities, and facilitate the infrastructural development of emerging industries. These are necessary steps to take if ASEAN intends to avail itself of its demographic advantage and drive synergies. It is also a cultural bridge builder of ASEAN enabling entrepreneurs to acquire an accurate local understanding of the individual markets.

In line with the ASEAN Leaders’ Joint Statement on the Establishment of an ASEAN Villages Network in May 2023, the Institute’s immediate goals would, however, be to promote agricultural, rural, and social development by accelerating the adoption of digital technologies in rural areas and among Micro-, Small and Medium-sized Enterprises (MSMEs). In addition, AIITI can build a network of talents across the ASEAN region because interpersonal interaction is crucial to capacity building. Innovation, emerging technologies, and industries would spur the upgrading of infrastructure, and create new Science, Technology, Engineering, Arts and Mathematics (STEAM) and entrepreneurial opportunities for ASEAN youths. The demand for careers in culture, arts, and humanities would rise as people-to-people ties increase. New economies compel higher education institutions to improve their education quality, thereby retaining talents in the ASEAN region as the most expensive resource in the 21st Century is talent, which is more valuable than Southeast Asia’s abundant natural resources. ASEAN citizens would enjoy more inclusive education as a result. A study published in 2020 showed that in 2018 fewer than 10% of all inbound and outbound student mobility was between ASEAN countries. Interestingly, a likely by-product of AIITI’s efforts would be the strengthening of ASEAN’s regional resilience to enhance its weak intra-ASEAN University Student Mobility should ASEAN universities’ quality of education increase.

In summary, the ASEAN Institute for Innovation, Technology, and Industry (AIITI) can still work within the ASEAN framework, unlike the European Union (EU) model which would require national governments to surrender partial sovereignty. While ASEAN does not need an EU Commission-like organization, which would possibly lead to more red tape and waste of resources, the middle-aged ASEAN needs a body to muster thinkers, artists, entrepreneurs, and scientists who would determine its future.