Women, MSMEs, and DEFA: The Business Case for ASEAN’s Digital Integration

A woman posing in front of her stall. (ASEAN)

ASEAN’s Growth Engine: Small Businesses and Women Entrepreneurs

Between March 8-10 in Manila, the Philippines, ASEAN negotiators and legal experts convened to move the Digital Economy Framework Agreement (DEFA) closer to the finish line, working to resolve outstanding provisions in one of the region’s most ambitious digital undertakings. 

Since the start of negotiations in 2023, ASEAN Member States have made progress through fourteen rounds of discussions, agreeing on nearly three-quarters of DEFA’s core provisions. The agreement reached substantial conclusion at the ASEAN Economic Community meeting in October 2025 marking a major milestone toward finalisation. As a key deliverable of the Philippines’ 2026 ASEAN Chairship, the agreement is steadily taking shape with discussions informing next steps ahead of the ASEAN Leaders’ Summit later this 2026.

​​At its core, DEFA aims to address fragmentation in Southeast Asia’s digital landscape by aligning regulatory approaches and strengthening cooperation across priority areas, including digital trade, data flows, payments, cybersecurity, and online safety. By promoting greater interoperability and policy coherence, the agreement is expected to lower barriers to cross-border activity and improve the business environment. In a region where the digital economy is projected to reach US$2 trillion by 2030, DEFA has the potential to act as a key driver of growth and structural transformation. 

While much of the conversation has centered on data flows and digital trade rules which are all vital components of regional integration, the agreement’s long-term impact may depend just as much on something less headline-grabbing but equally consequential: the modernisation of digital government systems across Southeast Asia. This matters because the region’s economic dynamism is powered not only by multinational firms and technology giants, but by millions of micro, small and medium enterprises (MSMEs). 

Currently, Southeast Asia is home to more than 73 million MSMEs, employing over 140 million people, accounting for 99% of all businesses, and nearly half of regional gross domestic product (GDP). This backbone of the regional economy is driven in no small part by women entrepreneurs. At the same time, MSMEs are increasingly turning to digital tools to grow beyond domestic markets. Recent evidence shows that more than 60% of MSMEs in Southeast Asia are actively looking to expand their digital export footprint, with the vast majority prioritising regional markets. Digitalisation has played a central role in this shift with over 80% of MSMEs increasing their use of digital tools to access new customers, reduce costs, and improve productivity. 

As the world marks Women’s Month, it is time to zoom in on another form of female leadership unfolding every day across Southeast Asia. Women operate a substantial share of MSMEs across ASEAN: from retail and food services to e-commerce and online professional services. Their small businesses sustain households, generate employment, and increasingly participate in regional value chains. With women owning or leading roughly 20% to 65% of MSMEs across ASEAN, the region shows both strong female entrepreneurial participation and clear opportunities to expand women’s economic empowerment.

When public systems are slow or fragmented, MSMEs are often the first to feel the strain but stand to benefit the most when those systems improve. DEFA is a regional effort to deepen digital integration and modernise government services across Southeast Asia which could deliver meaningful benefits for women entrepreneurs. More than a digital trade initiative, DEFA offers an opportunity to strengthen the institutional environment in which MSMEs work in. Southeast Asia’s digital economy is expanding rapidly, with MSMEs of which many of them are women-led at the forefront of this growth. Yet the ability of these businesses to fully benefit from digitalisation depends not only on access to markets or technology, but also on how effectively governments support their day-to-day operations. In practice, this means that the impact of digitalisation is shaped as much by public systems—how services are delivered, accessed, and coordinated—as by private sector innovation.

Scaling Up: DEFA and Digital Trade Across ASEAN

Illustration of a connected city (Smart Cities World)

The link between digital government and business outcomes is straightforward. Research has shown that a digital government can be a powerful enabler for SMEs. Digital systems cut red tape, simplify compliance, and make it easier for small businesses to access information, support, and opportunities to grow. E-government platforms enable more efficient consultations and public service delivery for MSMEs with digital tools expanding across areas such as business support services, licensing, tax administration, and court systems. 

