Economic power is shifting towards emerging countries in Southeast Asia, as there will soon be more young people with degrees there than anywhere in the world.
There has been a lot of buzz around South East Asia’s blossoming tech scene over the last couple of years. And, rightly so, Philippines, Singapore, Thailand, Indonesia and Malaysia are fast becoming technological epicentres. With its newfound technological hotbed status, both mobility to Southeast Asia and GDP per capita have skyrocketed over the last five years. Singapore boasts net migration rates of up to 14.9%.
At first glance, this seems perplexing as Southeast Asia houses a large unbanked population and fragmented technological ecosystem.
But the region is on track to realise a $200 billion internet economy by 2025, with eight unicorns including Grab, Sea, Traveloka and ride-hailing app Go-Jek. That’s a lot of money. But how exactly has this happened? For so long we’ve seen American giants spearheading innovation, but the tables are turning, as there will soon be more young people with degrees in Asia than anywhere else. Even more notable, is that the US has tried to seize the opportunities provided in this nascent market and failed. In Singapore, Uber was unsuccessful in succeeding against Grab. Similarly, Lazada and Shoppee prevail over online shopping conglomerate, Amazon, as the go-to online shopping sites.
The stats are unquestionable, but the success of the region still seems unclear as an outsider looking in. This isn’t helped by the fact that, South East Asia often gets lumbered as a single, homogenous region; even though the dynamics of each country there are extremely varied.
Now, let’s take it country by country, shall we?
In 2017, the Philippines was highlighted by Forbes as the tenth fastest-growing economy in the world. This year, this island with a population of 104.9 million, is set to grow its economy by 6.8%, which is close to triple that of Singapore’s growth. The Philippines is home to Coins.ph, a financial services platform founded in 2014.
Thailand is also witnessing impressive growth at a predicted rate of 3.1% in 2018 and Bangkok is the fourth city in the region in terms of number of investments between 2013 and 2018, bagging 111 investments during this period.
Indonesia holds the highest GDP in the area and is home to a large unbanked population. On the innovation side, entrepreneurs hold strong networks, which means amongst other things that Indonesian entrepreneurs are likely to know each other. Product innovation is another strength, which is unsurprising as we see Jakarta-based Go-Jek quite often ranking in the top ten on Crunchbase.
As I’m sure you know, Singapore is one of the world’s wealthiest country-states. Not only is its economy growing exponentially, with high levels of tech usage in business and government operations, but it plays a notable role in boosting the economy of its neighbours, holding the most active investor in South East Asia, 500 Startups. Crypto, blockchain and distributed ledger more broadly are doing pretty well. Innovation in this area is prompted by government-backed initiatives and banks. Whereas in other countries, banks and cryptos do not play ball, we are seeing an effort by the Monetary Authority of Singapore to completed a proof-of-concept trial that uses distributed ledger technology to power domestic interbank payments. The entrepreneur ecosystem in Singapore is blessed with human capital, process innovation, the high growth and the internationalisation area. Singapore also offers the strongest tech employment opportunities and application developers there can earn up to $94, 891.
The State Of Southeast Asia Tech by CBinsights
Southeast Asia VS World’s Tech Cities
We’ve seen the strength of this burgeoning ecosystem, but what makes it different and unique to Silicon Valley, London or Berlin?
For innovators, the focus is on customer engagement and experience rather than getting people through the door. E-commerce and logistics dominate the scene. Aside from those two industries, blockchain is also picking up steam. There is a marked effort to get onto this distributed ledger train. Singapore is at the helm, planning to leverage blockchain to allow 19,000 migrants to transact without banking access. OmiseGo, Coins.ph are making significant strides to name a few.
The sheer number of investments over the years have allowed companies to scale and develop their products quicker. Tech companies in the region have pulled in $6.5 billion in disclosed equity funding, which is double what was pulled in 2016 and triple what was pulled in 2015. FinTech financing in Asia-Pacific doubled from $5.2 billion in 2015 to 11.2 billion in 2016, compared with 9.2 billion in the US and 2.4 billion in Europe. It’s not just old school equity funding rounds either, the newfound interest in crypto has inspired the creation of LuneX Ventures, South East Asia’s first ever crypto fund, dishing out initial coin offerings (ICO) left right and centre.
As with any burgeoning ecosystem, there are, of course, some challenges that need to be resolved for the region to capitalise on its potential. There still remain fragmented ecosystems, regulation and talent shortages. Despite all of the funding in recent years, there is also a sway towards investment to later stage businesses. $9 billion of the $13 billion invested in Southeast Asia’s startups since 2015 was raised by the region’s 7 unicorn companies
However, we all know that progress and true innovation would not be possible without a few hurdles along the way. Countries such as Singapore supporting their neighbours makes it a very special place indeed. Notably within Southeast Asia, founders are willing to cross national borders. In fact, this year’s South East Asian Tech Report, asked founders where would be best to start their business and 77% of answered a city other than where they were currently based.
Whether it is Coins.ph founders returning to Southeast Asia after a stint in California; Go-Jek being set up and expanding its portfolio from motorcycle ride-hailing phone service to providing services in transportation, logistics, mobile payments and food delivery in just four years; or that US conglomerates are unable to supersede homegrown businesses in the region or the sheer volume of investments prompted by the creation of innovative products Southeast Asia will continue to accelerate on this journey. And, I quite frankly am looking forward to where it might lead.
About the writer:
Naima Camara is a policy and research coordinator for an innovation centre in London. She specialises in writing about advanced digital technology trends around blockchain, immersive, artificial intelligence and how these technologies converge to revolutionise the economy.”
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