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SE Asia’s digital economy may treble to US$300b by 2025, S’pore ‘punching above weight’: Report

SINGAPORE — With the rise of e-commerce, ride hailing and online gaming in South-east Asia, the region’s Internet economy could swell to US$300 billion (about S$415 billion) by 2025, three times its current annual size. This is based on a report by Temasek, Google and Bain & Company released on Thursday (Oct 3).

There are 570 million people in South-east Asia. Of them, 360 million are now connected to the Internet — about 100 million more than four years ago.

There are 570 million people in South-east Asia. Of them, 360 million are now connected to the Internet — about 100 million more than four years ago.

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SINGAPORE — With the rise of e-commerce, ride hailing and online gaming in South-east Asia, the region’s Internet economy could swell to US$300 billion (about S$415 billion) by 2025, three times its current annual size. This is based on a report by Temasek, Google and Bain & Company released on Thursday (Oct 3).

In particular, Indonesia and Vietnam are the fastest-growing digital economies in the region, with average growth rates exceeding 40 per cent since 2015, the report noted. Other economies that were studied included those of Malaysia, the Philippines, Singapore and Thailand.

The 65-page “e-Conomy SEA 2019” report is the fourth in a series of annual reports published by Singapore's sovereign wealth fund Temasek and Internet giant Google since 2016, in a bid to track the growth of the booming digital economy in the region. Bain & Company joined them in the latest report.

Google South-east Asia's managing director Stephanie Davis said that Singapore, while being one of the smallest in the region in terms of both growth rates and population, is “punching above its weight” with greater access to talent, a disproportionate number of tech “unicorns” — worth over US$1 billion — and people who spend more for each online transaction.

Mr Rohit Sipahimalani, joint head of investment, portfolio strategy and risk at Temasek, said, however, that shortage of tech talent remains the main challenge across the region, including in Singapore.

This could limit the thriving Internet economy, even amid progress in financing, consumer trust, Internet access, logistics and digital payments over the years. 


There are 570 million people in South-east Asia. Of them, 360 million are now connected to the Internet — about 100 million more than four years ago.

Around 90 per cent access the Internet primarily with mobile devices.

The report identified four main sectors in the Internet economy in the region:

  1. The US$38 billion e-commerce industry – online retail, digital marketplaces, online groceries

  2. The US$12.7 billion ride-hailing industry – transportation, ride-sharing platforms and food delivery services

  3. The US$14.2 billion online media industry – subbscription video and music streaming services, online gaming and advertising

  4. The US$34 billion online travel industry – vacation rentals, flight and hotel booking services

E-commerce is the fastest-growing sector, growing seven times from the US$5.5 billion in 2015. It leapfrogged online travel this year to become the largest sector in the digital economy, with five million orders submitted on average daily, the report said.

E-commerce is also on track to hit US$150 billion by 2025, it added.

There are also five times more people who use ride-hailing services now, up from eight million in 2015 to 40 million this year.

“In the span of a few years, e-commerce and ride hailing have become an integral part of daily life for millions of South-east Asians, especially those living in big cities. They offer convenience, value and access to services and products that were previously difficult to obtain,” the report noted.


Beyond the four sectors of the Internet economy, the report said that digital finance businesses have reached an inflection point, with financial technology (fintech) making it possible to reach out to South-east Asians with limited access to traditional banking.

Of the 400 million adults in the region, 198 million are “unbanked” — people with no bank accounts.

Another 98 million are underbanked, which means they have a bank account but have limited access to credit, investment and insurance.

The report highlighted five types of digital services:

  1. E-payments – Digital payments reached US$600 billion in 2019, and are expected to cross US$1 trillion by 2025. This will make it the payment method used for nearly half of all transactions.

  2. Remittance – South-east Asians remitted around US$11 billion in 2019, with more than double — US$28 billion — expected by 2025.

  3. Lending – There is a loan book of US$23 billion in 2019, which is on track for a US$110 billion loan book by 2025, due to innovations in consumer and business lending.

  4. Investment – In 2019, the total market value of digital investments was US$10 billion, and may increase to US$75 billion by 2025.

  5. Insurance – Written premiums for digital insurance reached US$2 billion in 2019, and are expected to rise to US$8 billion in 2025.

However, Mr Florian Hoppe, partner and leader of Asia-Pacific digital practice at Bain, said that there will still be casualties among Internet-economy businesses, including more established players. One example of this is online marketplace and food delivery operator Honestbee, which is now in financial trouble.

There are no secret ingredients to success — it takes good management and a viable scaling and funding strategy to avoid failure, he told TODAY.

