Originally published in Advancing ASEAN in the Digital Age Book, 14 November 2017.

Why ASEAN Needs Policy Guidelines to Power and Protect its Emerging Digital Industrial Economies

ASEAN’s industrial roots are deep, diverse, and developing constantly to embrace new opportunities and technologies.

As reported in the “Fifty Years On, Southeast Asia Emerges as Global Growth Leader” story published by Bloomberg, factors such as growing domestic demand, infrastructure improvements, and lower labor costs have helped ASEAN emerge as strong manufacturing alternative to neighboring China.

In addition, according to findings from the 2016 Deloitte Global Manufacturing Competitiveness Index (DGMCI), Malaysia, Indonesia, Viet Nam, and Thailand are anticipated to be among the 15-most competitive manufacturing nations in the world by 2020.¹

Like Singapore (number 10 in the DGMCI rankings), Malaysia, Indonesia, Thailand, and Viet Nam have invested in programs designed to enhance their Industrial Internet of Things (IIoT), or Industry 4.0 readiness. Malaysia is following a National IoT Strategic Roadmap while Thailand, Indonesia, and Viet Nam, have similar campaigns in play. Across ASEAN in fact, IoT spending is expected to grow in value by 35 percent from an estimated US$1.6bn in 2015 to reach US$7.5bn by 2020².

50 billion connected devices by 2020

These plans underline the importance that governments across ASEAN have placed in maximizing the potential of IIoT to transform their economies. Cisco IBSG predicts that 50 billion devices will be connected to the Internet by 20203, while market research company, MarketsandMarkets estimates the IIoT will be worth US$195 billion by 20224.

For GE, the Industrial Internet refers to the integration of physical machines with networked sensors and software. Industrial Internet technologies gather data from machines and analyzes it, and the combination of technology, the curation of vast quantities of data, and predictive analytics can have a profound impact on not only industrial processes, but also health, energy efficiency and the lifespan of industrial assets, as well as the safety of industrial workers.

While the Industrial Internet is relatively young, it is progressing quickly driven by strong private-public sector innovation aimed at promoting interoperability for industrial customers. GE began its Industrial Internet push as an internal project in 2011 to understand how to use data from GE machines to gain more efficiency from our assets. GE then saw the opportunity to do the same thing for its customers, creating GE Digital in 2015 as the business unit to take this forward. This business delivers applications in Asset Performance Management (APM) and Field Service Management (ServiceMax) to drive value for customers, powered by Predix – GE’s platform for the Industrial Internet.

We work with industrial customers around the world to advance their Industrial IoT ambitions. Through these collaborations with customers – whose industrial assets cross many borders – we have identified a need for regulation/policies to expedite the development of this space.

Policy guidelines

Industrial Internet regulation today is in a premature state. As the sector develops however, policymakers will better understand the space and appropriate regulations. We believe a multi-pronged approach is the best way to harness its full potential and key policy areas include

Data Sovereignty –
Large aggregated data sets yield the greatest insights, to the benefit of Industrial Internet users and society. Given this, governments should not adopt laws or policies (without sound public policy justification) that require data to be located in a particular jurisdiction, or restrict transfer of data across borders. Laws that restrict aggregating data across borders deny the countries that enact such laws the full benefit of the Industrial Internet.

Privacy –
Governments should not adopt privacy regulation designed for the consumer internet and apply those same policies for the Industrial Internet. Data generated by industrial equipment (unless healthcare related) rarely includes anything that could be construed as personal data. Most of the data collected from locomotives, turbines, airplane engines, and oil wells concern the function of the machine itself.

Freedom of Contract –
Industrial Internet services are B2B, or B2G, with legally sophisticated parties on both sides. Given this, contracts are proving to be an effective means to address a range of issues with potential public policy ramifications such as liability, data rights, customer entitlement to software updates, and intellectual property. Contracts also offer more flexibility than legislation as Industrial Internet innovation continues. Government policy should respect the enforceability of contracts and promote freedom of contract.

Data Access and Use –
Rights to industrial Internet data are best handled through contractual arrangements, and not by government imposed rights. Many Industrial Internet companies determine issues of data ownership through contracts with customers, suppliers, researchers, and other parties – the contracts are negotiated by organizations with a deep understanding of the context in which the data will be developed, shared, and used. The sheer variety of scenarios involving technical data in B2B and B2G dealings are best handled by bespoke contractual arrangements not one-size-fits-all ownership rights, or access rules imposed by governments.

Cybersecurity –
Cybersecurity regulation should be technology neutral with respect to where data is processed and stored, and not discriminate against the Cloud. As in other areas of IT, the nature of cybersecurity threats targeting the Industrial internet is constantly changing, and the response from vendors must similarly evolve.

We believe voluntary, private-sector led, performance and risk based cybersecurity standards, such as the U.S. National Institute of Science Technology (NIST) framework is the most effective approach to promoting cybersecurity. While cybersecurity is a shared responsibility, government has a unique role to play in protecting private-sector critical infrastructure from nation-state attacks and cyberterrorism.

Standards –
Given we are in the early adoption phase for the Industrial Internet, its global nature, and pace of innovation, open and private-sector led groups are the most effective means to maximize innovation and interoperability. Governments that adopt country-specific Industrial Internet standards risk fragmenting the Industrial Internet, and cutting their countries off from the benefits of insights based on global data sets.

Intellectual Property –
Governments should not discriminate, based on field of technology, about the issuance of patents. Given the prominent role that software is playing in the functioning of the Industrial Internet, it is vital that software innovation is protected under robust patent and IP laws. In software, like other technology fields, robust IP protections incentive R&D investments that drive progress.

Workforce Development –
The Industrial Internet represents a significant opportunity for faster productivity growth, but with accompanying potential disruption to job markets. Governments should adopt a comprehensive approach to leverage digital industrial innovations for faster job creation with measures to support digital training and retraining programs, labor market reforms, redesigned social safety nets, and measures to promote digital innovation, and facilitate the adoption of skills-augmenting technologies.

Direct Government Engagement –
Governments have clear interests around promoting the Industrial Internet and digitization of businesses. They should consider using tools such as research funding, international cooperation agreements, and infrastructure spending to promote new technologies. In addition, government policies should encompass not only manufacturing, but a broad range of business sectors and applications – investments in digital infrastructure should be considered as important and beneficial as physical infrastructure projects.

As the digital industrial playing field is vast, wide, and borderless, drawing in players from all parts of the economy, developing fundamental ‘rules of the game’ to support sector development is a pressing need across ASEAN.

While Singapore, Malaysia, Thailand, Indonesia, Viet Nam, and other nations, deserve plaudits for their Industrial IoT foresight, it is imperative they ensure sector policymaking receives as much attention, priority, and action, as high-profile initiatives such as infrastructure development, technology implementation, education, and smart city plans.

A “working in tandem” plan is highly recommended, and given the pace of change, it may be the difference between a well-paced, step-by-step digital industrial transformation, or being caught in a perpetual cycle of playing ‘catch up.’

¹ Mighty five nations to be Asian powerhouses, New Straits Times.
² IoT developments in ASEAN highlight economic potential in the region, Deal Street Asia.
³ The Internet of Things – How the next evolution of the Internet is changing everything, CISCO.
⁴ Industrial IoT Market worth 195.47 Billion USD by 2022, MarketsAndMarkets.

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About Wouter Van Wersch