Southeast Asia digital economy 2025 [report]

Southeast Asia digital economy 2025

Through e-commerce, online travel booking or media, digital business is currently attracting a lot of interest in Southeast Asia. Set to grow to a total market size of US$ 200 Billion by 2025, the digital economy will expand through a host of startups that launch new technologies in the region’s most promising countries.

Google and Temasek, a Singaporean state-owned investment company, have recently collaborated together to produce a report on the digital economy of Southeast Asia and its evolution to 2025.

Detailed in a conference to present the results, the report shows that the digital market of Southeast Asia is estimated to grow to more than US$ 200 billion by 2025, multiplied by more than 6 from US$ 31 billion in 2015.

Southeast Asia digital economy report – summary

  • Executive summary – slide 4
  • Overview of Southeast Asia’s economy – slide 6
  • The Southeast Asia internet opportunity – slide 9
  • Southeast Asia Venture Capital and startup landscape – slide 22
  • Challenges to overcome – slide 28

Growth of the Southeast Asian digital economy

According to Google and Temasek, the total market value of US$ 200 billion of the digital economy of Southeast Asia. This “e-conomy” would cover the current main verticals:

  • e-commerce could exceed US$ 88 billion by 2025 (16x increase)
  • online travel – airline tickets, hotels reservations, cab/ride-hailing – should grow to US$ 90 Billion by 2025 (4x increase)
  • online media – games, advertising – are expected to grow to US$ 20 billion by 2025 (5x increase)

The region’s young population, increasing speed of internet, economic growth and expanding middle-class are the most important factors to drive the market’s boom. The digital population of Southeast Asia will see a staggering growth of 14% year-on-year,  with a total number of Internet users expected to grow from 260 million in 2015 to 480 million by 2020.

But the US$ 200 billion figure does not even account for other promising verticals for which there is no sufficient data available. Education, entertainment, financial services, and healthcare are all expected to grow rapidly in the coming years.

At the conference presenting the report, Rajan Anandan, managing director of Google Southeast Asia and India said that “affordable smartphones and affordable data are really driving this revolution” that creates a US$ 200 billion opportunity in Southeast Asia.

Southeast Asia’s startups and investments

Google and Temasek have estimated that to finance the growth of companies interested in developing and capturing the different verticals, investments of US$40 to 50 billion will be needed over the next 10 years. The Southeast Asian venture capital industry is therefore also set for a rapid growth.

There are 7,000 startups in the region, 80% of which are based in Singapore, Indonesia, and Vietnam. Together they have received US$ 1.1 billion in 2015 in 355 deals, accounting for but  88% of investments went into Singapore and Indonesia, including 65% for the region’s giants:

Challenges for startups in Southeast Asia

However promising the region’s digital market is, companies looking to grow and benefit from this potential need to face several challenges, especially:

  • acquiring and retaining skilled employees (particularly engineers)
  • payment methods, a concern for millions of people outside of the banking system
  • poor internet infrastructure out of large and developed urban centers
  • poor logistics infrastructure, especially for the final steps of goods delivery (“last-mile” delivery)
  • low consumer trust and high internet fraud

Google document published in May 2016

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