Home to nearly 700 million people scattered across 11 economies, Southeast Asia is developing rapidly. Despite the impact of COVID-19, the region’s combined GDP per capita grew from US$4,536 in 2020 to US$5,024.2 in 2021.
These fundamentals serve as the foundation with which Southeast Asia will enter its “digital decade,” a period of strong growth potential that could catapult the region into the next stage of its revolution. Core to this are the 100 million new internet users who have come online since 2019, as highlighted by the latest edition of Google’s e-Conomy SEA report.
Exhibit 1: 100 million additional internet users have come online in the last three years
According to the report, which was written in partnership with Temasek and Bain & Co., Southeast Asia’s y-o-y growth and inflation rates have beat out China, the EU and the US.
Exhibit 2: Southeast Asia is relatively less impacted than other regions
The success of the region’s digital economy is being driven by gains in the e-commerce, transport & food, online travel, online media and financial services segments. Combined, their growth is on track to add $200 billion in gross merchandise value (GMV) to Southeast Asia’s books.
Exhibit 3: Southeast Asia’s digital economy is closing in on $200 billion, growing 20% y-o-y
Foreign direct investments into the region remained strong throughout the first half of 2022, but observers remain concerned that forthcoming interest rates hikes by the US Treasury may impact future deal-making.
Exhibit 4: Investments maintained strong momentum in H1 2022, but investors are getting increasingly cautious
A major theme highlighted by the report is the growing importance of ESG policies and regulations to the long-term sustainability of the Southeast Asia’s digital economy growth. On the whole, companies are engaging in more sustainability-minded initiatives to reduce their carbon footprints, uphold human rights and practice good governance.
However, the report emphasises that digital players are still on track to emit 20 metric tonnes of carbon by 2030. More can still be done to lower this impact by 30-40%, while other initiatives like upholding human rights and implementing good business ethics are key to ensuring a better future.
Exhibit 5: Environmental and social sustainability are the greatest concerns among Southeast Asia’s core digital economy sectors
On the whole, the region is poised to leap into the decade of incredible growth. The report notes that the region’s digital economy is expected to achieve $1 trillion by 2030. However, this success hinges on their ability to increase digital inclusion of low-income (“budget”) users in urban areas, without losing sight of a sustainable agenda that can ably fulfil their environmental, social and governance responsibilities.
Exhibit 6: Digital economy GMV ($ billion)
Should the region achieve these goals, there could be significant developmental gains across all levels of society throughout the region. This will require collaboration from both the business community and local authorities to embed the necessary factors to foster a rich environment for everyone.
