Thriving spring for ASEAN’s digital economy

>> Digital economy-driven new growth orbit

A blooming digital market from ASEAN…

Despite a so-called “funding winter”, Southeast Asia remains home to the world’s fastest-growing digital economy: the region’s digital economy expanded by 12% last year and is expected to record a compound annual growth rate of 16% until 2030, reaching to almost US$1 trillion value by that year. This potential is partly driven by ASEAN’s growing population of 700 million, gathering a large portion of young, educated and tech-savvy people, as well as growing middle-class consumers.

We’re also increasingly seeing ASEAN’s growing appeal to investors in our discussions with clients, including at the recent Global Investment Summit, hosted by HSBC this April. This sentiment is also borne out in a recent HSBC survey of businesses operating in ASEAN, 74% of whom intend to increase their investment in the region in 2024.

The acceleration of digitalisation in the region has been boosted by Government programmes, from Singapore to Indonesia, Vietnam, Thailand, the Philippines and Malaysia. A new US$1.3 billion government fund was unveiled during an ASEAN-Australia summit in Melbourne early March, providing loans, guarantees, equity and insurance for projects that will boost the ASEAN-Australia corridor.

These factors all create fantastic opportunities for companies in the digital economy. There are particularly bright prospects for e-commerce, digital financial services, health tech, green tech, the clean mobility ecosystem and artificial intelligence.

…to Vietnam

Zooming into Vietnam, it has been the fastest growing digital economy in Vietnam in 2022, 2023 and expected to maintain this position until 2025, with the forecast of smartphones users reaching 67.3 million by 2026, accounting for 96.9% internet users. Vietnam has become a leading market for the digital industry for both local and international players.

The growth of the digital economy in Vietnam continues to impress, last year it contributed to 16.5% to the GDP, with over 1,500 Vietnamese digital technology enterprises gaining revenues from foreign markets, an increase of more than 7% compared to 2022.

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In a recent survey 60% of businesses operating in Vietnam told us that they plan to invest in technology and digitalisation of their existing business, with the focus on digital payments, e-commerce, AI. Those companies believe that adopting and enhancing digital services will help them meet customers’ expectations for digital convenience and improve efficiencies.

Capital, in this context, has become the lifeblood of innovative companies. Against that backdrop, HSBC has enhanced our offering to digital-economy companies, launching a dedicated US$1 billion ASEAN Growth Fund that can help finance platform companies with a proven track record in generating sustainable cashflows, even if they do not meet traditional financing criteria. 

We understand that profitability may not always reflect a company’s potential in its early stages, hence we take a long-term view of potential growth by evaluating companies based on key operating metrics, growth plans and customer-acquisition strategies.

Smart strategy

To sustain their growth, companies in the digital economy will need to focus on controlling costs and raising revenues. They must also reconsider their approach to funding to manage their cost of capital and secure their long-term viability.

Exploring partnerships with firms in other markets can also allow them to expand across borders or develop their capabilities without having to make substantial investments themselves. Securing the right partner can also boost their credibility, enhance appeal to customers and—particularly relevant in the current climate—make them more attractive to potential investors.

Such intra-regional initiatives also align with the aims set out in ASEAN’s digital masterplan to 2025, which was reaffirmed at a meeting of the bloc’s digital ministers earlier this year.

As ASEAN’s digital economy expands, cross-border e-commerce is also creating growth opportunities for new- and traditional-economy firms. Making it easier for customers to pay through a company’s digital platforms can be an important revenue driver over the years ahead.

Thriving spring ahead

While the past two years have been challenging for many digital economy firms looking to raise capital, there are reasons to be more optimistic in 2024.

The economic recovery is driving consumption among an increasingly affluent population of 670 million, as one person enters the middle-income bracket every two seconds on average. The region has one of the highest digital penetration rates in the world, while e-commerce passed the USD100 billion revenue mark last year.

Progressive approaches to financing, and the region’s strong fundamentals will all help drive the growth ambitions of businesses in ASEAN. And Vietnam, as one of the bloc’s members, will definitely benefit.