DIGITAL TRANSFORMATION AND ECONOMIC GROWTH OF THE ASEAN-6 COUNTRIES

Abstract

This study employs a panel data approach to analyse the impact of digital transformation on economic growth in the ASEAN-6 countries from 2000 to 2023. The research framework delineates economic growth (EG) as the dependent variable, while pivotal independent variables concentrate on diverse dimensions of digital transformation. These include broadband infrastructure (FixB), fixed-line telephony (FixT), Internet access (IV), mobile technology (MB), and ICT-related trade (ICTE, ICTI). Furthermore, the model incorporates several control variables to account for other economic influences, including investment (INV), trade openness (TO), population growth (POP), inflation (INF), urbanisation (Urban), and electricity access (Electric). The utilisation of panel data facilitates the management of unobserved country- and time-specific effects, thereby ensuring a more robust analysis. However, potential econometric issues such as heteroscedasticity and autocorrelation are mitigated through the application of the Generalised Least Squares (GLS) method, which enhances the precision of estimations. A descriptive statistical analysis was conducted to highlight notable variations in economic growth, trade patterns, and digital penetration across the ASEAN-6 region. The average GDP growth rate over the study period was approximately 4.8%, though individual country experiences exhibited significant fluctuations. Internet penetration levels also exhibited substantial differences, ranging from as low as 0.25% to as high as 97.69%, reflecting disparities in technological adoption and infrastructure development. Furthermore, a significant disparity was observed in the domains of high-tech manufacturing and ICT trade, suggesting that the process of digital transformation has occurred in a non-uniform manner across these nations. Preliminary correlation analysis suggests that the primary influence of digital transformation on economic growth stems from infrastructure development and technology adoption rather than direct contributions to GDP. The findings of the regression analysis, as conducted via the Pooled OLS model, suggest a positive and significant relationship between investment (INV) and trade openness (TO) on economic growth. However, it is notable that broadband infrastructure (FixB) appears to exert a negative effect, which is presumably a consequence of the substantial initial investment costs associated with the deployment of digital infrastructure. The findings reveal that other digital transformation indicators, such as mobile technology and Internet penetration, do not demonstrate significant direct effects on economic growth. Furthermore, the OLS model reveals severe multicollinearity issues, necessitating the use of more refined estimation techniques. Diagnostic tests demonstrate that heteroscedasticity does not pose a concern, as substantiated by the White test, while the Wooldridge test detects autocorrelation. Consequently, the employment of Fixed Effects (FEM) or Random Effects (REM) models with clustered standard errors is recommended, as these approaches yield more reliable estimation results. In conclusion, while investment and trade integration emerge as key drivers of economic growth in the ASEAN-6, the economic benefits of digital transformation may require a longer timeframe to materialise. It is therefore vital to enhance investment strategies in digital infrastructure and to address issues of multicollinearity if more accurate estimations are to be obtained and a more complete understanding of the role of digital transformation in economic development to be achieved.