Citing the example of embattled co-working space operator WeWork, Mr Sipahimalani said that such cases require a fine balancing act between growth and profitability, while also having proper corporate governance. WeWork’s bid to go public revealed that the company had been loss-making.

“What people are saying is that they don’t want models that are focusing on growth and have no visibility on when you are going to break even,” he said.


There are five million Internet users in Singapore this year, which is nearly equal to its entire population of 5.6 million.

In Singapore, online travel is a US$6 billion industry and is still the largest component of the Internet economy, followed by the US$3 billion in ride hailing, US$2 billion in e-commerce and US$1 billion in online media.

While Singapore’s growth may pale in comparison to Indonesia and Vietnam, this is due to the country’s smaller market, which is highly connected to the Internet with virtually zero unbanked persons.

In comparison, the untapped growth potential in other countries comes from the unbanked populations, those lacking Internet access or living in rural areas.

It may not be the largest in terms of gross merchandise volume, but Singapore is still home to a large number of multinationals who chose the country as a means to access the region.

Ms Davis of Google said that Singapore also has more tech “unicorns” than other countries except Indonesia, a rich start-up culture and strong access to talent, international or local.


Tech unicorns are companies that are valued above US$1 billion. There are 11 unicorns in the region, five of which are Singapore-based.

  • Bigo Technology (Singapore) – online and social media platform

  • Bukalapak (Indonesia) – e-commerce technology firm

  • Gojek (Indonesia): – ride-hailing and payments

  • Grab (Singapore) – ride-hailing and payments

  • Lazada (Singapore) – digital marketplace

  • Razer (Singapore) – e-sports and payments

  • OVO (Indonesia) – payments and financial services

  • Sea Group (Singapore) – e-sports and entertainment

  • Traveloka (Indonesia) – online travel

  • Tokopedia (Indonesia) – e-commerce technology firm

  • VNG Corporation (Vietnam) – online entertainment, social media and e-commerce

The report also identified 70 “aspiring unicorns” — tech companies valued at between US$100 million and US$1 billion. Mr Sipahimalani said that fewer than half of these are located in Singapore. 

They are:

  • Carousell (Singapore) – digital marketplace

  • ONE Championship (Singapore) – sports media property

  • Zilingo (Singapore) – fashion e-commerce

  • Carro (Singapore) – online automotive marketplace

  • PropertyGuru (Singapore) – online real estate marketplace

In other areas, the report said that Singapore is an established gateway for funding in the region, raising more than US$23 billion since 2016, the most in South-east Asia.

Mr Sipahimalani of Temasek said that amid the muted global economic growth created by trade tensions, the digital economy in South-east Asia still remains resilient. He explained that this is because most of the services in the digital economy concern domestic consumption, instead of external trade.

Investment confidence in startups remains strong despite these headwinds, while most prominent companies also have access to capital, he added.

In total, close to S$37 billion flowed into South-east Asia’s Internet economy between 2015 and the first half of this year.


However, the lack of readily available tech talent remains “an unresolved challenge” for the ecosystem, the report noted.

To this end, Internet businesses have launched upskilling programmes to fill the gap in digital skills, and have also hired senior professionals from the banks, retailers and global technology companies to manage new business units and increasingly complex organisations, the report said.

Ms Davis told TODAY that all tech firms, including Google, are facing a talent crunch. Google addresses this through a “hybrid” approach of hiring local talent, foreign manpower and situating engineering talent overseas. It has committed to training three million people in South-east Asia in digital skills.

She declined to reveal Google’s manpower footprint in Singapore, adding that the effort to bridge the talent gap will also need to involve governments and institutions of higher learning.

“If you think about the current approach (in securing talent), it has gotten us to a good spot — South-east Asia’s US$100 billion Internet economy is impressive. But if we are looking at tripling that, it is not likely to be sustainable (talent-wise). Talent continues to be the biggest hurdle that businesses face,” Ms Davis said.

On a more positive note, however, Mr Sipahimalani noted the trend of a “reverse diaspora”, whereby South-east Asians who moved abroad to study and work are now heading home to join or found startups.

Mr Hoppe of Bain & Company said that he, too, observed how Singaporeans are more willing to consider jobs in smaller but more exciting startups, as well as starting careers in countries that have fewer established norms.

Working in the Philippines instead of Silicon Valley, or a small firm rather than a large brand-name company, can be riskier but more rewarding. This is because they can make a bigger impact and have a stake in the company’s success, he said.

Related topics

Temasek Google Bain South-east Asia digital economy

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