By Sharon Lewis and Bobo Chan
*This article is the second of a five-part series on burgeoning digital economies in Southeast Asia. Read part one, on Indonesia, here.
Southeast Asia is home to stunning coastal vistas, delectable food, and a long history of cultural tradition. Today, however, Southeast Asia is known for one other thing–a region that is growing its innovative capabilities at full speed.
It would be wrong to see the region as a uniform, homogenized market. For instance, as one of the top 20 global startup ecosystems, Singapore has made its mark in Southeast Asia as a hub for innovation, owing to ease of doing business in the country as well as access to capital networks.
However, even companies in Singapore have to look at the wider Asia Pacific for markets to grow in, as Singapore is simply too compact a market for companies to scale. And Singapore is not the only one; as businesses start to exit China amidst global tensions, Southeast Asian countries are well positioned to seize the opportunity.
Southeast Asia also has a booming Internet economy. A massive 70% of Southeast Asian consumers are expected to go digital by the end of 2020, with a pool of 310 million users accounting for the region’s US$100+ billion Internet economy, although the numbers vary according to country.
In recent times, Southeast Asia has emerged from the shadows in tech and is accelerating the transformation of its digital landscape. Here’s a low-down on where its biggest economies have reached so far.
With stunning temples and thriving nightlife, Thailand is serene, lively and everything in between. It is also a $1.2 trillion economy (GDP according to purchasing power parity), propelled by tourism and exports.
2019 was a tough year for Thailand. Its economy, with a nominal GDP $543 billion, was hit hard by drought and falling household demand, not to mention the strong performance of the Thai baht hurting competitiveness in exports and tourism. Subsequently, economic growth contracted to a worrying 2.4% in 2019.
It’s not just the economy that is contracting, but its workforce as well. Thailand’s population, about 69 million people somewhat equally split between rural and urban, is aging. As of 2019, nearly 20% of its population was over the age of sixty, and by 2025, one in three Thai citizens are expected to become senior citizens.
The Thai Internet Economy is Nearly There
As of 2019, there were 47 million Internet users in Thailand, accounting for over 68% of its population. Per capita spending on the Internet economy in Thailand is concentrated in the Greater Bangkok area.
Interestingly, Internet users in Thailand spend over five hours a day on mobile Internet, a global record. Combined with the fact that Thailand is heavily reliant on tourism, its Internet economy is clearly playing to the country’s strengths.
For instance, online travel comprises the biggest segment of Thailand’s Internet economy, worth $7 billion in 2019 and growing at 17% annualized growth. It is followed by online media which is growing at a rate of 35%, driven by social media and video platforms in Thailand.
Despite being the second largest Southeast Asian economy, Thailand’s startups have not seen the success that their Indonesian or Singaporean counterparts have.
The country recorded the lowest startup funding in the first half of 2019 across Southeast Asia, with $50 million raised, but the tide is expected to turn this year.
For instance, Thai startups have raised a total of $162.6 million in the first half of 2020, with Q2 funding of $96 million beating a previous all-time high of $90.8 million raised in Q4 2017.
Of this amount, Thai fintech SYNQA raised nearly half of the year’s total, raking in $80 million in its Series C round of financing in June this year.
A Well-Backed Digital Transformation
Digital transformation is expected to grow Thailand’s economy by 0.4% by 2021, adding $9 billion to its GDP. As of 2017, 4% of Thailand’s economy came from digital products and services. This is not game-changing growth, but for a country that needs to get its economy back on its feet quickly, perhaps this is an opportunity that Thailand needs to grow.
The country is in a strong place when it comes to its digital transformation journey. The larger vision for digital transformation in Thailand is helmed by the Thai government’s Thailand 4.0.
Launched in 2016, Thailand 4.0 is an economic model that aims to resolve issues such as the inequality trap with a focus on innovation, and propelled the country into a cashless economy, with many Thai banks investing in digitalization.
Thailand has a significantly small unbanked population (18%), although nearly half its population is underbanked. Moreover, 34% of Thai organizations were found to be ahead in their digital transformation journeys, far beyond of the 21% global average.
Currently, China and South Korea are world leaders from the Asia Pacific region in the adoption of 5G. However, the Thai government has plans to leverage the next-gen network to drive smart industries within the country, based on Internet of Things (IoT) technology.
The Thai government is also promoting digital technologies as a pillar of its economy, especially in agriculture and small and medium enterprises (SMEs), which employ the most people in Thailand, Thai Prime Minister Prayut Chan-o-ch said at a conference last year.
“I want to remind you all that you should take advantage of the government’s adoption of advanced digital technologies to develop human capital, society and key business segments, including farmers and (SMEs),” he also said.
Moving forward with these words in mind, it remains to be seen how and when Thailand’s economy will bounce back from its 2019 struggles and the blows of the COVID-19 pandemic, and emerge as an economy to watch out for.
Header image by Il Vagabiondo on Unsplash