Digital Skills Are Becoming ASEAN’s New Growth Engine: Here's why

For years, digital-development strategies have been built around a straightforward objective: expand networks, increase Internet penetration and connect more people. Across parts of Southeast Asia, that approach is now running into a more complicated reality. Connectivity can rise dramatically without producing an equally strong expansion in digital skills, online transactions or meaningful participation in the digital economy.

The study, "The Digital Transformation of Societies: The Example of Malaysia, Thailand and Indonesia in the ASEAN Economy," published in Sustainability by Barbara Siuta-Tokarska, Dominik Krężołek, Ahmad Haziq Ahmad Bakhtiar, Magdalena Belniak, Konrad Kolegowicz and Tomasz Kusio, examines this tension through the experiences of three major ASEAN economies, arguing that societal digital transformation is better understood through three connected dimensions, Access, Skills and Use, rather than through infrastructure alone.

Malaysia emerges as the most mature and balanced digital society among the three countries, Thailand records the fastest transformation, while Indonesia makes major gains in connectivity but continues to struggle to convert access into advanced digital capability and use.

Connectivity Is Becoming the Starting Point, Not the Finish Line

The researchers developed a Digital Development of Society, or DDS, Index to capture what conventional connectivity measures often miss. Instead of treating Internet availability as synonymous with digital development, the framework combines access to technology with digital competence and actual patterns of use. Its underlying logic is simple: access is necessary, but it becomes economically and socially meaningful only when people have the skills to use digital tools effectively.

The three countries are already approaching high levels of basic connectivity. During 2020–2023, mobile-network coverage across the countries reached roughly 98–99%, while household Internet access ranged from about 87% to 96%. Once these indicators approach saturation, the space for further infrastructure-driven gains naturally narrows, shifting the development frontier toward skills and more advanced use.

The digital divide is changing rather than disappearing. The first divide separates those who have access from those who do not. The second separates people who are technically connected but lack the competencies, confidence or opportunity to use digital systems for more demanding purposes such as banking, commerce, public services or productive work.

In developing economies that have leapfrogged directly into mobile-first digital ecosystems, smartphones can rapidly expand access, but mobile connectivity by itself does not guarantee deep participation in digital markets. The difference between being online and being digitally empowered becomes increasingly important as economies depend more heavily on platforms, digital finance and technology-enabled services.

Three Countries, Three Very Different Digital Economies

Malaysia recorded the highest level of digital development throughout the study period. Its advantage came not only from strong infrastructure but from a more balanced combination of access, skills and use. The country maintained the highest ranking across all eight years examined, while its digital ecosystem increasingly moved toward higher-order priorities such as advanced human capital, innovation and digital competitiveness.

Thailand tells a different story. It achieved the fastest overall transformation, with the study estimating an annual DDS increase of about 0.0416, compared with 0.0386 for Malaysia and 0.0325 for Indonesia. More importantly, Thailand converted connectivity into advanced digital behaviour at remarkable speed, particularly in transactions and e-commerce.

The study reports Thailand's e-commerce activity rising from about 7% in the earlier period to 93% in the later period, while Internet use climbed to around 90%. Transactional skills also increased sharply, suggesting that the country did not simply put more people online; it created conditions in which digital services became embedded in everyday economic activity.

Indonesia presents the most revealing contrast. Household Internet access increased substantially and mobile coverage became nearly universal, yet the country's digital development remained much more infrastructure-driven. The study's decomposition shows Access contributing 0.1134 to Indonesia's DDS increase, compared with 0.0793 from Skills and 0.0371 from Use. Malaysia and Thailand, by contrast, were primarily driven by skills.

Indonesia demonstrates how rapid network expansion can coexist with weaker transactional capability and advanced technology use. In policy terms, it suggests that building more infrastructure will eventually generate diminishing returns unless governments also address digital literacy, payments, trust, logistics and the practical ability to use online services.

Human Capital Is Becoming the New Infrastructure

Skills generated the largest increases across all three countries during 2020–2023. The result only partially supported the researchers' expectation that infrastructure would remain the dominant force behind digital transformation. Instead, as networks matured, skills increasingly became the factor determining how far digitalization could progress.

Governments have traditionally treated broadband deployment, spectrum allocation and network coverage as visible indicators of digital progress. Those investments remain essential where connectivity gaps persist, but in more mature systems the binding constraint may increasingly lie elsewhere, in whether citizens can transact securely, evaluate information, use digital financial services or navigate increasingly sophisticated online platforms.

The policy requirements differ by country. The researchers argue that Indonesia should focus more strongly on basic digital literacy, regional disparities and SME digitalization. Thailand needs to deepen advanced digital capabilities, e-commerce capacity and lifelong learning, while Malaysia's next priorities increasingly include innovation, AI readiness, cybersecurity and more advanced human capital.

For businesses and investors, the same lesson applies. Internet penetration alone may be a weak indicator of actual market readiness. A country can look digitally advanced in infrastructure statistics while still lacking the consumer skills, payment ecosystems or trust necessary to support sophisticated digital services at scale.

The New Policy Test Is Whether Access Becomes Opportunity

The study shows why digital-development policy needs better diagnostics. The DDS framework attempts to distinguish whether a country is constrained by connectivity, capability or actual use, allowing policymakers to target the weakest part of the digital ecosystem rather than defaulting to infrastructure spending.

The analysis covers only three countries over eight years, limiting its statistical generalizability. Some observations, particularly within the Skills and Use dimensions, required imputation, although sensitivity testing produced highly consistent results and the country ranking remained stable.

The researchers also caution against treating changes around 2020 as proof that the pandemic caused the acceleration. COVID-19 coincided with national digital strategies, continuing telecommunications investment and other structural forces. The period is therefore better understood as one in which multiple forces compressed years of digital adoption into a shorter window rather than as a clean natural experiment.

The next phase of digital transformation in emerging economies will be less about whether citizens can connect and more about whether they can convert connectivity into productivity, transactions, services and opportunity.