As South-east Asia's internet economy takes off, finding tech talent remains a challenge
To build a US$200 billion South-east Asian internet economy, US$40 billion to US$50 billion in investments will be required in a decade.
South-east Asia's internet economy has been growing an average annual rate of 27 per cent and is on track to exceed US$200 billion by 2025, according to a report by Temasek and Google.
The region's internet economy accounted for 2 per cent of GDP in 2017, up from 1.3 per cent in 2015 and projected to reach 6 per cent by 2025, they said in the report titled e-Conomy SEA Spotlight 2017.
This latest report follows from Google and Temasek research out in 2016 which shed light on the fast-growing internet economy in the region.
They estimated that to build a US$200 billion South-east Asian internet economy, US$40 billion to US$50 billion in investments would be required in a decade.
In addition to funding, key challenges to realising this growth potential include the availability of homegrown tech talent, a developed digital payment ecosystem, last-mile logistics infrastructure, high-speed internet access and consumer trust.
'Unprecedented growth' in South-east Asia's internet economy
There will be 330 million monthly active internet users in the region by the end of 2017 - adding over 70 million new users since 2015, according to the Google and Temasek report.
For many users in the region, mobile is the internet, as more than 90 per cent of internet users are on smartphones.
Users in South-east Asia are incredibly engaged, the report noted, spending an average of 3.6 hours per day on mobile internet, more than in any other region in the world.
Users in Thailand lead the world with 4.2 hours per day spent on mobile internet, and users in Indonesia come a close second at 3.9 hours per day. By comparison, users in the United States spend an average two hours per day on mobile internet; users in Britain, 1.8 hours per day; and users in Japan, one hour per day.
E-commerce sector reaches US$11 billion
Google and Temasek note that e-commerce is booming across the region, with Google Search interest for e-commerce brands growing more than two-fold in two years.
This has been driven in part by the surge of marketplaces where SMEs sell to consumers on mobile-first platforms. Top players in this space, like Lazada, Shopee, and Tokopedia, have enabled growth by providing scalable, readily accessible platforms where smaller retail players can transact online and reach new consumers within and beyond South-east Asia.
Ride-hailing boom
Ride-hailing services will reach US$5.1 billion in gross merchandise volume in 2017, more than double from US$2.5 billion gross merchandise volume in 2015, according to Google and Temasek.
In South-east Asia, this sector is hotly contested between Grab, the regional homegrown champion; Uber, the global sector leader; and Go-Jek, the Indonesia-focused two-wheeler player.
The top three ride-hailing players have engaged more than 2.5 million drivers in South-east Asia, a four-fold increase from 600,000 in 2015. As a result, ride-hailing is helping make car ownership affordable in the region.
Ride-hailing players in South-east Asia have also expanded their offerings beyond their initial focus on transportation services. Grab has launched, among others, GrabShare and GrabHitch (carpooling), GrabFood (food delivery), GrabExpress (courier), and GrabPay (payments), and it acquired Indonesian startup Kudo to build an Indonesian digital payments ecosystem.
Shortage of homegrown tech talent a pressing challenge
Despite these opportunities, internet economy players across the region still face challenges. The most pressing of these is the shortage of tech talent. This has led to South-east Asian players such as Grab and Go-Jek opening tech hubs in China, India, and the US where top engineering talent is more readily available.
Companies are also grappling with identifying the right executives, choosing between highly experienced foreigners or nationals who understand the local context but have less experience. They struggle to simultaneously attain high employee morale and high revenue performance.
In South-east Asia, unlike in Silicon Valley, there is not a deep reservoir of executive experience around these topics.
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