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15 Signs That South East Asia’s Digital Economy Could be Huge

Services are moving online and the shift to a digital world may be gaining momentum. Traditional businesses may in fact already be feeling the heat from the rise of the digital economy.

For instance, bricks-and-mortar retailer Isetan (Singapore) Ltd (SGX: I15) noted that technological-savvy customers are turning to e-commerce, intensifying the competition for consumers’ dollars. Meanwhile, mall owner CapitaLand Mall Trust (SGX: C38U) is taking big steps to draw customers back to its malls and away from online shopping.

Elsewhere, land transport services giant Comfortdelgro Corporation Ltd (SGX: C52) is facing competition from the likes of ride-hailing apps such as Uber and Grab.

There are signs that the digital economy might even accelerate from here. A recent study by Google and Temasek, one of the Singapore government’s investment arms, had highlighted 15 key figures that investors might want to take note of:

  1. Southeast Asia (the study only includes Thailand, Singapore, Indonesia, Vietnam, Philippines, and Malaysia; from here on, Southeast Asia will mean just the aforementioned six countries) is one of the world’s fastest growing regions when it comes to internet user growth. The internet user base in Southeast Asia is expected to grow from 260 million in 2015 to 480 million by 2020. The study also believes that 3.8 million users are coming online every month.
  2. Indonesia is expected to be the fastest growing internet market in Southeast Asia from 2015 to 2020 with a 19% compound annual growth rate (CAGR) in the number of internet users. Singapore’s internet market looks to be fairly saturated as the number of internet users is expected to grow at just a 3% CAGR.
  3. The size of the internet economy is estimated to be around US$31 billion in Southeast Asia in 2015. This is expected to hit almost US$200 billion by 2025, signifying a 645% increase over the next decade.
  4. One key driver for that projected growth will be eCommerce. Online transactions are expected to explode from US$5.5 billion in 2015 to US$88 billion over the next 10 years. But here’s the kicker: Even at US$88 billion in 2025, eCommerce is expected to represent just 6.4% of the total retail pie at that point in time. Over the same 10 year block, Singapore’s eCommerce market is expected to grow from US$1 billion to US$5.4 billion.
  5. Demographics may favor the region as well. It is estimated that 70% of Southeast Asia’s population is under the age of 40 years old. Internet speeds are expected to improve and more than 80% of the population is expected to gain access to the internet (as compared to just 46% today).
  6. The online rides market in Southeast Asia is expected to increase from US$2.5 billion in 2015 to US$13.1 billion in 2025. Closer to home, Singapore’s online rides market is expected to top US$1.5 billion in 2025.
  7. Southeast Asia’s online ads market is expected to balloon from US$2.1 billion in 2015 to US$9.9 billion in 2025. In Singapore, the online ads market is expected to approach US$1 billion over the same timeframe. Investors in newspaper publisher Singapore Press Holdings Limited (SGX: T39) might want to take note; the company still derives the bulk of its revenue from advertising shown on its traditional print media.

The above represents just a slice of the wealth of data shared in the report. From the data, it looks like Southeast Asia’s digital economy is here to stay and has significant room for growth in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.Motley Fool Singapore contributor Chin Hui Leong owns shares of Alphabet (the parent company of Google).