Southeast Asia’s digital economy is projected to be worth more than US$200 billion by 2025. That is a 400% increase from 2017’s US$50 billion – or a 10-year compound annual growth rate (CAGR) of 27%.
ASEAN member states are working together to help businesses better capture opportunities generated by the digital boom. For example, countries are now in discussions on a potential ASEAN Agreement on e-commerce, which aims to e-commerce trade rules, lower operating barriers to entry, and build up greater digital connectivity among countries.
With innovation and the digital economy set to be the backbone of the region’s growth, here are the key opportunities for Singapore companies:
Singapore firms with complementary expertise can also band together to offer end-to-end solutions which better meet market demands. Companies can overcome individual capability gaps, and present their different strengths and specialised solutions as a comprehensive package which addresses all of the client’s needs. For example, Shopmatic, Red Dot Payment and iCommerce Asia have come together to provide a holistic proposition that encompasses e-marketplace creation and maintenance, digital payment solutions and logistics solutions.
6Source: Joint study by Google and Temasek on “e-Conomy SEA”, 2016
As demand for goods grow, so will the supply. Manufacturing is set to play a critical role in Southeast Asia’s growth, with individual ASEAN countries possessing their own niche and in turn offering different opportunities for Singapore firms:
The bloc is also undertaking initiatives to facilitate the free flow of goods – in turn strengthening ASEAN as a single production base, and indirectly encouraging consumption. For example, the ASEAN Single Window will integrate the National Single Windows of member states to allow the electronic exchange of customs data. This lets ASEAN-based traders obtain customs clearances, permits, and other trade-related documentation for trade with other ASEAN countries on a single platform. Currently, Indonesia, Malaysia, Singapore, Thailand and Vietnam have implemented the ASEAN Single Window, with the remaining countries in discussions to do so. In addition, ASEAN is working to implement an ASEAN-wide self-certification scheme that would allow certified exporters to self-declare the country of origin for their goods on permitted commercial documents, without having to apply for a conventional Certificate of Origin Form from their customs authorities. Together, these developments will make it easier for goods to flow within the region by expediting cargo clearance and cutting down paperwork.
As the region develops, the demand for infrastructure is set to boom. The Asian Development Bank estimates ASEAN’s annual infrastructure investment needs stand at US$184 billion7.
This demand is largely fuelled by multi-year infrastructure programmes such as the Philippines’ US$180 billion “Build, Build, Build” initiative and Indonesia’s infrastructure drive under the Jokowi administration. In April 2018, Vietnam announced plans for more than US$900 million worth of investment for economic zones and industrial parks till 2020. In countries such as Malaysia, Indonesia and the Philippines, infrastructure projects in the pipeline are estimated to account for 10% to 15% of each country’s GDP8. Indonesia alone needs more than US$1 trillion in infrastructure investment from 2015 to 2030. All these point to significant opportunities for companies with the expertise to design, develop, construct, operate and upgrade infrastructure assets.
Another key area of growth lies in smart cities. Most of ASEAN’s growth has been, and will continue to be, driven by urban centres. A population of 90 million is expected to urbanise by 2030, with “middleweight” cities of between 200,000 and 2 million residents expected to drive 40% of the region’s growth . Talks are also underway for an ASEAN Smart Cities Network to connect 26 designated cities and leverage technology to improve the lives of citizens. Different cities will focus on different needs that will specifically address issues unique to them. Singapore firms with expertise in smart city technologies can contribute effectively to these efforts.
The Belt & Road Initiative also opens new avenues for Singapore firms. Singapore firms can draw on their experience in navigating regional markets, as well as reputation for efficiency and neutrality, to work with Chinese firms to bring projects in the region to fruition. These partnerships with complementary Chinese partners have the potential to unlock projects previously unfeasible due to gaps in capability, capacity and political influence.
As Asia’s infrastructure hub, Singapore is home to a comprehensive ecosystem comprising stakeholders across the entire value chain. Developers, investors, financiers, multilateral development banks, professional service providers, engineering, procurement & construction players come together in Singapore – according Singapore-based firms a wealth of solutions they can tap to capture the region’s opportunities. Financing is an area Singapore companies can contribute to. Infrastructure projects are capital-intensive while public funds are often limited. This means significant private sector financing is required – opening opportunities for Singapore’s financial institutions.
6Source: “Meeting Asia’s Infrastructure Needs”, Asian Development Bank, 2017
8Source: "Optimistic 2018 outlook for Southeast Asia but hurry on economic integration”, HSBC for Channel NewsAsia, 2018