Southeast Asia’s digital economy soars high

It’s not always bad when projections are not met. Such as in this case.?

Back in 2016, Google, Temasek, and Bain & Company, in their inaugural e-Conomy SEA report, projected the digital economy across six Southeast Asian countries—Singapore, Indonesia, Malaysia, Vietnam, Thailand, and The Philippines—to reach US$200 billion by 2025.?

This region, which has a population of 600 million, is about to hit this milestone by the end of 2022—three years earlier than expected. All thanks to the massive digital adoption that kickstarted with the onset of the Covid-19 pandemic more than two and a half years ago.?

There are now 460 million internet users across these countries, out of which 60 million came online since the pandemic. This means over 76% of the region’s population is online and using e-commerce, online food delivery, online transport and travel, on-demand music and video, gaming, and digital financial services.?

Now, the latest edition of this report by these giants says that the combined digital economy of these six Southeast Asian countries can go up to US$1 trillion by 2030, in gross merchandise value, which implies the total monetary value of products and services sold online.?

But there is an if attached, as per the researchers.?

It’s possible, if tech companies offering digital services can maintain growth against macroeconomic headwinds—rising inflation, growing geopolitical tensions, supply chain disruptions, and slowing global economy—and focus on reaching profitability in the next two to three years.

And if they can unlock and tap suburban and lower-income users in urban areas and grow sustainably by addressing environmental, social, and governance responsibilities.

Well, it seems, venture capitalists, which focus on Southeast Asia and have US$15 billion dry powder, believe these companies can do it and are bullish about the region’s potential, in the long run—going by the money flowing into this region, particularly in early and growth-stage startups.

Despite the funding winter, investors poured US$13.2 billion into Southeast Asia in the first half of 2022, almost 15% higher than what they invested in the first half of 2021, the latest edition of the e-Conomy report notes. Moreover, the average check size also went up by about 13% year-on-year.

Singapore and Indonesia were leading investment destinations yet again this year, with 57% and 25% of the total investments flowing into these markets.?

Interestingly, the digital financial services sector overtook e-commerce in investment volume in the region, with 31% of all funding in the first half of 2022 going into it, compared to e-commerce’s 15% share.?

Within digital financial services, the payments segment saw the largest number of deals. And that brings us to another eye-popping figure.?

The #digitalpayments market—in terms of the total transaction value—in the region is expected to reach US$1.1 trillion by 2025 and US$2.1 trillion by 2030, growing at a CAGR of 13%, from US$806 billion in 2022.

Well, on that high note, let’s dive in for this week’s recap.

For the love of small retailers in Southeast Asia

Amazon is steadily making inroads in Southeast Asia. For instance, the American e-commerce major has seen the number of Vietnamese sellers growing by 80% between September 2021 and August 2022, over the previous 12 months. For the last few years, the company has been wooing Vietnamese businesses to sell on its platforms, instead of going for Chinese rivals. Now, these retailers sell around 10 million products to customers worldwide. Next year, Amazon plans to focus on helping Vietnamese businesses to build and register their brands.

Meanwhile, Indonesian e-commerce company Bukalapak , which went public last year, posted a revenue of US$57.6 million in the third quarter of 2022, up 86% over a year ago period. The company owes this revenue surge to Mitra Bukalapak, its online-to-offline solution for local retailers that helps them digitize their offerings and procure physical goods to sell. As of September, Mitra had 15.2 million registered merchants. Mitra earned US$30.6 million in revenue, which is almost 53% of the company’s total sales.?

In the middle of the action

A recent report by Tech in Asia said a bunch of Indonesian HR tech firms focusing on blue-collar jobs—those entailing physical labour in areas like manufacturing, construction, mining, agriculture, or power generation—have been growing robustly since the pandemic led to increased labour demand.?

For instance, Jakarta-based MyRobin.ID , which pivoted to catering to blue-collar workers at the start of the pandemic, grew 11x in 2021 and turned profitable earlier in June. Another company in this space, Staffinc Group , has expanded 20x in the last three years.?

Another noteworthy development was the launch of Arta Finance —a year-old company with eight former Google executives in its founding team. The US and Singapore-based company that has just come out of stealth mode intends to become a digital family office for the masses, by letting accredited investors invest in alternative assets from top fund managers, with a minimum of US$10,000. Although its service is currently available in the United States, it will soon open up to other markets too.

On the funding side, Dubizzle Group , a Dubai-based classifieds player focused on emerging markets like Southeast Asia, South Asia, the Middle East, and North Africa has recently raised US$200 million from Affinity Partners and Prosus. The company plans to invest most of this funding in its technology platform.?

Some more action in climate tech

Indonesia Stock Exchange has just signed a memorandum of understanding with Singapore-based MetaVerse Green Exchange—which provides carbon-as-a-service solutions backed by its blockchain-based digital-asset exchange platform—to develop a carbon-exchange system in the country. The move is in line with Indonesia’s commitment to cutting greenhouse gas emissions by 43% by 2030.?

Elsewhere in Southeast Asia, an agritech venture is in making. The one that is backed by high-profile investors—Bill Gates’ VC arm Breakthrough Energy Ventures, Wavemaker Impact, and Temasek. This still-unnamed agritech platform will identify the most effective strategies to reduce greenhouse gas emissions in paddy fields as well as develop economic incentives to drive the adoption of the technique.

Meanwhile, fast fashion giant SHEIN is launching a resale exchange for its American customers, after the company received a backlash for encouraging endless consumption by frequently launching thousands of new styles and not being concerned about the textile waste that it leads to. With the resale exchange, Shein intends to help its customers sell their prior purchases to other users and thus participate in a circular economy.

And that’s the wrap for this edition of #ICYMI. We will continue to curate the weekly highlights of the Asian tech ecosystem in case you missed what made the buzz in the week that just went by. You can subscribe to #ICYMI to get it every Friday to stay abreast of noteworthy tech developments.