Southeast Asia’s digital economy has not just stayed afloat in these tough times, but has seen accelerated growth.
Google, Temasek and Bain & Company’s recent e-Conomy SEA 2020 report said 40 million people came online for the first time this year, bringing the total number of Internet users in the region to 400 million. Southeast Asia’s Internet sectors has hit $100 billion this year and are on track to cross $300 billion by 2025.
“COVID-19 has changed people’s daily lives in fundamental ways. The digital adoption that was projected to happen over several years has accelerated. With its young, diverse and mobile-first population, and a host of innovative start-ups, Southeast Asia will continue to define the future of digital ecosystems,” said Stephanie Davis, vice president, Google Southeast Asia.
e-Commerce has emerged as the largest vertical, growing 63% to reach $62 billion in 2020, and is expected to continue its growth trajectory, reaching $172 billion by 2025. The adoption and usage of e-commerce, food delivery, and online media have surged. Digital financial services are set for a tailwind in the long run as consumers and small and medium sized enterprises (SMEs) have become more receptive to online transactions.
On the other hand, and not surprisingly, travel was the most affected segment, contracting 58% to $14 billion. There are, however, signs of recovery in domestic tourism, particularly among hotels and holiday rentals within driving distance from major metropolitan areas. Online travel is expected to bounce back to $60 billion by 2025.
The continued work-from-home arrangements and reduced confidence in shared transportation will likely see muted resurgence through the first half of 2021.The transport and food sector is expected to bounce back to $42 billion in Gross Merchandise Value by 2025.
Funding stays healthy and active
The report said regional tech investment landscape continues to flourish with an increase of 17% in the number of deals between the first half of 2019 and 2020. The total deal value declined slightly from $7.7 billion to $6.3 billion, over the same period, attributable to the slowdown in big-ticket unicorn investments. This has meant smaller, non-unicorn investments which continue to grow, made up more than half (53%) of the total deal value, against 34% the preceding year.
Funding for unicorns in mature sectors such as e-commerce, transport and food, travel and media slowed from $5.1 billion in the first half of 2019 to $3 billion in the first half of 2020.
“Southeast Asia’s Internet economy continues to present investible opportunities for Temasek, and we expect to continue to increase our investments in this space in the next few years. The region’s Internet economy will be the key driver of social progress in areas of interest to us, and support more sustainable and inclusive growth. While COVID-19 has been challenging for everyone, the changing behaviour of consumers has massively accelerated the digital adoption rate, even in a country like Singapore, where it was already very high,” said Rohit Sipahimalani, chief investment strategist; head, South East Asia, Temasek.
“Despite significant challenges this year, the long-term outlook for Southeast Asia’s digital economy remains more robust than ever. We expect that a number of factors, including dramatic growth of consumer adoption, greater trust in technology, and market forces creating significantly greater online supply, will give a permanent boost to the digital economy,” explained Aadarsh Baijal, partner and head of digital practice in Southeast Asia, Bain & Company.
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