Resilient amid the COVID-19 pandemic . . .
The e-Conomy SEA 2020 report, a multi-year research project tracking Southeast Asia’s internet economy, was released jointly on Tuesday by Google, Temasek, and Bain & Company. The report indicates that despite the global slowdown, Southeast Asia’s digital economy grew by C$132 billion in 2020. The pandemic has accelerated digital adoption in the region, and the report projects that Southeast Asia’s internet sectors will remain on track to cross the C$395-billion threshold in total sales by 2025. Staying on track despite fundamental global economic headwinds indicates strong growth in digital adoption.
Unpacking the change . . .
COVID-19 has fuelled changes in consumer behaviours and strong growth in sectors such as e-commerce, food delivery, digital payments, online entertainment, health-tech, and ed-tech, which have helped offset contractions in travel and transportation in the region. E-commerce has grown faster during the pandemic than it did pre-crisis, growing 63 per cent from C$50 billion in value in 2019 to C$81.5 billion in 2020 (and projected to reach C$226 billion by 2025). Digital payments are a growing sector, increasing from C$788 billion in 2019 to C$815 billion in 2020, while the percentage of cash transactions decreased from 48 per cent pre-COVID to 37 per cent in one year. Forty million people in Southeast Asia joined the ranks of internet users in 2020 alone, compared to 100 million from 2015 to 2019.
Cautious optimism . . .
With more countries in the region slowly recovering from the pandemic, investment in Southeast Asia’s tech startups is starting to pick up. But returning to pre-pandemic investment levels, both in terms of value and number of deals, is projected to remain a challenge at least until the first quarter of 2021. The funding slowdown also reflects an ongoing re-orientation, started in 2019, focusing on sustainable growth. While previous years' goals were for breakneck growth, investors are now looking for sustainable, profitable business models in the region’s tech startups. The report confirms that the pandemic has simply accelerated this shift to sustainability and profitability.