By Sharon Lewis and Bobo Chan
*This article is the last of a five-part series on burgeoning digital economies in Southeast Asia. Part 1 | Part 2 | Part 3 | Part 4
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.
In recent years, industries across Vietnam have undergone changes at unprecedented speed, and, from the looks of it, are reaping the rewards simultaneously.
From 2002 to 2018, 45 million people in Vietnam were lifted out of poverty. Today, the country’s GDP (according to purchasing power parity) flourishes at $1.035 trillion. Vietnam’s miracle growth has made it one of the fastest-growing economies in Asia.
Bolstering Vietnam’s Startup Ecosystem
Vietnam’s startup ecosystem has been faring well, and in fact, has even been dubbed as “Southeast Asia’s Silicon Valley” by PC Magazine. Specifically in the fields of IT, ICT and digital services, Vietnam houses approximately 30,000 businesses.
Investments in Vietnam-based tech startups amounted to a total of $741 million in 2019, and this year, the country’s startup ecosystem rose 13 places to rank 59th in a list of 100 best startup ecosystems this year.
Yet, Vietnam still falls behind compared to its fellow ASEAN counterparts–Malaysia was ranked 48th, Thailand, 50th, the Philippines, 53rd and Indonesia, 54th.
Nonetheless, Vietnam’s Internet economy enjoyed close to $1 billion in funding in 2019, which makes it the third most-funded economy next to Indonesia and Singapore.
This is largely due to Vietnam’s ecommerce startups, such as homegrown “aspiring unicorns” Tiki and Sendo and regional companies Lazada and Shopee, which have been capitalizing on the Vietnamese marketplace.
A Mecca for Digital Transformation?
Owing to its significant Internet economy and its advantage in digitalization, Vietnam has gone on to [emerge] as “the most digital of all economies in the [Southeast Asian] region.” The Vietnamese government is leading the charge with the country’s digital transformation.
In a report titled ‘Vietnam’s Future Digital Economy-Towards 2030 and 2045’, the Vietnam Government outlined two important areas of Vietnam’s technology landscape. These are manufacturing, which makes up for 16% of the country’s GDP, and fintech, enabling banking and insurance companies to digitize and automate the way they work.
With a population of 97 million, Vietnam also holds a large, youthful and tech-savvy labor force to take charge of the country’s digital revolution, thanks to the policies, programs and initiatives implemented by the Vietnam Government.
For instance, from 2005 to 2017, the government increased its state budget on education to incorporate technology trends into the educational curriculum, placing an added focus on STEM fields.
Moreover, according to the government, Vietnam provides the “lowest fixed broadband prices” in the APAC region, and, like Thailand, will be one of few countries worldwide to trial 5G in 2021.
The Vietnamese government also aims to make the Internet more accessible to Vietnam’s population. Executed correctly, this can remove potential barriers to access to technology posed by social and geographical differences, and promote digital inclusion in Vietnam.
Vietnam has performed strongly in a regional comparison between ASEAN nations in the areas of high technology exports, and shone in its position on the Global Innovation Index. By 2018, the ICT industry in Vietnam brought in $98.9 billion.
With governmental support and sky-high rates of digital literacy, Vietnam looks well poised to carry its digital transformation journey ahead.
While Vietnam has had a stellar run with digital technologies, the country faces obstacles to achieving a complete digital transformation.
A cybersecurity law enacted in 2019 caught flak for monitoring and potentially censoring citizens’ online activities. Furthermore, laws in Vietnam need to be updated alongside technological developments, and be enforced to ensure that Vietnam consistently hits small digital milestones.
Another limitation that has been holding Vietnam’s digital transformation back is the lack of financial resources available for digitalization. To rapidly bolster data and transmission speeds, enormous investments will be required, but they are yet to come in. The lack of investments so far is likely because many traditional Vietnamese investors are skeptical of technology startups.
“They are more conservative and prefer putting money into real estate,” Nguyen Thuy Lien, Head, Corporate Development, at the games-publishing startup, Appota, told CNN. Thus, investors’ mindsets toward tech startups must change in order for the tech landscape to make new breakthroughs.
Vietnam’s success hinges on how well the country conquers its challenges in achieving digital transformation. But as of now, the country stands as a modern digital economy in the making.
Header image by Roméo A. on Unsplash