The New Tigers of the Digital Economy
In the past 40 years, Asia’s economies have greatly contributed to global growth. Stimulated by the fast, catch-up phenomenon underway in many traditional fields of activity, these economies are now following suit in new sectors, the first of which is the digital economy. Leading the charge are Southeast Asian countries, strategically positioned between China, India and Australia.
Attesting to this transformation in new creative sources of digital value, the third Google–Temasek report, released at the end of 2018, notes accelerating growth. The combined value of digital economies in Southeast Asian countries more than doubled between 2015 and 2018, increasing from US$32 billion to US$72 billion. This third report presents revised regional growth forecasts; digital economy is expected to reach $240 billion by 2025.
By 2025, Indonesia, the Philippines, Vietnam and Thailand should record growth rates in their respective digital economies above 20% annually. At the same time, the IMF anticipates that the global economy will grow by 5.2%—four times faster than the average of all other sectors of activity. Within these countries, sectors such as e-commerce, vehicle-for-hire services, such as Uber, Lyft and Grab, and digital media will contribute greatly to this transformation.
As the Google–Temasek report recalls, major capital has been raised in the region: Close to US$24 billion between 2014 and 2018, including $6 billion for Singapore-based Grab, a service comparable to Uber, available in 168 of the region’s cities.
Budding ecosystems, growing investments
In general, the most committed mobile users on the planet are in Southeast Asia. In 2018, more than $11 billion was invested in advertising, video games and MOD-VOD. These investments are testimony to the emergence of dynamic techno-creative ecosystems that not only accelerate growth but also lead to the emergence of new business opportunities. In December 2018, the Singapore government announced the creation of a coproduction fund to finance feature film production—mainly indie productions—by foreign producers.
Similarly, Indonesia took the initiative to organize, in partnership with the United Nations Conference on Trade and Development (UNCTAD), the first World Conference on Creative Economy in 2018. Many reports published by Western think tanks, including the Toronto-based Martin Prosperity Institute, have dealt with the region and its high development potential in these segments.
This evolution could contribute to transforming the global digital panorama, nowadays largely dominated by American and North Asian companies. No Southeast Asian companies are among Forbes’ top 100 digital companies, but this reality is likely to change.
Despite this rose-coloured portrait, the region is facing several challenges. The World Bank has pinpointed six further development opportunities to support the development of Southeast Asia’s digital economy. Promoting access to high-speed internet, developing digital skills, investing in dematerialized payment systems, setting up more efficient logistical circuits, and putting mechanisms in place to enhance trust and foster more direct state involvement in the digital economy are many business opportunities for these countries.
Shadowed by India’s, China’s and Australia’s major economies and next to a market of 4.6 billion people (more than half of the world population), Southeast Asia has the opportunity to become the world’s digital economy hub. Its openness and willingness to connect regionally and internationally are promising signs for world producers who are interested in the region.