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SE Asia’s digital economy may treble to US$300b by 2025, S’pore ‘punching above weight’: Report (Today Online)

With the rise of e-commerce, ride hailing and online gaming in South-east Asia, the region’s Internet economy could swell to US$300 billion (about S$415 billion) by 2025, three times its current annual size. This is based on a report by Temasek, Google and Bain & Company released on Thursday (Oct 3).

In particular, Indonesia and Vietnam are the fastest-growing digital economies in the region, with average growth rates exceeding 40 per cent since 2015, the report noted. Other economies that were studied included those of Malaysia, the Philippines, Singapore and Thailand.

The 65-page “e-Conomy SEA 2019” report is the fourth in a series of annual reports published by Singapore's sovereign wealth fund Temasek and Internet giant Google since 2016, in a bid to track the growth of the booming digital economy in the region. Bain & Company joined them in the latest report.

Google South-east Asia's managing director Stephanie Davis said that Singapore, while being one of the smallest in the region in terms of both growth rates and population, is “punching above its weight” with greater access to talent, a disproportionate number of tech “unicorns” — worth over US$1 billion — and people who spend more for each online transaction.

Mr Rohit Sipahimalani, joint head of investment, portfolio strategy and risk at Temasek, said, however, that shortage of tech talent remains the main challenge across the region, including in Singapore.

This could limit the thriving Internet economy, even amid progress in financing, consumer trust, Internet access, logistics and digital payments over the years. 

UPWARD TRENDS IN INTERNET BUSINESSES

There are 570 million people in South-east Asia. Of them, 360 million are now connected to the Internet — about 100 million more than four years ago.

Around 90 per cent access the Internet primarily with mobile devices.

The report identified four main sectors in the Internet economy in the region:

  • The US$38 billion e-commerce industry – online retail, digital marketplaces, online groceries
  • The US$12.7 billion ride-hailing industry – transportation, ride-sharing platforms and food delivery services
  • The US$14.2 billion online media industry – subbscription video and music streaming services, online gaming and advertising
  • The US$34 billion online travel industry – vacation rentals, flight and hotel booking services

E-commerce is the fastest-growing sector, growing seven times from the US$5.5 billion in 2015. It leapfrogged online travel this year to become the largest sector in the digital economy, with five million orders submitted on average daily, the report said.

E-commerce is also on track to hit US$150 billion by 2025, it added.

There are also five times more people who use ride-hailing services now, up from eight million in 2015 to 40 million this year.

“In the span of a few years, e-commerce and ride hailing have become an integral part of daily life for millions of South-east Asians, especially those living in big cities. They offer convenience, value and access to services and products that were previously difficult to obtain,” the report noted.

DIGITAL FINANCIAL SERVICES

Beyond the four sectors of the Internet economy, the report said that digital finance businesses have reached an inflection point, with financial technology (fintech) making it possible to reach out to South-east Asians with limited access to traditional banking.

Of the 400 million adults in the region, 198 million are “unbanked” — people with no bank accounts.

Another 98 million are underbanked, which means they have a bank account but have limited access to credit, investment and insurance.

The report highlighted five types of digital services:

  1. E-payments – Digital payments reached US$600 billion in 2019, and are expected to cross US$1 trillion by 2025. This will make it the payment method used for nearly half of all transactions.
  2. Remittance – South-east Asians remitted around US$11 billion in 2019, with more than double — US$28 billion — expected by 2025.
  3. Lending – There is a loan book of US$23 billion in 2019, which is on track for a US$110 billion loan book by 2025, due to innovations in consumer and business lending.
  4. Investment – In 2019, the total market value of digital investments was US$10 billion, and may increase to US$75 billion by 2025.
  5. Insurance – Written premiums for digital insurance reached US$2 billion in 2019, and are expected to rise to US$8 billion in 2025.

To read the rest of the article, please use this link: https://www.todayonline.com/singapore/se-asias-internet-economy-set-treble-us300-billion-2025-spore-punching-above-weight-report


By Today Online | October 4th, 2019

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