South-East Asia digital economy to reach RM1.5t by 2025

by BLOOMBERG

SINGAPORE • South-East Asia’s booming Internet economy is set to double to US$363 billion (RM1.51 trillion) by 2025, eclipsing the previous forecast of US$300 billion, research from Google LLC, Temasek Holdings Pte Ltd and Bain & Co shows.

E-commerce, travel, media, transport and food are driving the region’s digital growth, with online spending rising 49% in 2021 to US$174 billion, the companies said in their latest annual report.

The region added 60 million new digital consumers since the start of the pandemic, led by Thailand and the Philippines.

South-East Asia, home to Alibaba Group Holding Ltd’s Lazada and Tencent Holdings Ltd-backed Sea Ltd, will see a 62% increase in e-commerce gross merchandise value (GMV) this year as home-bound consumers pick up groceries and essentials from the likes of Lazada’s RedMart and Sea’s Shopee.

Online shopping is now forecast to hit US$234 billion in 2025 versus a previous US$172 billion estimate, making up 64% of the region’s total estimated digital GMV of US$363 billion, the research shows.

“We continue to see users come online at a blistering pace,” Stephanie Davis, VP at Google South-East Asia, said in an interview with Bloomberg TV’s Haslinda Amin and Rishaad Salamat.

“Digital consumerism has really taken hold since the pandemic. We’re seeing a digital decade ahead of us in South-East Asia and a possibility of US$1 trillion economy in the digital space by 2030.”

Deals for Internet companies in South-East Asia totalled US$11.5 billion in the first half of this year, putting the region on track to surpass the US$11.6 billion investment in all of 2020.

Some of the region’s most valuable tech start-ups including Grab Holdings Inc and GoTo are preparing to go public to raise capital or allow early investors to monetise their holdings.

“2021 has been a record for investments in South-East Asian net economy,” Rohit Sipahimalani, chief investment strategist and head of South-East Asia at Temasek, said during a virtual press conference.

“The world is awash with liquidity and looking for investment opportunities in low interest-rate environment, but it’s also because people have seen the resilience of the sector to Covid.”

Indonesia is the region’s largest digital economy where online spending will probably double to US$146 billion by 2025.

Venture capital deals in the country in the first half of 2021 surpassed the full-year totals of each of the past four years, the report showed. Vietnam is expected to grow at the fastest rate among the six countries tracked by the study, nearly tripling in online GMV over the next four years.

Each of the markets has big growth potential over the next decade, with Indonesia alone possibly becoming twice as big a market by 2030 as the entire South-East Asia is currently, said Florian Hoppe, head of digital practice in Asia Pacific at Bain.