The rapid adoption of digital technologies by Southeast Asian businesses and the region’s increasingly affluent consumers is complementing government efforts towards the economic integration of the region by making a common market a reality.
In a new report by Boston Consulting Group (BCG), it describes how invisible data highways are bridging vast island archipelagos and populations separated by a wide variety of languages and cultures through smartphones, the wireless internet, and social media.
Companies are using this connectivity to offer new, accessible services to the region's consumers, said the BCG report.
There is plentiful evidence of digital's impact on the consumption of goods and services that until recently were relatively inaccessible for most Southeast Asians.
New online grocers and marketplaces such as RedMart and honestbee are allowing families in Jakarta, Singapore, and Manila to have Australian organic beets, American rib-eye steaks, Norwegian salmon, fresh Chinese bok choy, and African condiments and packaged teas delivered to their doors.
To capture the enormous opportunities, companies will need an ASEAN-wide digital strategy, said the report.
This is not a one-size-fits-all approach to Southeast Asia – on the contrary, companies should identify and engage with the rich new market segments that span Southeast Asia by analysing the immense data generated by the region's connected customers.
The digital integration of Southeast Asia is still in its early stages, and different tariff and regulatory regimes will continue to have an impact on the physical movement of goods for the foreseeable future. But businesses can help ASEAN governments gain a better understanding of the evolving digital economy—and how to mobilise it to boost growth.
To take integration to the next level and create a common market, several complex, shared challenges must be addressed.
ASEAN's digital integration has so far been a bottom-up process, driven mainly by entrepreneurs with relatively little involvement from governments. ASEAN's underdeveloped regulatory framework is difficult to navigate, and different trade regimes keep many goods from moving freely across borders. Inadequate or inefficient logistical infrastructure in much of Southeast Asia also slows cross-border commerce. Yet another obstacle is the requirement that e-commerce models allow cash on delivery, since several Southeast Asian economies remain predominantly cash-based.
Southeast Asia's private sector should work with the region's governments and regulatory bodies to address these challenges.
Other areas that companies should look at include developing an outstanding digital experience and enhancing their ASEAN operating model to better incorporate digital.
By accelerating digital integration, ASEAN nations and companies can turn one of the world's most dynamic regions into one of its greatest growth zones for decades to come, said the report.