For many women entrepreneurs, these improvements are tangible. Balancing business operations with unpaid care responsibilities often leaves little time for lengthy visits to government offices. Delays in licenses, permits or approvals can quickly strain cash flow for small firms operating on tight margins. Digital government reforms therefore offer a practical way to remove these everyday bottlenecks.

Additionally, accessible and affordable e-government services play an important role in encouraging MSME formalisation, particularly among women, young and rural entrepreneurs. Several initiatives across ASEAN already demonstrate how digital government reforms can expand opportunities for women entrepreneurs. In the Philippines, programmes such as the Department of Trade and Industry’s Negosyo Centers and the OneStore.ph platform help women-led MSMEs access e-commerce tools, digital finance, and wider markets. In Indonesia, Tokopedia illustrates the value of public–private partnerships in digitalising government services. By partnering with the government to facilitate online business registration, the platform helped thousands of MSMEs formalize their operations and access digital markets, contributing to nearly a 30% increase in women sellers compared with pre-pandemic levels.

Upon its expected conclusion this 2026, DEFA will be the world’s first regional agreement on the digital economy. DEFA aims to promote common principles for digital trade, data governance, and digital cooperation which can help governments modernise the way public services are delivered. While national reforms have made progress in digitalising public services, many systems remain disconnected, creating complexity for businesses operating across borders. DEFA aims to support ASEAN’s digital transformation through cooperation on areas such as paperless trade, interoperable cross border payments, electronic authentication, digital documentation, cybersecurity, and digital skills development. Despite different stages of digital development, the digital economy offers shared growth opportunities across Member States, projected to contribute 10-30% of national GDPs.

The stakes are high. As the region’s digital economy grows toward a projected US$1 trillion by 2030, DEFA is expected to double this figure. Payments interoperability, for example, could grow regional MSME exports by over US$20 billion, creating around 2.7 million small business jobs. Ensuring that women entrepreneurs easily interact with government systems and participate in digital trade will be critical as DEFA helps catalyse reforms that make these interactions faster, more transparent, and increasingly interoperable across ASEAN economies. 

DEFA stands out for embedding business input into its design. Over 2,000 MSMEs across ASEAN helped shape the provisions that respond to the needs of small and women-led enterprises. It also promotes investment in digital skills helping women entrepreneurs overcome barriers to digital training, finance, and online platforms. By strengthening regional cooperation on digital capacity-building, DEFA ensures that modernised government systems match the skills women need to benefit from them. DEFA can reshape how these dynamics interact by reducing regulatory friction and strengthening alignment across public systems, making it easier for MSMEs, particularly women-led businesses, to navigate requirements, access services, and operate across borders.

All 11 ASEAN member states have adopted national digital economy strategies to guide their digital transformation, although progress differs across countries. Major economies such as Singapore, Malaysia, Thailand, Indonesia, Vietnam, and the Philippines are actively investing in strengthening their digital ecosystems. National efforts aim to unlock the benefits of digitalisation and the DEFA can support them by aligning regional rules and creating more policy coherence across borders. 

Governments are already building digital systems that simplify doing business and create a strong base for interoperability. In Singapore, the Singpass digital identity system enables businesses to access more than 2,000 public and private services through a single authentication framework, supporting digital signatures and secure data exchange between agencies. In Thailand and Indonesia, interoperable QR payment systems have expanded cashless transactions among small vendors, strengthening financial traceability and supporting credit access. In Vietnam, the expansion of mandatory electronic tax filing marks a major step toward a fully digital ecosystem, reducing paperwork and facilitating digital compliance for small-scale taxpayers. Meanwhile in Cambodia, business support services are available online through public institutions such as the Khmer SME website while information on customs procedures and trade regulations is regularly published online and shared through digital channels such as Telegram.

DEFA can create a regional environment that builds on these digital developments, making digital services more consistent and accessible across borders and reducing regulatory complexity and costs. In doing so, it can enable MSMEs, especially women-led enterprises, to operate more easily beyond their home markets and convert digital access into sustained cross-border growth.

