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8 takeaways from Google, Temasek, and Bain & Company’s 2021 report on Southeast Asia’s internet economy

Written by Khamila Mulia Published on   4 mins read

From broad views to sector-based analysis, the report provides a look at what’s in store for Southeast Asia.

The digital economy in Southeast Asia continues to grow at a rapid pace. In fact, the region is on a path for its internet economy to reach USD 1 trillion in value by 2030, according to the sixth edition of the “e-Conomy Southeast Asia (SEA) Report – Roaring 20s: The SEA Digital Decade,” published by Google, Temasek, and Bain & Company.

The annual report unpacks research in six countries—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. It dives into trends across five sectors, namely e-commerce, online media, transport and food, online travel, and digital financial services, as well as two nascent sectors, health tech and edtech. Here are eight takeaways from the report.

#1. A four-comma internet economy

Southeast Asia’s internet economy is projected to reach USD 174 billion in gross merchandising value (GMV) by the end of 2021. It is expected to hit USD 360 billion by 2025, exceeding the previous forecast of USD 300 billion. The report’s researchers estimate that this figure will hit USD 1 trillion digital economy by 2030. By then, Indonesia’s digital economy could be double the size of Southeast Asia’s GMV today, and Vietnam’s could be three times that of Indonesia’s GMV today.

#2. Indonesia contributed the largest GMV, the Philippines led in growth

All six countries covered in the research experienced double-digit growth from 2020 to 2021. Indonesia contributed 40% of the region’s total GMV, at USD 70 billion in 2021. It was a significant bump from last year’s USD 47 billion. The country has the potential to reach USD 146 billion by 2025. Meanwhile, the Philippines led with an impressive 93% growth to become a USD 17 billion digital economy.

Thailand’s GMV is set to reach USD 30 billion this year. Malaysia expects to become a USD 21 billion internet economy. Vietnam is projected to reach USD 21 billion in 2021. Meanwhile, Singapore is expected to grow by 35% from USD 11 billion in 2020 to USD 15 billion in 2021, with the potential to reach USD 27 billion in 2025.

#3. Home to 440 million internet users

The region saw 40 million new internet users in 2021 alone, bringing the internet penetration in Southeast Asia to 75%. Southeast Asia now has 440 million internet users, eight out of ten of whom are digital consumers who have made online purchases at least once. Approximately 60% of new internet users in 2021 are in non-metro areas. Since the pandemic reached Southeast Asia in early 2020, 60 million new internet users came online. Thailand and the Philippines have had the highest proportion of new internet users during the pandemic.

#4. E-commerce and food delivery are main drivers, online media saw healthy growth

E-commerce’s gross merchandising value in Southeast Asia could exceed USD 120 billion by the end of 2021, nearly doubling from 2020’s USD 62 billion. The figure may reach USD 234 billion in 2025. The food delivery sector has grown 33% year-on-year to reach USD 12 billion by end of 2021, and is projected to hit USD 23 billion by 2025. Around 71% of internet users in the region have ordered food online at least once.

Meanwhile, online media witnessed 32% growth to USD 22 billion in 2021. In particular, the pandemic has brought about a new generation of gamers who are generally more willing to spend money on games.

Online travel faces a challenging recovery. The sector’s GMV expects to only grow 5% in 2021 to reach USD 13 billion, a slight increase from USD 12 billion last year. However, it is expected to hit USD 43 billion in 2025.

Healthtech and edtech remain nascent sectors. Funding interest is intact as health tech startups received USD 1.1 billion in investments in H1 2021 alone, and edtech providers racked up USD 200 million in the same period.

#5. SMEs turn to digital platforms to survive the pandemic

Digital financial services are crucial enablers for SMEs. Around 60% use digital tools to enhance operational and back-office productivity, while 90% of digital merchants accept payments digitally. In the next five years, eight in ten merchants expect to generate more than half of their sales and supplies through online channels.

#6. Fintech will grow exponentially

Digital financial services, especially payments and lending, are experiencing healthy growth. Digital payments are projected to reach USD 1.1 trillion in gross transaction value by 2025, up from a forecast of USD 707 billion in 2021. Digital lending could see a 50% increase in the aggregate outstanding balance from USD 26 billion in 2020 to USD 39 billion in 2021, led by growing appetite for lending and “buy now, pay later” services.

#7. Southeast Asia is a lucrative market for investors

Investments in the region’s digital economy are expected to reach an all-time high this year. Deal values are estimated to have reached USD 11.5 billion in the first half of 2021, meaning the full year’s figure will surpass the USD 11.6 billion total investment for all of 2020. E-commerce and fintech make up more than 60% of deal value this year. Increased deal activity and larger valuations led to the emergence of 11 new consumer tech unicorns in 2021, bringing the total number to 23. A number of these unicorns are looking to go public next year.

#8. Challenges and enablers in the digital economy

Talent acquisition continues to be an unresolved challenge, and the region is seeing a set of emerging enablers that require multilateral solutions between consumers, merchants, platforms, and regulators, in order to reach a USD 1 trillion internet economy in 2030. Those enablers include a commitment to sustainability, robust and business-friendly data regulation, stronger data infrastructure, as well as an equitable system to protect gig workers and consumer interests.


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