In Southeast Asia, the COVID-19 pandemic has led to massive permanent adoption of digital services with more than a third of digital consumers being new users, out of which 90% intend to continue using digital services.
This comes from the latest report 鈥渆-Conomy SEA 2020鈥� released by Google, Temasek, and Bain and Company this November. The latest 鈥渆-Conomy SEA鈥� report, which focuses on the digital economy in Southeast Asia, is consistent with the last four years of reports on the expected surge of growth of the digital market in the region.
In 2020, some 40 million new digital service users in Southeast Asia, which subsequently increases the region鈥檚 market to 400 million from 360 million in 2019. That鈥檚 roughly 70% of the population in the region. This is a much significant spurt compared to the growth seen in previous years (10 million in 2019, and 100 million between 2015 and 2019). As the COVID-19 pandemic rages on, Southeast Asians are using digital services to maintain vital access to their daily needs.
The surge was found within the sectors of e-commerce, online media and food delivery, while transport and online travel suffered significant challenges. Ultimately however, the internet sector is expected to remain resilient at US$100 billion in Gross Merchandise Value (GMV) by the end of 2020, while still being poised to grow to over $300 billion in GMV by 2025, the report states. Understandably, Education technology and Health technology stand out as being potential new frontiers for investors. Health technology usage has quadrupled since government began implementing lockdown policies. Education technology, which was already experiencing a steep uptick in investments in 2019, is rapidly becoming a necessary alternative, which subsequently spurs rapid innovation among education providers.
In terms of countries, Indonesia and Vietnam are still seeing double digit growth, with Vietnam seeing a significantly high adoption rate among people living in metro areas. Meanwhile, in Indonesia, people living in non-metro areas are increasingly becoming more savvy to digital services, with over half (56%) of new users in the country hailing from rural areas. Meanwhile, funding has slowed relative to the startup investment boom seen in 2018, spurring more and more unicorns to focus on profitability. This in turn should deliver a better roadmap for investors looking to finally gain the return on their investments.
Having said that, the digital economy in Southeast Asia is looking stronger than ever, with nearly all indicators signaling continued growth despite the challenges that are currently ongoing. These include internal challenges such as the lack of skilled workforce and talents and lack of physical infrastructure, as well as external shocks such as the COVID-19 pandemic and developing geopolitical issues.
It should be noted that the members of the newly signed (though yet to be ratified at the time of the publication of this article) Regional Comprehensive Trade Partnership (RCEP) stands to gain significantly from the growth in Southeast Asia鈥檚 digital economy. Countries like South Korea, Japan, and China are already making headways in penetrating the Southeast Asian market and the RCEP will further entrench their positions as market leaders in the region, leaving European Union countries only as proxies if companies do not enter the market themselves and learn about the region. The RCEP by itself presents a wealth of opportunities with which EU companies can potentially benefit.
To further discuss this issue, The German 鈥� Indonesian Chamber of Industry and Commerce (EKONID) held a digital trade mission with online presentation event and B2B meetings in Indonesia and Singapore from November 23 to 27, 2020. Our partners for this event are the German Association of the Toys industry (DVSI), the Spielwarenmesse e.G., the Southeast Asia Toy Association (SEATA), and the industrial partners Brandora GmbH and little big things GmbH.
Along with our colleagues at 91大神 Singapore, and supported by the German Ministry of Economic Affairs and Energy (BMWi), the webinar will see companies focusing on toys, housing, school supplies and sustainable products, among other industries, as well as potential business partners in Indonesia and Singapore, gather to discuss the latest development regarding the sector.