The AANZFTA Upgrade:
E-Commerce Enhancements (Part 2)
By Miguel Jaime Encarnacion
Published on 29 August 2025
The second installment of this series discusses electronic commerce (e-commerce) under the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA). Focusing on regulatory aspects, this blog follows its development from the original 2009 AANZFTA to its Second Protocol which entered into force on 21 April 2025. Despite institutional improvements and increased interactions with existing ASEAN legal instruments, concerns persist regarding its implementation and business utilisation among various stakeholders, including micro, small, and medium enterprises (MSMEs).
I. The Rationale for E-Commerce Enhancements in the AANZFTA
The AANZFTA is the first ASEAN agreement with a Dialogue Partner incorporating an e-commerce chapter. The original chapter focused on e-commerce promotion and enhanced cooperation (Article 1). Central topics included electronic authentication and digital certificates, online consumer protection and online data protection. These elements were designed to enable businesses to benefit from e-commerce’s efficiencies and cost savings.
Parties were tasked to maintain or adopt national legal frameworks governing electronic transactions that aligned with international norms (Article 4) and required them to publish relevant e-commerce measures to promote transparency (Article 3).
Since the AANZFTA’s adoption, digital economies in ASEAN have experienced significant growth. Between 2014 to 2019, e-commerce activity in ASEAN-6 economies surged from USD 5.5 billion to USD 33.6 billion. The practical application the original chapter became limited.
A 2015 Assessment highlighted the absence of e-commerce projects within the AANZFTA’s Economic Cooperation Work Programme. A General Review, divided in two stages, took place in 2017. Stage One broadly noted the direct correlation between implementation and the effectiveness of the relevant institutional bodies. In the case of e-commerce, the absence of a specific subsidiary body hindered its progress. The oversight function was vested in the FTA Joint Committee (which was also tasked with the implementation and operation of the overall AANZFTA). Stage Two recommended updating key provisions that took into account the developments since the original agreement. These were endorsed in the 23rd ASEAN Economic Ministers–Closer Economic Relations Consultations. During the negotiations, a Committee on E-Commerce was established.
II. E-Commerce (Second Protocol – Chapter 10)
Built on the modest foundations of its predecessor, the Second Protocol works toward creating an environment of trust and confidence (Article 2). E-commerce has proven its importance as a reliable driver of the economy even in difficult periods. In fact, the COVID-19 has brought forth a dramatic uptake of digital adoption in ASEAN. It is therefore crucial to improve its enabling framework.
a. Trade Facilitation
Significant enhancements have been introduced to facilitate trade, with the objective of supporting business expansion in the AANZFTA region.
Parties must work towards initiatives to achieve paperless trading (Article 5), endeavor to accept electronic trade documents as legally equivalent to paper versions and make them accessible in electronic format. Generally, the legal validity of electronic signatures (Article 6) cannot be denied solely due to their digital nature. Participants in e-commerce transactions can determine their preferred electronic authentication technologies and retain the opportunity to prove compliance with applicable laws and regulations.
Electronic invoicing (e-invoicing) (Article 7), another innovation, has the potential to substantially reduce business costs by minimising the need for physical invoices. Through the principle of interoperability, the AANZFTA can assure its stakeholders that diverse regulatory frameworks should not impede cross-border trade. Coherent e-invoicing measures can help businesses abide by similar standards across the market. However, the fulfillment of this mandate remains challenging due to several factors, such as IT infrastructure and fragmented data policies. The provision’s usage of flexible terms such as “recognise” and “cooperate” may also limit enforceability.
b. Fostering a Conducive E-Commerce Environment
The Second Protocol recognises the importance of relevant international standards (Article 8) to decrease trade costs and increase interoperability, reliability, and efficiency. Sharing best practices on standards, technical regulations, and conformity assessment procedures is also encouraged to facilitate e-commerce and digital trade.
Provisions on online consumer protection (Article 9), online personal information protection (Article 10), and unsolicited commercial electronic messages (UCEM) (Article 11) signal a strong inclination towards data protection. Parties must adopt or maintain regulatory laws that combat fraudulent and misleading practices, as well as protect the users’ personal information. In the case of UCEM, Parties must obtain the consent of recipients to receive such messages or otherwise provide for their minimisation.
c. Cross-Border Electronic Commerce
Parties are generally prohibited from requiring businesses to use or locate computing facilities within their territory as a condition for conducting business (Article 17). Furthermore, the Second Protocol supports the cross-border transfer of information through electronic means if such activity is for the conduct of business (Article 18).
