Navigating Sustainable Development in Southeast Asia: The Interplay of Digital Technology, Trade Openness, and Institutional Quality

Abstract The objectives of United Nations Sustainable Development Goals (SDGs) underscore the significance of leveraging innovation and technology to tackle urgent global issues, including poverty, inequality, climate change, and sustainable economy. Southeast Asian Nations (ASEAN) exhibits notable GDP and digital economy advancements, although they also face considerable pollution. However, relatively few research has investigated ASEAN’s sustainability. This paper is to examine the effects of digital technology (DT) and digital service trade (DST) on ASEAN’s sustainable development, considering the moderating role of institutional quality (IQ). This study employs panel data from 10 ASEAN countries spanning 2005–2019 and utilizes feasible generalized least squares (FGLS) analysis and Panel generalized estimating equations (PGEE) analysis to evaluate the moderating influence of institutional quality on digital technology and digital service trade in influencing ASEAN's sustainable development. This study used population size and industrial value added as control variables. Empirical data showed the essential role of institutional quality in affecting sustainability. The findings demonstrate that digitalization alone is insufficient to achieve sustainability. Digital service trade can jeopardize sustainability unless it is tempered by strong intelligence, which reduces risks associated with cross-border data flows and digital inequality. The study indicates that institutional development is required before utilizing digital technologies and digital service trade for environmental and social advancement. Institutional quality and focused policy alignment are critical for transforming digital innovation and trade into equitable and long-term growth throughout ASEAN.