Southeast Asia’s internet economy hits $100bn milestone
Fuelled by the digital economies of Indonesia and Vietnam which grew at over 40%, followed by that of Malaysia, Philippines and Singapore with annual growth rates of between 20% and 30%, the region has been shaping technology trends in its own way.
The report’s co-authors, internet giant Google, Singapore state investment company Temasek Holdings and management consultancy Bain & Company, attributed the growth spurt to the influx of new online users in the region – around 100 million more compared to four years ago.
This growing market of customers, they noted, has incentivised businesses in the region, from established unicorns to small and medium-sized enterprises to adopt and leverage digital tools to expand rapidly.
Unicorns such as e-commerce bigwig Lazada, for example, have benefited from the growing propensity of consumers to shop online.
According to the report, the region’s e-commerce market is now valued at $35bn, up from just $5bn in 2015, making it the biggest and fastest growing segment in the digital economy. By 2025, the e-commerce sector is projected to reach $150bn.
Ride-hailing is another bright spot, with 40 million people across the region ordering transport, food and other services on demand from the likes of Gojek and Grab, as compared with just eight million in 2015.
Riding on the surge in demand for e-commerce and ride-hailing services is digital payments, which is set to grow further to reach 100 million Southeast Asians with limited access to financial services today.
With digital payments slated grow from $600bn in 2019 to more than $1tn by 2025, accounting for almost one in every two dollars spent in the region, the ride-hailing and e-commerce giants, as well as telcos, banks and even airlines are all getting on the bandwagon.
Although big cities, such as Jakarta, have been the growth engines, accounting for more than half of the region’s internet economy despite accounting for just 15% of the total population, demand for digital services is starting to emerge from less densely populated areas.
According to the report, the internet economy is set to grow twice as fast outside metropolitan areas, supporting new jobs and opportunities and increasing the need for investments to expand internet access in underserved regions.
Keeping up with this growth will be a challenge, however. The report noted that tight labour markets remain a pressing concern, as companies look for skilled workers to take on new roles created in the digital economy through upskilling programmes.
In addition, they have also hired senior professionals from banks, retailers and global technology companies to manage new business units and increasingly complex organisations.
The good news is that the internet economy is maturing to a point where seasoned founders and early employees from the first wave of startups are starting to lead new ventures and pass on their experience, according to the report.
Southeast Asians who moved abroad to study and start their careers are also responding to the call, it added, with more heading home to join or found startups.
“This ‘reverse diaspora’ one that was unheard of only a few years ago is yet another show of confidence in the future of Southeast Asia’s internet economy,” said the report.