Are Investments in Southeast Asia Set to Take Off?

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After locking down for most of 2020, Southeast Asia is picking up where it left off as technology investors return to a region that is embracing the Internet, e-commerce and digital banking faster than anywhere in the world.

Last year alone, another 40 million people in Southeast Asia logged into the Internet for the first time, bringing the total to 463 million. And once they’re online, they’re staying online - with five Southeast Asian countries among the top 11 worldwide for the number of hours spent surfing the Internet.

The rapid adoption of the Internet, together with the high rate of engagement, is helping the region’s recently poor and agrarian countries suddenly leapfrog to the forefront of the Internet age.

Today, more than half of Indonesians are using voice to search online, the Philippines leads the world in the use of social media, and no country does more online gaming than Thailand. 

And now investors in the region are putting up some impressive statistics of their own. In the first quarter of this year, they poured a record $6 billion into the region’s technology startups. At the same time, the total value of mergers and acquisitions in Southeast Asia also set a record, jumping 83% to $124.8 billion in the first half of the year. 

This could be just the beginning. With a young and ambitious population of 600 million adopting technology faster than anyone else, Southeast Asia has all the ingredients to become the world’s most dynamic startup market for years to come.

In this article, we will explore the emergence of technology like 5G, digital banking, e-commerce and AI through the lens of countries that are starting to lead the way.

Thailand

This nation of 70 million people is finally sharing the investment spotlight with Singapore and Indonesia. The country reported its first tech unicorn in 2021, following a record year for tech startups in 2020 when investment more than tripled to $364 million from $109 million.

Thailand is also positioning itself to be a leader for the next generation of digital devices and solutions, thanks to its progress in rolling out 5G networks. 

A recent snapshot puts Thailand ahead of countries like Singapore and Australia for 5G metrics, including upload speed and video experience. A 5G-connected corridor in the country’s east is attracting companies specialising in electric vehicles, artificial intelligence, robotics, and genomics sequencing.  

The rapid introduction of 5G in Thailand and elsewhere in Southeast Asia is a natural next step for a region that already leads the world for the fastest adoption of cloud computing, with the local cloud market expected to reach $40 billion by 2025. 

Indonesia 

With the world’s fourth-biggest population and an insatiable appetite for technology, Indonesia has produced several globally recognised startups such as Grab, which is planning a $40 billion SPAC IPO later this year.

And yet, despite the flurry of progress, Indonesia remains a largely untapped market. There are 80 million Indonesians who are still unbanked. Millions of others are just starting to move beyond basic digital banking and explore an expanding ecosystem of digital solutions, including insurance, micro-lending and investing.

Indonesia
Indonesia is a rising presence in Southeast Asia.

Only last year, another 27 million Indonesians joined the Internet for the first time – where they will stay logged in for twice as long as Internet users in Japan. 

Research suggests Indonesia’s combination of a large untapped population and a rapid embrace of technology could deliver a digital economy worth $124 billion by 2025. This figure would represent almost a third of the $309 billion forecast for all of Southeast Asia.

Vietnam

Vietnam is a latecomer to Southeast Asia’s digital transformation, but it’s moving just as quickly, if not faster. 

Some of the most intense activity is occurring in e-commerce, which is expected to grow from just 3% of total sales now to 10% by 2025 – with the share possibly reaching 50% in the country’s two biggest cities.

With Alibaba leading a $400 million foray into Vietnam’s e-commerce sector earlier this year and foreign investors like GGV Capital funding the local startup Telio to connect retailers with distributors and brands, prominent investors are taking notice.

These investments will help the country’s digital commerce sector grow 19% a year until 2024 when the total sale of goods and services online is expected to exceed $26 billion. 

With 69 million Internet users (another half a million joined last year) and 154 million mobile connections, Vietnam is ready to make the leap from a largely unbanked, cash-based economy to a digital leader like many of its neighbours in Southeast Asia.

Singapore

Singapore lacks the large, untapped hinterland that makes other countries in Southeast Asia attractive to investors. Still, the city-state makes up for it with one of the world’s most business-friendly environments and a talented workforce that is second to none.

Singapore startups are at the bleeding edge of innovation, creating the next generation of technologies that will shape how people will live and work throughout the world. They are particularly active in artificial intelligence, which will be the foundation for progress in all industries – whether it’s managing inventory and mapping deliveries or becoming the nearly-human connection between a brand and the customer.  

The Singaporean startup Wiz.AI, for example, is using AI to create the nuances in human conversation that will make people comfortable talking to machines online. Another local startup called Hypotenuse is deploying AI to write product descriptions. While its AI is writing for a company’s general customer base today, at some point, the firm will fine-tune these product descriptions for specific individuals based on their Internet history.  

Thanks to these startups and others, Singapore is helping to create the next generation of tech innovation and economic growth. One study forecasts that AI will contribute almost $1 trillion of new economic output in Southeast Asia alone by 2030. 

As the effects of the Covid-19 pandemic gradually ease and investor confidence and regional economies return to full strength, Southeast Asia’s startup outlook can only get brighter.

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