SINGAPORE – More than 75% of the population in six major Southeast Asian countries have access to the internet and a majority of them have shopped online at least once, according to a new report from Google, Temasek Holdings and Bain & Company.
As many as 40 million people across Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand came online for the first time this year, according to the report which was released on Wednesday.
That pushed the number of internet users in those six countries to over 440 million people, of which 80% made an online purchase at least once, the report said.
The report did not address the populations of all Southeast Asian countries, leaving out ASEAN members Brunei, Cambodia, Laos and Myanmar, as well as East Timor and Papua New Guinea.
The coronavirus pandemic caused a surge in digital services such as e-commerce, food and grocery delivery and online payment. More than 60 million people in the region used digital services for the first time due to Covid-19 — and 20 million of them did so in the first half of 2021, according to the report, which is in its sixth year.
Road to a $1 trillion internet economy
Most internet sectors in Southeast Asia have been resilient to the ill-effects of the pandemic, including months of stringent lockdown measures, which affected businesses and employment worldwide.
As the number of people vaccinated against Covid grows, countries have been slowly easing restrictions this year to get their economies back on track.
The report predicted that the internet sector in those six Southeast Asian countries could reach $174 billion in gross merchandize value (GMV) in 2021 — up 49% from a year ago, with e-commerce driving most of the growth. GMV is a metric most commonly used in e-commerce that measures the total dollar value of goods sold over a certain period of time.
Alongside e-commerce, online financial services in the region are also growing as digital payments and e-wallets become more mainstream, according to the report. The gross transaction value for digital payments in those six countries this year is predicted to be $707 billion, up 9% from last year.
E-commerce is expected to remain the largest segment of the internet economy through to 2025 and beyond, according to Stephanie Davis, vice president for Southeast Asia at Google.
“But we see really robust growth across the other categories as well,” Davis told CNBC’s “Street Signs Asia” on Wednesday. “We expect transport to make a comeback, we see food delivery remaining strong in the region.”
The muted travel segment — which took a hit due to the pandemic — is set for a rebound starting next year and a return to strong growth by 2025, she added. All six countries are set to post double-digit growth this year compared to 2020.
The Philippines is leading by a large margin, and is set to post a 93% growth in GMV from $9 billion in 2020 to $17 billion in 2021, the report showed.
Overall, the internet economy in the six countries is predicted to cross $360 billion by 2025. It could reach anywhere between $700 billion and $1 trillion by 2030 as online shopping becomes the norm, according to the report.
A thriving deals landscape
More investors are pouring money into Southeast Asia’s internet economy, particularly in sectors such as e-commerce and online financial services.
“The world is awash with liquidity and people are looking for growth opportunities in a zero interest rate world environment,” Rohit Sipahimalani, chief investment strategist at Singapore state investor Temasek, told CNBC’s “Street Signs Asia” on Wednesday.
“Apart from that, actually, people have been really impressed by the resilience of [the region’s internet] sector during Covid,” he said, adding that in the past, it was mostly private capital that funded companies operating in that space.
“For the first time this year, we’re seeing many of these companies in a position to tap the public markets,” he said.
Bigger funding rounds and higher valuations for start-ups have created 11 new consumer technology unicorns this year while more established companies are exploring initial public offerings, according to the report. A unicorn is a start-up that is valued at $1 billion or higher.
For example, online marketplace Carousell raised $100 million in fresh funds in September that valued the company at $1.1 billion while ride-hailing giant Grab in April announced plans to go public.
Indonesia’s e-commerce giant Bukalapak also made its stock market debut in August.