Both provisions authorise limitations which are necessary to achieve legitimate public policy objectives or protect essential security interests, but the open-ended nature of these concepts may present some difficulties. These flexibilities, while maintaining appropriate regulatory space for privacy or security concerns, leave room for diverse interpretations.
d. Dispute Settlement
The settlement of disputes (Article 20) is a key advancement. In contrast to its precursor, the revised article now provides for a recourse to Consultations and Dispute Settlement (Second Protocol – Chapter 20). Interestingly, it is New Zealand’s first time to secure enforceable e-commerce rules in an FTA with ASEAN.
Implementation and application are phased. Certain provisions are not subject to dispute settlement until three years after the Second Protocol’s entry into force. Additionally, Chapter 20 shall not apply to Cambodia, Lao PDR, and Myanmar. This opt-out, however, is subject to review.
e. E-Commerce and MSMEs
Despite the significance of MSMEs in the ASEAN market, they have only accounted for only 38% of the ASEAN-6 business-to-consumer e-commerce export revenue in 2023. One factor behind this limited participation is the insufficiency of digital infrastructures, which can, in turn, leave them vulnerable to cyberthreats.
Parties must work together to assist MSMEs utilise e-commerce (Article 4). Novel provisions on open government data and digital inclusion help facilitate integration and market access. Open government data (Article 15) advocates for the accessibility of government information in open or machine-readable formats. Parties can harness government information and data to foster development, competitiveness, and innovation in the region. Digital inclusion (Article 19) acknowledges the potential of e-commerce in promoting inclusive development and trade through cooperation on matters such as addressing trade barriers, and sharing of best practices. These create opportunities for businesses, including MSMEs, to capitalise on the benefits of digital trade—including those which have been ordinarily unavailable on traditional platforms.
The AANZFTA Implementation Support Programme (AISP) supports this initiative. The 2024-25 AISP Economic Cooperation Work Plan has over AUD 3.4 million worth of activities for ASEAN’s priorities, including e-commerce.
III. Relationship with Other ASEAN Instruments
There are several ASEAN instruments related to e-commerce and the AANZFTA. For instance, the ASEAN Digital Integration Framework, designed to present an overview of digital integration, recognises data protection as a priority area while supporting digital trade and innovation. The ASEAN Agreement on E-Commerce aligns with the Second Protocol on issues such as paperless trading, online consumer protection, and online personal information protection.
Although these instruments were respectably designed to spur ASEAN’s digital growth, their execution has encountered several hurdles, including the regulation of cross-border data flow. The pace of integration is affected by the disparity within the AMS, alongside national policies and ambitions to develop the domestic digital economy. Furthermore, it is pivotal as it is laborious to harmonise these provisions with the Second Protocol to ensure consistency. While these agreements acknowledge the role of e-commerce in assisting businesses, especially MSMEs, they differ in scope and enforcement. The new provisions provide broader coverage, but they do not automatically translate to deeper commitments.
Upcoming regional strategies endeavour to tackle these concerns. The Digital Economy Framework Agreement has identified core elements to ensure responsible digital growth, including cross-border data flows and data protections. It is expected to furnish a clearer ownership structure for sectoral bodies. The ASEAN Economic Community Strategic Plan 2026-2030 also emphasises the commitment to accelerating digital and technology transformation, particularly in the context of cross-border e-commerce.
IV. Conclusion
The regional development of e-commerce requires structured implementation and the involvement of key stakeholders. On one hand, it is crucial to translate the provisions of the Second Protocol into actionable commitments, particularly in critical areas where the language remains non-binding. It needs to be consistent with other ASEAN instruments to refine regional priorities and avoid redundancies. In addition, clear institutional support must be accompanied by clear resource allocation. It should adhere to its promise of empowering MSMEs—a vital sector which can significantly boost business utilisation. This concerted effort, in principle and practice, brings the AANZFTA one step closer to bringing tangible benefits to businesses and consumers.
Miguel Jaime Encarnacion is a Research Associate with the ASEAN Law and Policy Team at the Centre for International Law, National University of Singapore.