Southeast Asia has been a hub for manufacturing and export-led growth for decades. However, with the rise of the digital economy, the region is now turning towards tech-based services, driven by innovation, entrepreneurship, and favorable government policies. The tech industry in Southeast Asia has seen unprecedented growth in recent years, with a thriving startup ecosystem and increasing investment from both local and foreign investors. According to a report by Google, Temasek, and Bain & Company, the region’s internet economy is expected to reach $300 billion by 2025, up from $100 billion in 2019. To accommodate the startup ecosystem in Southeast Asia, Venture Capital funds raised $151 billion in the first three quarters of 2022, the highest it has ever been. The growth in the tech industry is fueled by the region’s young and tech-savvy population, with over 400 million internet users and a rapidly expanding middle class.
One of the significant factors contributing to the growth of the tech industry in Southeast Asia is the increasing use of mobile phones and the internet. Mobile penetration in the region is among the highest in the world, with mobile internet usage reaching 70% in some countries. This has led to the rapid growth of e-commerce, online payment systems, and other digital services. Consumer-facing software specifically has seen significant growth in the region and two of the biggest IPOs in 2022 (Gojek #1 and Bilibili #5) were both consumer technology companies.
Governments in the region are also recognizing the potential of the tech industry and are taking steps to promote innovation and entrepreneurship. Singapore, for instance, has established a robust startup ecosystem with a range of government-backed initiatives, such as grants, tax incentives, and access to funding. The country has also invested heavily in research and development, with a focus on emerging technologies like AI, blockchain, and quantum computing.
Similarly, Indonesia has launched a digital roadmap to promote the growth of its digital economy, focusing on areas such as e-commerce, fintech, and the development of digital infrastructure. The country has also created a regulatory sandbox to enable startups to test new products and services in a controlled environment. In Indonesia alone, the Technology, Media and Telecommunications industry raised over US$1.7 billion which represented 71% of total funds raised.
Southeast Asia’s internet economy is expected to reach US$350+ billion by 2025 — surpassing the previous forecast of $300 billion. The region’s young and tech-savvy population, combined with the increasing use of mobile phones and the internet, is fueling the growth of e-commerce, online payment systems, and other digital services. With the region’s governments recognizing the potential of the tech industry and taking steps to promote innovation and entrepreneurship, Southeast Asia is poised to become a major player in the global tech industry in the coming years.