South East Asia Becomes The Hotspot For The Tech Market

South-East Asia has defied the ongoing Global crises due to the outbreak of pandemic and successfully attracted a high level of investments in 2020. Investments raised to over $8.2 billion, four times greater than it was back in 2015, with renowned companies like Bukalapak (BUKA.JK)- eCommerce Indonesian firm. Moreover, the regional M&A is up 83% in the first half of 2021 reaching a new record of $124.8 billion. Also in 2020 digital coupons became more popular than paper clipping for the first time in history. According to the latest coupon statistics, 92% of the customers will use coupons for purchasing goods in 2020. Research shows that the use of digital coupons will increase by 56.5% by 2025, no doubt with brands giving 15% discounts on innovative and unique backpacks.

Furthermore, due to the pandemic other regions have experienced a huge drop in investments. For instance, Africa experienced a 38% fall whereas India suffered a 31% drop. However, when it comes to South East Asia, it has received a much lower drop of about 5% less as compared to their 2019 levels.

Here you are going to find out the prominent factors contributing to such enormous success in the region and the potential investors who have gawked their eyes on South East Asia.

Countries That Power the Tech Industry In South East Asia

South-East Asia has turned into an IT hub with the home to 10 leading tech giants. The region has the most web users with a total internet penetration 70% greater than the global average usage. Back in 2020, more than 229 family offices were registered in Singapore with the estimated assets and management up to $20 billion. When it comes to investment opportunities, Jeffrey Jaensubhakij, the chief investment officer at Singapore sovereign wealth fund GIC stated,

"Indonesia, Vietnam, Thailand – all these countries have large enough domestic populations where digitization opportunities can be unicorn size,"

Singapore

About 31% of the total market growth is generated from Singapore and it has been forecasted that the market will continue to grow much faster than in other regions.

Singapore provides a vibrant ICT ecosystem with the establishment of leading tech unicorns like Google, Facebook, and Alibaba. Some other prominent names are Lazada, Razer, Grab, and Garena. These companies provide a rich environment and boost the overall industry revenues making the region's potential enough to attract prospective investors. The world-class infrastructure and the skilled youngsters have made the region become the top ranked country in the IT industry. Having uninterrupted internet connectivity, Singapore is the best avenue to enter into the Asia tech industry. The English-speaking nation with an enthusiasm for tech has attracted many investors from around the globe.

Vietnam

Vietnam is accoladed as a star in the tech world. With a population of about 93.5 million the region is defined by its hard-working individuals who are young coders, programmers, entrepreneurs, and creative thinkers. They have given birth to many undeniable tech innovations.

Jeff Diana, Atlassian's Chief People Officer (CPO) stated, "Vietnam is quickly becoming an investment and tech hub for local and international enterprises, and HCMC is at the heart of this transformation,"

During the last decade, the country has transformed enormously, becoming the third-largest e-commerce market with limitless digital infrastructures and innovations. With the growing eCommerce market in the country, companies like Enjify are gaining a foothold by advertising their Enjify discount codes to Vietnam’s young and tech-savvy customers.

Vietnam is more involved in IT hardware and consumer electronics. The revenue generation of consumer electronics in 2020 was about 1.3 billion U.S. dollars, as per the Statista report. When it comes to the use of IT hardware and gadgets the Rakuten insights show over 65% of users have smartwatch and fitness tracking gadgets.

Here is a look into Vietnam’s GDP report from 2010 to 2021 that shows a predominantly upward trend.

Due to the upheaval in the IT sector, the country has maintained a promising GDP.

Apart from this, the five top industries leading in Vietnam are Fintech with revenue generation of up to US$7.8 billion in 2020, Artificial Intelligence, eCommerce, Software outsourcing, and Education Technology.

Thailand

As per Statista, the GDP of Thailand from 1986 to 2026 is showing an upward trend. The contributing factors lie in its government's unmatched efforts to transformation.

"Investment Year" was the year 2019 in which the Thailand government issued new policies to bring massive level transformation. There was a $45 billion leap that favored more than 10 big industries increasing their development in the region and around the world.

Here are some highlights to Thailand’s Eastern Economy Corridor Plan 2019:

The initiative ensures greater connectivity in the region with 5G and Internet of Things (IoT) technology, which became the driving force to attract potential investors. With the initiatives in improving infrastructure, the nation's top telecommunication operators began investing in the region. This progressive plan has broadened the avenue making Thailand a hub of enormous business opportunities.

The Key Types of Investors Attracted By South East Asia's IT Market

Let's dive into learning about the prominent investors who are doubling down in South East Asia's digital economy.

Big Tech

Back in June 2020, Google together with Temasek Holiday invested $350 million in Tokopedia. Furthermore, back in 2018, Microsoft had invested in Grab an undisclosed amount with another investment of about $100 million in Bukalapak. China and the USA are finding great potential in the Tech industry of SouthEast Asia. China was the first one to join the market by getting involved in AliBaba. Later contributed to Akulaku, DANAM-Pay (eMonkey), and Wave Money.

Venture Capitalists

South East Asia provides a hub to venture capitalists with private equity investments. The market generated nearly USD 14.1 billion in 2018. Some of the top VC firms include the names 500 Startups, Partech, Gobi Partners, Insignia Ventures Partners, East Ventures, and Wavemaker Partners. Moreover, the regional investment raised prominently as compared to that in Asia. With a rate of 5.2x times the investments grew to reach up to $8.2 billion in 2020 which was about $1.6 billion back in 2015.

Some Significant Compliance Considerations To Note

Undoubtedly, the tech sector of South East Asia has attracted many investors due to its robust infrastructure and innovative government policies. However, there are other compliance considerations that cannot be overlooked. As per the M&A due diligence investigations, investments in the tech industry do come with some alarming risks. Hyper aggressive competition, cyber security, and intellectual property loss are some of the important issues in the region.

Regulatory Patchwork

There has been a strict regulatory scrutinization placed on companies that are working on data movement. Over the last few years, regulators in Asia have created some strict rules that are creating trouble for the tech firm in regards to regional ambitions. The regulations are getting restrictions. Where consumer selling is highly profitable, the strict penalties are making it difficult to do business. One important issue of the region is that the local tech players are using political connections to mold the regulations, making a favorable environment for themselves but hostile for the outsiders.

Social, Cultural, and Political Grounds

In South-East Asia, you need to check the social, political, and cultural aspects of your business and observe whether it's going to be accepted in the region or not. There have been issues retailed to socially sensitive sectors like media providers, payment systems, and telecommunications. Recently, to get a hold of the business ecosystem, the Control Risk carried out a survey and investigated many popular social media influencers in Vietnam who have been actively involved in spreading negativity about clients' products. In this way, marketers have to stay involved in creating positive campaigns about their products which shows the hyper-competitive nature of the industries in the region.

Conclusion

To successfully initiate the expansion plans there is a need to look into all the contributing factors from political grounds to cultural acceptance. International investors are now penetrating the region at such a faster pace that the business ecosystem of SouthEast Asia has now become more diverse.