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ver US$25 billion in gross merchandise volume was settled within 24 hours through Alibaba’s online retail marketplaces in the “Ali-double-11” global e-shopping festival on Nov. 11, 2017. Another leading e-commerce platform, JD.COM, reported $19 billion in online orders on the same day.

Asia has been benefiting more than any other region since cross-border e-commerce introduced new dynamics to international trade. Global e-commerce retail sales has been growing faster than traditional retail sales since 2014.

Many Asian markets will see double-digit e-commerce growth in the next five to 10 years.

India, Indonesia and Malaysia are among the fastest-growing e-commerce retail markets at a rate of over 20 percent per year, while China’s e-commerce is growing at an annual rate of around 17 percent.

From 2015 to 2021, the region’s total market revenue from e-commerce will increase from around $320 billion to over $900 billion. The Chinese market will contribute over 90 percent of this growth, with its share in the global e-commerce market expected to increase from about 30 percent in 2015 to nearly 40 percent in 2021. India and the 10 member states of ASEAN will see an increase their combined share in the global market from 2.5 percent to 4 percent.

Asia is likely to become the global epicenter of e-commerce by 2025 for the following reasons.

First, is adaptiveness. Economic digitalization is a worldwide phenomenon. The digital revolution has been linked with the emergence of new market conditions and dynamics in the global business environment.

To some extent, the region’s adaptiveness to global economic digitalization comes from its capacity for technology adoption and incremental innovation.

The deep involvement in global value chains has opened the window for developing Asian markets to access the latest technologies and has also facilitated their learning.

And the countries’ capacity for incremental innovation allows them to benefit from second-mover advantages to grow faster and even leapfrog to the front of the market — the popular use of e-payments in China and the success of the Alibaba group are typical examples.

In ASEAN, the facilitation of e-commerce growth is one of the six main areas covered by the E-ASEAN Framework Agreement, while developing a digital economy and e-commerce are already part of most member states’ national strategies and action plans.

Second, is market gravitation. Despite the new features of a digital economy, e-commerce is still influenced by the traditional conditions for economic development such as market size, trade facilitation and investment freedom. Asia covers almost half of the world’s population, nearly 30 percent of the world’s gross domestic product (GDP) and 40 percent of world trade.

In terms of age distribution, 70 percent of ASEAN’s population is between 15 and 64 years, representing both a large market and a large labor force. By 2015, more than 1.2 billion people, or about half of the region’s households, already had internet access.

A population connected to the internet also indicates the prevalence of those who may have higher purchasing power.

Internet connectivity is widespread in Singapore and Malaysia, and plays an important role in their economies. Nearly 90 percent of households in Singapore are internet users. The internet-related economy accounted for 4.1 percent of Malaysia’s national GDP in 2012.

Even the less-developed countries of Cambodia, Laos, Myanmar and Vietnam are quickly catching up. The proportion of internet users in Vietnam have increased from 1.3 percent to 52.7 percent from 2001 to 2015.

Third, is readiness. E-commerce development needs technology, market and government policy support. A country’s readiness to support a digital economy will determine the success of its businesses that are involved in e-commerce. Information communication technology drives e-commerce by expanding the volume and capacity of online communication, especially through fiber-optic cables and commercial satellites.

Moreover, physical infrastructure that supports a stable and fast internet connection is a precondition for e-commerce. In particular, many emerging Asian countries have made great progress in developing mobile broadband services.

Almost 80 percent of Chinese users and two-thirds of users in ASEAN use a smartphone to access the internet. Cambodia, Laos, Myanmar and Vietnam have among the highest growth rate in mobile subscriptions. More specifically, compounded annual growth rate ranges from 36 percent in Cambodia to 70 percent in Myanmar. India’s smartphone penetration rate is projected to increase from 58 percent in 2015 to 74 percent in 2021.

All these data provide a compelling foundation to endorse e-commerce.

A most urgent task, however, is to build a region-wide environment that enables e-commerce. While market mechanisms should take the lead in this, the role of policy intervention should not be neglected. For instance, e-commerce value chains depend upon both physical and virtual spaces. It needs government involvement to set up rules, regulations and legislation that cover both the physical and virtual aspects of the market to ensure secure and stable e-commerce growth.

In addition to national efforts, progress toward regional integration has provided policymakers extra channels to promote e-commerce development via deeper market integration and cooperation, especially in regulation harmonization and service liberalization.

Typically, when thinking of long-term e-commerce success, human capital and innovation are the key. It not only poses higher requirements for the coverage and quality of education and training systems, but also calls for region-wide service liberalization to improve mobility and help diffuse knowledge.
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The writer is an economist at the Economic Research Institute for ASEAN and East Asia (ERIA). The views expressed here are personal and do not reflect ERIA’s position.