05 Jul Buzz: Southeast Asia is the Hot Digital Investment Destination
It is mid-2021 and the world is still grappling with the COVID-19 pandemic. Though with vaccine availability, not all hope is lost, but countries are still reeling under different waves, supply chain issues and economic paralysis. ASEAN has not been immune. The pandemic has been marked by negative economic growth in 2020 for most Southeast Asia countries, except Vietnam which was able to grow positively by 2.9% in 2020. But what the pandemic brought with itself, was an urgent digital thrust, the world didn’t know it needed. Much more than a push, the pandemic has catapulted the global digital industry providing it with unseen opportunities. And no place does this hold truer than in ASEAN.
Adapt Adopt Achieve
The adaptation of people’s behaviors towards the New Normal as an effort to break the chain of COVID-19 pandemic, encouraged the use of the more engaging digital technology. As per the 9th Katadata 2020-21 report, the total digital investment in Southeast Asia reached US $8.2 billion in 2020-21 a sharp annual increase from the previous year at US $7.7 billion. Indonesia contributed the most with 70% of all the investment value originating in the country, followed by Singapore 14%, Thailand 5%, Malaysia 5%, Vietnam 4% and Philippines 2%. Clearly, 2/3 of total investment in ASEAN was dominated by Indonesia.
While just like the rest of the world, macro-economic contractions were seen across ASEAN, however, it did not discourage the interest of venture capitalists to inject investments into the region’s start-up ecosystem. The optimism has primarily ridden on strong fundamentals such as market size, digital literacy and government support. Recent regulations in Vietnam and Indonesia have been largely interpreted as business friendly and has helped retain the region’s investment buoyancy.
Unicorns and their magic
This is reinforced by the emergence of two new unicorn companies from Southeast Asia, such as VNPay from Vietnam, which at the end of year 2020 reached a valuation of US $1 billion and J&T Express from Indonesia (Q1 of year 2021 with a valuation reaching US $7.8 billion).
In November 2020, Tokopedia, an Indonesian e-commerce firm, received additional funding (approx. US $350 million) from the world technology giant, Google and Singapore investment firm – Temasek. Gojek, another Indonesian multi-service digital platform, has received investment from Facebook and PayPal in the middle of 2020 following other investors such as Google and Tencent with an investment of US $1.8 billion. Other unicorns from Indonesia such as BukaLapak has also received the capital flow from tech giant company, Microsoft, along with GIC Pte and Emtek with investment reaching US $100 million and Traveloka that has received additional investment from Venture Capital Indonesia, East Venture amounting to US $250 million.
Singapore continues to be a favorite destination for investors. While Singapore is home to less than 1% of ASEAN’s population, it contributes to more than 11% of the ASEAN GDP. Its geographic location makes Singapore as a trading hub-spot. Additionally, political stability creates the sense of security for the investors. Singapore ranks 2nd globally in the 2020 Doing Business study conducted by World Bank followed by Malaysia and Thailand at 12th and 21st , respectively. As we know, Singapore based Grab, the popular ride hailing and financial services platform, received a total funding amount of US $12.1 billion over the last year. In April 2021, Grab, announced plans to go public via a record-setting SPAC merger with Altimeter Growth Corp., valued at nearly US $40 billion. Another unicorn from Singapore, Lazada is a platform for an online shopping received funding amounting to US $4.2 billion. PropertyGuru, one of the unicorn firms from Singapore, focused on online property that operates as a rental and sale listings site, has also received funding amounting to more than US $550 million in 2020.
East ahoy!
ASEAN region is buzzing with funding news and IPO announcements. The region is an obvious choice and in the long-term, it will only consolidate its position as the reigning start-up kingdom. Southeast Asia is likely to change the competition map of tech-companies shifting them away from US, China and India. Demographic dividend, appetizing market, favorable government regulation and internet penetration will continue to create attractive business and investment opportunities in the region, as the world comes to terms with the New Normal digital era.