Turning ASEAN’s Digital Economy into Business Advantage

Illustration of a small-business conducting transaction (The Asia Foundation)

Although the language of trade agreements can appear technical, their implementation often shapes the everyday experience of doing business. To ensure DEFA delivers on its projected potential, stakeholders must focus on practical priorities that will determine how effectively the agreement translates into real outcomes for inclusive economic growth. Here’s what business can do:

1. Translate DEFA into Robust National Frameworks and Futureproof Business Operations for Emerging Tech

DEFA sets the stage for a stronger, more connected regional digital market. Yet, DEFA’s full potential hinges on its effective national implementation. ASEAN’s digital landscape remains deeply uneven and many countries lack robust cybersecurity, with only half having comprehensive data protection laws. This fragmentation, alongside varied national capacities, creates continuous friction for businesses. Companies must move beyond compliance and proactively shape DEFA’s implementation to fully unlock its benefits. Businesses and industry groups must advocate for adaptive, clear, and consistent rules, especially concerning data governance, cybersecurity, and AI integration. In parallel, businesses should increasingly adopt flexible, forward-looking emerging technology frameworks grounded in ethical principles, ensuring alignment with global standards and fostering responsible AI use. This is vital given only six ASEAN Member States currently have explicit AI strategies. Early engagement with regulators, pushing for common standards, and championing technology-neutral policies are critical business efforts in nurturing the regulatory environment, ensuring DEFA’s success at the national level and its full impact across the region.

2. Leverage fintech partnerships to expand cross-border inclusion

Fintech is central to unlocking DEFA’s full potential, particularly in payments and financial access, and businesses should actively partner with fintech providers to scale interoperable solutions. Such partnerships can drive cross-border QR payments and digital financial services, enabling MSMEs to participate more effectively in regional trade. This is particularly crucial for women-led businesses, which face a disproportionate financing gap, with an estimated 59% of unmet MSME credit demand linked to specific constraints faced. Across ASEAN, fintech is already outperforming traditional systems across ASEAN in expanding access and lowering barriers; the imperative for firms now is to seize the opportunity to scale these solutions regionally. Businesses that act early to partner with fintech providers can reduce frictions, broaden participation, and gain a first-mover advantage in one of the fastest-growing areas of the digital economy.

3. Invest in digital skills to ensure broader participation in ASEAN’s digital integration

Achieving full, inclusive digital integration across ASEAN depends on a digitally skilled workforce. Without broader digital capability, DEFA risks creating a two-speed ASEAN, where advanced markets surge ahead while others fall further behind. To mitigate this, businesses must strategically invest in developing digital skills across their entire value chains, with a particular focus on MSMEs in less-connected markets. Training in e-commerce, digital payments, and digital public services is acutely important for women entrepreneurs who often face disproportionate hurdles in digital adoption. Overcoming these profound digital divides requires synergized efforts: holistic policy frameworks targeting nuanced gender biases, coupled with pivotal capacity-building initiatives like mentorship and digital literacy to empower women. Leading corporations from the broader Asia-Pacific (China, India, Japan, South Korea) already leverage digital upskilling as a clear path to market expansion and renewed engagement. Businesses actively investing in these efforts secure critical funding and diplomatic support, transforming commitment into tangible returns.

When women-led MSMEs thrive, ASEAN’s economy thrives with them. By 2045, ASEAN envisions to become the world’s fourth-largest economic bloc powered primarily by its digital economy. This ambition relies on the success of women-led MSMEs who are proven vital economic drivers. Women reinvest up to 90% of their income into families and communities, generating profound multiplier effects across education, healthcare, and local development. For ASEAN’s entrepreneurial ecosystem to flourish, its digital environment must robustly support women entrepreneurs. DEFA offers the essential framework to align national systems and enhance regional digital integration. Regional agreements can set the course, but it is domestic implementation that ultimately determines the outcome. As DEFA moves forward, there is an opportunity to embed digital transformation more deeply into public institutions in ways that directly support inclusive business growth. If done well, the benefits will extend beyond trade integration and be reflected in empowered women-led businesses, more resilient local economies, and a stronger digital future for Southeast Asia.

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