Thursday, September 29, 2022

Awakening the slumbering giants of Southeast Asia

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Kanin Asvaplungprohm (“Asva”), founder and general partner of Robust.

Now that China has had its moment, it may be time for the countries of Southeast Asia to rise again.

China’s workforce and skilled, low-cost manufacturing base have performed well, contributing to the rise of companies such as Facebook, Apple, Amazon, Netflix, and Google (the oft-mentioned prominent technology companies collectively known as FAANG). But China’s GDP growth is slowand I see the effects of the war in Ukraine, Covid lockdowns and other restrictions as possibly a contraction of the economy.

Why Southeast Asia? Why now?

Appetite is rapidly changing as investors and entrepreneurs look beyond the tech mecca Silicon Valley. It’s hugely overcrowded, and the simple economics is that there’s too much demand, drive up valuations and returns down.

While things are slowing due to a bearish economy and aggressive rate hikes have impacted globally, Southeast Asia has not lost any momentum. Southeast Asia’s tech startups have an impressive $8.2 billion in 2019.

A joint report by Google, Temasek and Bain & Co. shows that while the middle class in Southeast Asia is growing rapidly, the population is also coming online at a breakneck pace, with an estimated 40 million new internet users log in in 2020 and 2021.

During Covid-19, digital connectivity in Asia played a vital role in overcoming the difficulties of conventional trade. And crucially, according to the same report, 94% of new digital consumers plan to continue using digital services after the pandemic.

In addition to providing a fertile ground for digital transformation, the people of Southeast Asia are poised to embrace the tech industry. STEM Education Expenses has increasedand the cost of living is low, making the skilled labor force in the region affordable.

In addition to labor arbitrage, the Southeast Asian tech ecosystem is also characterized by market valuations that 30% to 40% lower than the US and lower regional start-up costs. This explains why the SEA tech ecosystem is rapidly gaining ground.

Many countries are even leading the way worldwide. According to Business news in Thailand“The Philippines and Malaysia have become the top two countries in e-commerce retail growth, with an increase of 25% and 23% per yearrespectively.”

The OECD predicts that emerging Asian economies will grow by: 5.8% on average in 2022 and 5.2% in 2023 and is the only region in the world likely to avoid the effects of stagflation. Beginning in March 2022, the White House plans to make another $150 million in Southeast Asian countries for initiatives to deepen US relations in the region.

Public markets are also attractive, and with SEA valuations nearing rock bottom, this is probably a good time to invest as I believe there is still an early mover advantage.

Overall, for the reasons outlined above, I remain optimistic about the long-term outlook for startups in Southeast Asia, even with the recent market volatility. Looking at the long-term average, every technology-related tech in the region has continued to grow, and Southeast Asia’s main engines – Thailand, Vietnam, Indonesia and Malaysia – continue to push forward as the post-pandemic era beckons and measures are scrapped.

With tourism likely to return to the forefront, countries are also benefiting from increased export growth and the shift of manufacturing from China to Vietnam, for example. As better economic news continues to spread and roll in, the countries of Southeast Asia are quickly awakening from their slumber. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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