Consider that the median age of people in Germany and Japan is 47, and that it’s 37 in China and the United States. People are notably younger in Southeast Asia, which likely means they will provide an exciting arena for millennia-generation digital economies.
Asia is no longer going to the world’s low-cost manufacturing region. As the McKinsey consultancy firm headlines in a new report, “Asia’s future is now” and “the question is no longer how quickly Asia wil rise; it is how Asia will lead.”
As global media obsesses with the giant American tech firms such as Google, Facebook and Amazon, while also noting that China has its own ecosystem dominated by Baudu, JD, WeChat, Tencent and TikTok ,a Chinese video-clip app that has been the most downloaded item worldwide on the iOS app store for five consecutive quarters. It’s easy to miss a hefty number of successful start-ups based in Indonesia, the Philippines and elsewhere around the region.
Take PT Aplikasi Karya Anak Bangsa, known as Go-Jek, the only Southeast Asian company included in Fortune’s “50 Companies That Changed the World” list in 2017 and now worth around $10 billion. It began life a decade ago as a fleet of 20 motorbikes providing commuting services around Indonesia. Today it is an app-based on-demand service that has been downloaded 30 million times and employs more than one million drivers of motorbikes and cars, offering a critical tool to people in bustling cities such as Jakarta but also farflung rural villages. It has begun operations in Vietnam, Singapore and Thailand, with Malaysia and the Philippines soon to join the list.
Having achieved cachet and scale, it now has investments in engineering firms in India, various fin-tech startups, a recruiting platform based on Artificial Intelligence and it recently acquired its home country’s largest online ticket booking and event management company. Based in an innovatively revamped derelict shopping mall, Go-Jek has also rolled out further products such as an e-wallet, a medicine delivery service, a massage-hailing app and Go-Food, the world’s largest food delivery app.
The explosive growth testifies to the growing incomes in a region with a population far larger than Europe’s. Indeed, retail sales in the region are expected to nearly double by 2025 to $1.4 trillion, according to a study by Google and Singapore’s institutional fund Temasek. “Millennials are the biggest adopters of e-commerce, and players in Southeast Asia are continuously focused on catering to this generation,” says Tan Yinglan, chief executive of Insignia Venture Partners, which focuses on technology startups in the region.
Sustainable success will require optimized infrastructure investments, as virtual commerce loses its efficiency in the absence of the ability to move people, goods and services to where they want to go. Logistics costs account for high shares of local GDP and constitute a bottleneck about which policy makers are well aware. Budget flows are robust, as returns on better infrastructure can be rapid in terms of lowering business costs linked to communication, transportation, sanitation and energy.
While China has a special position in Asia due to its size and single regulatory framework, Southeast Asia comprises around a dozen countries with vastly different cultures, languages and income levels. There’s a 44-fold difference in GDP per capita between Singapore and Myanmar.
That may generate a more maverick style of competition as it proves harder to achieve monopoly-type domination. Tigers may prove more agile than dragons.
“We expect digital disruption in Southeast Asian markets to continue moving faster than in Western markets,” says Suvir Varma, senior advisor with Bain and Company in Singapore. One reason that competition will intensify amid the rapid growth, he notes is that is that Internet access and smartphone ownership is skyrocketing at a time when there are fewer existing legacy structures in the retail space.
Southeast Asian companies may be uniquely well placed to expand internationally due to the diversity of their domestic human environments, says June Chen, an associate at Monk’s Hill Ventures, a tech fund in Bangkok, who expects payment services will be a key differentiator for success as more than half the region’s population do not have bank accounts and would often be unable to apply for traditional loans.
As it will be the region’s younger millennials who are calling the shots, novelty is the order of the day. Indeed, today’s landscape increasingly resembles that found by Marco Polo when he traveled around the region 700 years ago.