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Southeast Asia’s Internet economy growing faster than predicted: Report

SINGAPORE — Driven by the explosive growth of the online travel business and e-commerce, Southeast Asia’s Internet economy has expanded far quicker than expected to reach US$50 billion (S$67.6 billion) this year, according to a report by Internet giant Google and Temasek Holdings.

Southeast Asia’s Internet economy has expanded far quicker than expected to reach US$50 billion (S$67.6 billion) this year, according to a report by Internet giant Google and Temasek Holdings.  Photo: Glenn Carstens-Peters/Unsplash

Southeast Asia’s Internet economy has expanded far quicker than expected to reach US$50 billion (S$67.6 billion) this year, according to a report by Internet giant Google and Temasek Holdings. Photo: Glenn Carstens-Peters/Unsplash

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SINGAPORE — Driven by the explosive growth of the online travel business and e-commerce, Southeast Asia’s Internet economy has expanded far quicker than expected to reach US$50 billion (S$67.6 billion) this year, according to a report by Internet giant Google and Temasek Holdings.

Noting that the expansion of the region’s Internet economy was 35 per cent faster than projected, the report released on Tuesday (Dec 12) said it was on a “solid trajectory” to exceed an earlier target of US$200 billion by 2025.

The number of Web users has gone up by 70 million since 2015, to 330 million this year. The report focused on four key sectors of the Internet economy: Online travel, e-commerce, ride-hailing services and online media. Among these, e-commerce and ride-hailing services grew the fastest, with a compound annual growth rate of 41 and 43 per cent respectively. The online travel market remains the largest, at US$26.6 billion, followed by e-commerce (US$10.9 billion), online media (US$6.9 billion) and ride-hailing services (US$5.1 billion).

In particular, the rise of e-commerce — led mainly by small and medium businesses selling to consumers on mobile-first platforms such as Lazada and Shopee — has been fuelled by a highly-connected user base in the region. For example, Southeast Asians spend 140 minutes shopping online every month, almost twice as much time as Americans do, the report said.

By 2025, the region’s e-commerce market is predicted to hit US$88.1 billion.

Users in the region also spend more time in general surfing the web on their phones than anywhere else: Those in Thailand topped the charts at 4.2 hours a day on average while users in China, for example, spend about three hours a day on average on such activity. Users in Singapore spend about two hours a day, similar to their counterparts in the United States.

For ride-hailing services, the report estimates that over six million rides in Southeast Asia were booked everyday in the third quarter of this year, on apps such as Grab, Uber and Indonesian motorbike-hailing start-up Go-Jek.

The report noted that ride-hailing firms are expanding into on-demand services such as food delivery and courier services.

According to Google, search volumes for digital payments also grew by 161 times in the third quarter of this year, as compared to the same period in 2015.

The report found that between last year and the third quarter of 2017, more than US$12 billion were pumped into the region’s Internet companies. Singapore-based companies such as Grab and Lazada were involved in a majority of these investments, receiving about 58 per cent of total funds raised. In comparison, Indonesia-based companies received 34 per cent of the investments, for example.

Nevertheless, a sizeable share of the funds received by Singapore-based companies flows into their regional operations, said the report.

Out of the US$12 billion invested into companies in Southeast Asia, three quarters were raised by the Internet “unicorns” comprising Go-Jek, Grab, Lazada, Razer, Sea Ltd (formerly known as Garena), Traveloka and Tokopedia.

However, despite the promising outlook for the Internet economy, the report warned that the shortage of homegrown talent in Southeast Asia was a pressing challenge.

While advances in e-payment solutions and consumer trust in online transactions have improved in the last two years, the talent crunch remains largely unresolved, the report added. The shortage is mainly in senior engineering roles and leadership positions, said Google managing director (Southeast Asia and India) Rajan Anandan.

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