Southeast Asia’s digital economy to exceed $240bn by 2025

According to Google report Southeast Asia’s internet economy will grow far more than previously estimated

Photo: Reuters

Southeast Asia’s internet economy is expected to exceed $240bn by 2025, a joint study by Google and Temasek Holdings shows. Figure represents a fifth more ($40bn) than a previous estimate the companies made - as more consumers use their smartphones to go online. The study, first published in 2016, encompasses ride-hailing, e-commerce, online travel and online media in Southeast Asia’s six largest economies - Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. The latest report released on Monday adds new sectors such as online food delivery, as well as subscription music and video on demand.

The report estimated that the gross merchandise value (GMV) of the region’s internet economy has reached $72bn in 2018, rising 37 percent from the year earlier as affordable mobile data and improvements in connectivity has led to more internet users in Southeast Asia, where currently more than 90 percent of them are accessing the world wide web through their smartphones.

“As data gets more affordable, they’re spending more and more time, and doing a lot more, which is what’s driving e-commerce, ride-hailing and all the other sectors that we’ve studied,” Rajan Anandan, vice president for India and Southeast Asia at Google commented.

Online shopping has been the fastest growing sector of the internet economy, with study showing the GMV of e-commerce in the region exceeding $23bn in 2018 and rising more than four times to exceed $100bn by 2025, due to increased consumer trust. The report credits e-commerce giants Alibaba Group Holding Ltd’s Lazada, Sea Ltd’s Shopee, and Indonesia’s Tokopedia - for helping develop the sector.

Meanwhile the competitive ride hailing sector is also developing rapidly with GMV reaching $7.7bn in 2018.

“Powered by the ambitions of Go-Jek and Grab to become Southeast Asia’s ‘everyday apps’, we project that ride hailing will reach almost $30bn by 2025,” the Google-Temasek study notes.

It added that 2018 was on track to be a record year for fundraising for the region’s internet economy companies, with $9.1bn raised in the first half of the year, nearly as much as in all of 2017. Majority of the funds went to nine internet unicorns in the region (start-ups that have valuations of $1bn or more). Several prominent companies have also raised funds: Ride-hailing giant Grab said it’s on track to raise $3 billion by the end of the year; its Indonesian rival Go-Jek reportedly raised about $1.5 billion in funds in February while Lazada received an additional $2 billion from Alibaba in March.

In line with the growth of the internet economy in Southeast Asia, the region is expected to see an increasing number of jobs, as well. According to the study, 1.7m full-time jobs are set to be created 1.7 million by 2025, three times the number in 2018. They will be needed to cope with the projected growth in e-commerce logistics, as well as in ride-hailing and food delivery services, the study said. Out of them about 200,000 highly skilled jobs will also be created by 2025 as companies continue to grow their core business and expand into new areas.
Furthermore, the total number of partners employed, such as part-time workers and freelancers leveraging the Internet for employment, will also jump to 12m up from the current 4m.

As a largest and fastest-growing internet economy in Southeast Asia, the study names Indonesia which is forecast to grow to $100bn by 2025, accounting for $4 of every $10 spent in the region. 

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