The digital transformation of South and Southeast Asia is opening a range of opportunities for its citizens, especially younger generations. Many Southeast Asian countries like Indonesia are even in the lead globally in certain digitalization sectors.
For example, according to a World Economic Forum survey, the Philippines and Malaysia have become the top two countries in e-commerce retail growth, increasing by 25% and 23% per year.
With the advent of rapid digitalization, Asian countries like India, Bangladesh, Pakistan, and the Philippines are tapping new opportunities by exporting online labor to the West. In Bangladesh, for example, the digital economy is bringing employment to hitherto excluded sections of the population.
The Pandemic Was a Game-Changer
During the COVID-19 pandemic, digital connectivity in Asia and ASEAN played a vital role in overcoming the difficulties of conventional trade. The digital economy functioned as a key enabling factor in the Asian recovery, Observer Research Foundation reports.
According to Nikkei Asia, the pandemic has had a striking impact on Southeast Asia’s digital economy. Sixty million people in the region became online consumers during this period.
With this accelerated uptake of technology, there was an increase in all e-commerce during the pandemic, with solid growth in sports equipment and supermarket items.
Asia, the most populous continent, has a sizable number of mobile phone users globally; around two-thirds of people use mobile services, and there is still room for further expansion. The fastest growth rates are in South and Southeast Asian countries.
The use of smartphones is quite common across most emerging economies. Countries like Singapore (87%), Malaysia (83%), and Thailand (75%) have comparatively higher smartphone penetration.
However, in the case of smartphone market growth in 2020, the Philippines had the highest increase, over 90%. Similarly, according to the Global System for Mobile communications Association (GSMA), mobile data consumption in South and Southeast Asia will increase by three times by 2025, from 9.2 GB to 28.9 GB per month per user.
The United Nations Economic and Social Commission for Asia and the Pacific (UN-ESCAP) reports that Asia is the fastest-growing region in the global e-commerce marketplace. Around 78% of Asia’s $2.448 trillion e-commerce retail sales are via mobile phones.
Social media has been another driving force in digitalization on the continent – but the penetration rate in Southeast Asia is much higher than that of South Asia.
For instance, Malaysia has the highest social media penetration rate (81%) in Southeast Asia, followed by Singapore (79%); the Philippines (67%) and Indonesia (59%) also feature strongly. But, in South Asia, the highest-ranking nations, India and Bangladesh, only have penetration rates of 29% and 22%, respectively.
Digitization and Indonesia
Indonesian e-commerce players have been rapidly growing over the past decade and started to disrupt the traditional retail market. For MSME producers, this becomes an opportunity to capture more market access. However, the entrance of e-commerce players also creates a threat as they create fiercer market competition for wholesalers and retailers.
The Indonesian Ministry of Trade continues to optimize the potential of Indonesia’s rapidly growing digital economy sector. It is estimated that by 2030, the sector’s contribution to the national economy will increase to 18 percent of the total gross domestic product (GDP).
This was conveyed by the Deputy Minister of Trade Jerry Sambuaga at the World Cloud Show Indonesia Edition 2022, organized by The Trescon Global Business Solution in Jakarta.