The Face of Southeast Asia’s Rising Young Entrepreneurs
Young digital natives are leading a post-COVID societal transformation in Southeast Asia. Here’s a snapshot of the entrepreneurial landscape in this dynamic region.
Southeast Asia Is Ascending
Southeast Asia has a population of 670 million, with 61% of its people under 35 years old. Indonesia has the largest population in the region, with 278 million people. The next generation of young digital entrepreneurs is moving online fast, positioning the region as the world’s next great technology hotspot.
Southeast Asia’s GDP hit $3 trillion in 2021. The surge in growth will spark higher living standards and a jump in consumer demand, especially in e-commerce, fintech, and travel and transportation.
This year, the G20 Summit will be held in the Southeast Asian country of Indonesia, one of the fastest-growing and most rapidly digitizing economies in the world. One in three companies in the Asia-Pacific region will generate more than a third of their revenues from digital products and services by 2023. Meanwhile, SEA’s digital economy is set to triple to more than $360 billion by 2025.
Indonesia's G20 presidency has the potential to boost domestic consumption while also accelerating digital transformation. With this opportunity, there is a possibility of national GDP growth of up to Rp7.4 trillion, involving many MSMEs, and the absorption of around 33 thousand workers across various sectors. (source here) A massive opportunity exists to create value and change how millions of people live.
Digital Commerce Explodes
The Moment Has Arrived
Southeast Asia currently accounts for 50 percent of today’s internet users. The pace of digital commerce in Southeast Asia is increasing faster than in other Asia-Pacific regions. Online retail for key categories roughly doubled over the past year, reaching 9% of total retail sales in 2021, up from 5% in 2020. Growth in digital shopping in Southeast Asian countries now eclipses China.
In fact, the number of new digital consumers added in one year in Singapore, Malaysia, Indonesia, the Philippines, Thailand, and Vietnam is equivalent to the population of the United Kingdom.
A New Generation of Digital Natives
Thanks to improved education, technological advances, and increased government investment, Southeast Asia has seen the rapid rise of a new generation of digital-native entrepreneurs and consumers.
In Southeast Asia, 78% of consumers are now digital consumers or those who performed a commercial transaction online. The moment has arrived for brands to take advantage of Southeast Asia’s paradigm shift in consumer behavior.
The Digital Economy Roars
ASEAN’s digital economy is set to hit $1 trillion by 2030, Google’s research shows. Fintech and e-commerce represent two of the largest segments of the digital economy, sparking strong interest from investors.
E-commerce deals in the region were valued at $4.7 billion in the first half of 2021, with digital financial services valued at $2.5 billion. Southeast Asia saw a strong rebound in overall deal activity, rising from $6.3 billion in the first half of 2020 to $11.5 billion in the first half of 2021.
At least 19 Southeast Asian unicorns — companies valued at more than $1 billion — were minted in 2021, up from only one in 2013, according to DealStreetAsia. Every country in the region saw a company join the unicorn club for the first time over the last decade.
Venture capital interest in the region remains at an all-time high. Dealmakers are flocking to fund startups in the hope that they will become the next Southeast Asian unicorn.
Spotlight on Indonesia
The fintech market in Indonesia has exploded over the last few years. In Indonesia, young, digital-native consumers and entrepreneurs prefer faster and more convenient alternatives to traditional banking.
As a result, young consumers are quickly adopting e-wallet, peer-to-peer software, digital banking, and payment gateway solutions. Businesses are processing online payments, running marketplaces, distributing payroll, accessing loans, and more.
The region’s commitment to modernizing its economic, mobile, and broadband infrastructure is starting to pay dividends as entrepreneurs with innovative ideas are emerging, despite the lingering economic impact of this pandemic. More than one-third of Indonesia’s young people between the ages of 15 and 35 currently work for themselves or aspire to become self-employed.
For the next generation of entrepreneurs, opportunity abounds — if they can crack the region’s complex geographic, economic, and cultural code.
A Dynamic Market
Indonesia is Southeast Asia’s largest market, with a population of 275 million speaking some 300 different languages and scattered across 17,000 islands.
With such wide geographic and linguistic diversity, Indonesia is emerging as a proving ground for a variety of MSMEs seeking to go global. Indonesia is quickly proving the adage true: “If you can make it here, you can make it anywhere.”
The pandemic accelerated the shift online that was already taking place in Indonesia. With more than 170 million people online and a rapidly growing middle class, Indonesia’s digital economy is on track to quadruple by 2025.
Of the top five digital tools that increased in use during the pandemic, three tools — social media, e-commerce buying, and video streaming — were used for the first time by more than half of business owners.
Trying to build the businesses of tomorrow on yesterday's infrastructure remains difficult for Indonesian entrepreneurs. The top challenges include:
Financing Constraints: Traditional banks are reluctant to lend to MSMEs, limiting the sources of capital and keeping businesses from expanding. Fintech lending focused on MSMEs can help.
Inadequate Skills: A lack of education and training prevents MSME owners and workers from identifying the right digital solutions and adapting business models and processes. Promising ed-tech startups can offer upskilling opportunities for employees.
Poor Infrastructure: Access to networked digital services is not widespread and the services that exist are unreliable. The Palapa Ring project is improving mobile connectivity across the nation’s far-flung islands.
Indonesian entrepreneurs can also tap into strong growth potential:
Fintech Solutions: By applying emerging technologies, MSMEs are increasing their ability to adapt.
Higher Productivity: 95% of MSMEs feel their productivity has increased after using digital services.
Improved Efficiency: Using digital tools can boost sales and streamline bookkeeping, product tracking, and HR management.
The Southeast Asian Moment
Southeast Asian countries are being thoroughly transformed. Since the pandemic began, digital consumers have been demanding that businesses offer a seamless experience online. The kind of digital transformation that evolved over decades in Western countries has by necessity taken place almost overnight in Southeast Asia.
Young digital-native entrepreneurs are leapfrogging the competition as they actively transform their companies and economies. Together they face a once-in-a-generation chance to position the region for an epic opportunity.
ASEAN-5 = Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
Digital consumers are those who perform a commercial transactions online.
World Economic Forum, ASEAN Digital Generation Report, October 2021
Bain, “Six Ways to Win 350 Million Southeast Asian Digital Consumers,” August 2021
Jungle Ventures, “Southeast Asia’s tech start-ups could be valued at $1 trillion by 2025, venture capital firm predicts,” CNBC, Aug. 8, 2021
Nasdaq, “A Bright Future: Shaping the Culture of Entrepreneurship in Southeast Asia,” Sept. 14, 2021
ISEAS, Yusof Ishak Institute, “The Missing (Small) Businesses of Southeast Asia,” July 22, 2020
ASEAN Business Partners, “Southeast Asia’s economy is evolving—the unicorn theory,” 2021
Deal Street Asia, “Southeast Asia mints 19 unicorns so far in 2021, could surpass previous decade’s total,” Oct. 4, 2021