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A 'Sea' change with closer regional ties
THE growth of digital technology in the region is critical to Sea's core market of South-east Asia, said Santitarn Sathirathai, the group chief economist at the New York-listed, Singapore-based Internet company.
Initiatives that support regional connectivity have been crucial to Sea, he added, even as the company's strategy involves tailoring products and services to each local market.
Sea, which operates the video game platform Garena, e-commerce site Shopee, and financial services firm AirPay, calls Taiwan, Indonesia, Vietnam, Thailand, the Philippines, Malaysia and Singapore key markets.
According to the group's latest annual report, "substantially all of our assets and operations are located in Greater South-east Asia".
It added: "Our scale, regional breadth, and substantial home court advantage provide a strong foundation on which we are able to rapidly scale new businesses."
Sea reported adjusted revenue of US$553.6 million for FY2017, with turnover primarily from Thailand, Taiwan, Vietnam and Indonesia, according to the annual report.
The bulk of Sea's income was from its digital entertainment business, but growth accelerated in the e-commerce and digital financial services arms as well.
"As a pan-regional company, we work across seven markets and multiple languages, with local consumer customs and preferences differing vastly market to market," said Dr Santitarn.
"As a result, we place a heavy emphasis on localisation - in each market we tailor our various platforms and services to suit the preferences of consumers in that market."
MOST EXCITING MARKET
Dr Santitarn called South-east Asia the "most exciting consumer market in the world", given the region's rapid urbanisation and relatively young populations.
"More importantly, the growth potential of ASEAN'S digital economy is even greater than that of the overall economy," he added.
He said that "our success rests on the ASEAN digital economy reaping its full potential" and noted that "we are merely scratching the surface", compared with the levels of e-commerce penetration and online gaming expenditure in the US and China.
"This means that we are only in the very early days of digital transformation and that there is a significant upside as the overall 'pie' grows."
One success story he cited was that of a preserved fish snack vendor in central Thailand, who more than doubled sales after using the Shopee platform, and eventually exported to Vietnam and the Philippines as well.
Dr Santitarn added: "That said, each ASEAN economy is very unique. We think in-depth understanding of local customers and localisation is key, to unlock the region's true potential."
Some examples of custom content included partnering local football leagues to introduce Vietnamese and Thai football stars as playable characters in a football-themed video game on the Garena platform, as well as showcasing local crafts from different parts of Indonesia on the Shopee app there, to meet consumer interest.
Dr Santitarn said that regional investments in infrastructure have been critical to Sea's operations: "The broad policy framework of improving ASEAN intra- as well as inter-country connectivity has been and continues to be very important for us."
He credited Indonesia's Palapa Ring broadband project with helping to support Sea's plan of linking sellers to remote areas with faraway buyers.
"For instance, we are proud to have connected an SME (small and medium-sized enterprise) selling locally crafted rattan bags from the island of Borneo to reach a wider customer base outside of its Kalimantan hometown using the Shopee platform."
Dr Santitarn said: "The ASEAN government policies to improve logistic infrastructure have also been crucial. After all, the effectiveness of digital platforms is still dependent on the ability to deliver goods to consumers anywhere seamlessly and efficiently.
"To this end, we are in support of the ASEAN governments' continued investment in infrastructure and welcome recent improvements in the World Bank Logistic Performance Index, especially in Indonesia, Vietnam, and Thailand."
He also highlighted digital economy initiatives such as the development of e-payment methods like the bank-agnostic PayNow in Singapore and PromptPay in Thailand.
The Monetary Authority of Singapore and the Bank of Thailand announced last year that they would work together on connecting the two systems.
"These two countries are also developing their own QR code standards and implementing national digital identity systems," said Dr Santitarn.
"This could, over time, help increase the shift from cash-on-delivery to e-payments, facilitating e-commerce transactions further."
He emphasised that Singapore, where Sea's group headquarters is located, "plays a unique and important role for us" thanks especially to what he called "the government's proactive policy stance to develop the tech ecosystem".
The top talent here in science, technology and engineering, as well as the Republic's ease of doing business and friendly regulatory environment, allow tech companies to adapt quickly to changing circumstances, he said.
"Singapore policymakers have both a global and a regional mindset, and look to support businesses that are expanding in ASEAN. This means the government view is very much aligned with regional firms like ourselves.
"We certainly look forward to be a part of Singapore's efforts as ASEAN chair to foster a more digitally integrated region," he added.
Looking forward, Dr Santitarn said that ASEAN governments could benefit from deeper public-private cooperation and more transnational projects to develop the region's digital ecosystem further.
"Digital players in the region like ourselves share similar goals as the governments - to develop the digital industry in the region to empower entrepreneurs and consumers. Business can bring in sector-specific knowhow while the government can help shape the policy environment. We think that active consultation and cooperation with industry players is crucial," he said.
"Sea is proud to have already been doing its small part in an effort to prepare talents for the digital ASEAN. For instance, since its inception in 2016, Shopee University has provided assistance to more than 50,000 entrepreneurs in more than 30 cities in Indonesia. Sea's Garena has also partnered universities in Thailand to develop curriculum on game design and e-sports management, empowering ASEAN youth with knowledge to succeed in the digital economy."
When it comes to cross-border collaboration, Dr Santitarn said: "ASEAN governments could cooperate, coordinate and communicate to each other more as many of the barriers to digital trade and e-commerce would benefit from regional collaboration.
"Currently, each country has its own digital economy development plan, with limited linkage across countries. ASEAN could consider developing common frameworks to tackle constraints holding back its digital integration," he said.
"With Singapore as chairman of ASEAN this year, we think this is a golden opportunity to push both types of cooperation forward, to build a world-class digital economy in our region."