Forecast:
- ASEAN tech boom could grow further if restrictions lifted
- Thailand’s digital economy will be hampered by online speech restrictions
- Indonesia’s digital economy could become world class in three years
Southeast Asia is seeing a major tech boom. But while some countries seem poised for unprecedented digital growth, others are being held back by burdensome regulations and paranoid governments. If those constraints are lifted, the region’s digital economy could be unstoppable.
Last year was a record year for startups in Southeast Asia, with $1.6 billion in funding — a 40 percent jump from the previous year. Tech in Asia reported that 380 deals were inked that year — a surge from the previous year’s 313. E-commerce accounted for the bulk of the financing, at around $600 million at a time when e-commerce is expected to climb five-fold to $35 billion, according to UBS and reported by Tech in Asia.
Perhaps one of the biggest assets of countries belonging to the Association of Southeast Asian Nations – or ASEAN – it is nearly 600 million strong population, half of which is under age 30. And since youth in much of the region is growing up in a world where the web is fast becoming a basic need – as important as a telephone – they will be a market their entire lives for the ASEAN tech community. They and the generations after them will increasingly do their shopping, banking and socializing online. All the while technology in Southeast Asia will continue to make innovations.
Indonesia is a major example of this. The archipelago, with a 250 million strong population, is Facebook’s fourth largest global customer, and the capital Jakarta is more active on Twitter than any other city worldwide.
The country’s middle class is expected to double in the next five years, according to Boston Consulting group – and that means huge markets for e-commerce and tech social media companies. The country’s startup scene is generating growing attention from venture capitalists outside the country, including U.S. firms. Just this month, Indonesian startup Snapcart just landed $1.6 million in financing just four months after its launch. The pre-series A funding came from several venture capital sources including a Los Angeles and Singapore-based Wavemaker Partners. And just over a year ago, Indonesian e-commerce company PT Tokopedia received a whopping $100 million from Sequoia Capital and Japanese investment firm SoftBank Corp.
In November, the Communications and Information Minister, Rudiantara, announced a roadmap to provide support for young Internet entrepreneurs, with the aim of having 1,000 new startups in the next five years, and with expectations that two of those companies will be valued at $1 billion. That is on top of a number of other initiatives that show a major government effort to boost the digital economy. Those include one announced last year to raise $1 billion to help the country’s digital startups, and the mission of getting internet access for 150 million Indonesians, from current levels of around 84 million. Some tech insiders have contended that the country could become a world class economy as early as three years from now.
However, the right policies need to be put in place, such as creating a national strategy to pull all the key players together, although that is happening piece by piece. Some also argue that startups need to have more resilience, as startups in Indonesia sometimes buckle and give up when things get tough, before they’ve seen things through. Moreover, getting Internet access to all of the country’s 18,000 islands will be a challenge.
But while Indonesia shows much potential, other ASEAN countries may be hampered by their own governments and by Southeast Asia politics.
Vietnam has massive potential, but also many pitfalls and bear traps. While the country has a large, well-educated and young population, critics said the government needs to step aside, or else the country’s digital economy may never meet its full potential.
Vietnam is one of the region’s fastest growing smartphone markets – most Southeast Asians access the Internet via mobile devices – and Apple in November set up a subsidiary in Vietnam. From 2009 to 2013, the number of mobile phone subscribers in Vietnam surged by 26 percent to 124 million.
But authorities have set many burdensome regulations, such as requiring content administrators to have a university degree. And just over a year ago, the government shut down a popular humor site that boasted 4 million Facebook followers, due to officials’ belief that the site insulted national heros.
For Thailand, the Internet economy will see a negative impact of the military government’s crackdown on free speech, and its plans for a “single gateway” – a system that allows the government to control the Internet. That creates an uncertain environment for foreign investors, and amounts to severe restrictions on the development of the country’s digital economy. Some Thai citizens have been jailed for posting certain opinions on Facebook, and it remains unclear just what is allowed and what is not allowed to be said online.
While the political situation has not stopped manufacturers from investing over the years – in fact, FDI grew substantially in recent decades despite ongoing political turmoil – the Internet economy functions differently than manufacturing. While manufacturers can function quite well without freedom of speech, the Internet relies on the free and open flow of opinions and information. While some countries’ Internet economies can see moderate to fairly decent success while living under free speech restrictions, they will likely never see their true potential.
The military government announced in December it would invest a few billion baht into the tech sector, part of which is slated to help startups. While the move will likely help startups in terms of capital, it still does not solve the fundamental problem, and the country’s Internet economy is unlikely to truly thrive in the current political environment.
Moreover, the problem may not go away, despite which government is in power. That is because the decade-long political crisis has not been solved, and is unlikely to be solved anytime in the near future. Until that happens, long-term economic policies – including policies to promote the Internet economy’s development – cannot be implemented.
Despite all those problems, ASEAN still has the right mix of population growth, educated young people and a surging and tech-savvy middle class to make it an internet powerhouse. If restrictions are lifted the region could become an internet goliath.
Photo Credit: Michael Luhrenberg
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