To say that Southeast Asia's digital economy is sizzling would be an understatement. Once projected to be worth more than US$200 billion by 2025, recent forecasts have shown that it is set to grow to a staggering US$363 billion instead一with Indonesia, Vietnam and Philippines in the lead as the region’s fastest-growing digital economies.
Notably, there’s been a surge in investment activity in Southeast Asia's tech companies where investments have reached an all time high in 2021, with a total of $11.5 billion in capital invested in just the first half of the year.
According to Bloomberg, the region’s ability to thrive despite the turbulence of a pandemic has gained the attention of investors looking for investment opportunities in emerging markets, particularly in a low interest rate environment.
Now that we know that the region is booming exponentially, which industries in particular happen to be leading the charge?
Here we explore Southeast Asia’s fastest growing industries to watch out for in 2022.
E-commerce
Depending on your familiarity with the region, it should come as a surprise that e-commerce tops the list as the fastest growing industry by a longshot. The pandemic has solidified the fact that the Southeast Asian market loves to shop online.
But how big has the industry gotten?
Research from Google, Temasek Holdings Pte and Bain & Co. shows that SEA now has a total of 440 million internet users一out of which 80% have made at least one purchase online. While that translates to a lot of parcels, it also means that e-commerce is not simply the more convenient way to shop. Instead, it has grown to be the way of life for SEA internet users.
According to forecasts, e-commerce would continue to be the region’s biggest growth driver until 2025, with a projected GMV of $234 billion from 2021’s $120 billion.
Online food delivery
Through various lockdown measures, rising COVID cases and other pandemic-related events, it is evident that consumers prefer to err on the side of caution by ordering their food online or through an app.
The data from Grab’s 2021 Food Delivery Industry Overview report seems to agree.
In 2022 and beyond, Southeast Asia’s appetite for food delivered to their doorstep has only gotten stronger than ever. According to the report findings, the region’s online food delivery spend is forecasted to grow more than 2x faster over the next 5 years from 12.1% compound annual growth rate (CAGR) to 24.4%.
Moreover, by 2025, Southeast Asia’s demand for prepared meals is only expected to go up even higher, at an estimated US$170.5 billion in sales. The increasing demand is exacerbated by the region’s rising smartphone adoption in Tier 2 cities as well as an increase in its middle class population.
Online travel
Out of all the industries in this list, this might just be the most unexpected one. Travel has been through the ringer thanks to the pandemic. However, research from Google, Temasek Holdings Pte and Bain & Co. shows that the battered industry is likely to rebound once travel restrictions start to ease. This could be due to a number of factors such as pent-up demand as consumers remain homebound as well as a shift in consumer behaviour as resources and media available online let travelers ascertain conditions of their accommodations before booking.
Research findings reflect an optimistic outlook for the future of travel, with a projected growth of $13 billion GMV in 2021 to a surge of $43 billion in 2025.
Online media
Who among us hasn't been binge watching our favorite shows from the comfort of our couches?
Steaming videos aside, online media such as gaming and music is expected to recover and even grow, with video subscription services seeing the biggest increase in consumer interest.
According to research, online media GMV is expected to soar from $22 billion in 2021 to $43 billion in 2025 as consumers return back to school or the office, where commuting and taking public transportation become part of our daily routine once again.
Financial services
For the uninitiated, digital financial services is made up of remittance flow, lending, digital payments, insurance and investments.
Research from Google, Temasek Holdings Pte and Bain & Co. shows that financial services usage is on the rise, with consumers gravitating towards lending the most一especially now that buy-now-pay-later models have become a popular mode of payment for underbanked markets with Indonesia showing the highest consumer interest at 16x. On top of that, e-wallet payments are also on the rise with Malaysia and the Philippines showing the biggest increase at 16x and 12x respectively.
In fact, financial services are so in demand that it is on par with e-commerce to attract the biggest chunk of investments in SEA.
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