Could all roads lead through South-east Asia?

FOR years, South-east Asia has been described as a region of potential whose time will one day come. We believe that time is now. But to see it clearly, we need to combine the old and new world lens. For those of us from the region, it’s especially exciting to see the world beginning to recognise what we’ve long known: South-east Asia is not just rising – it’s redefining.

The predominant lens, focused on demographics, trade, footprint, productivity and land, remains critically important and a source of pride. But as we look to the future, this no longer captures what drives global growth. Today’s defining resources are data, compute and risk capital. Beyond asking “Where is my cost cheaper?”, today’s entrepreneur also asks, “Where can I build and scale bold ideas?”

With this new dual lens, South-east Asia looks less like a developing region and more like a live laboratory – where technology stacks collide, consumer behaviours diverge and breakthrough models are born. What’s emerging is an engine of innovation.

Where East and West compete – and the world builds

Global demand for AI-ready data centre capacity is projected to grow at an average annual rate of 33 per cent between 2023 and 2030, with artificial intelligence (AI) workloads expected to account for 70 per cent of total demand by 2030. And South-east Asia is right in the eye of this storm.

In a bifurcating world where US and China tech stacks increasingly diverge, South-east Asia is one of the few regions where both ecosystems meet on equal footing. Tencent and Google operate in the same markets. Alibaba’s cloud business competes with Amazon Web Services (AWS), and homegrown giants like Sea Group continue to assert themselves. This direct collision creates an unusual innovation dynamic – forcing companies to adapt, localise and often reinvent.

It’s no surprise, then, that capital is pouring in. Over US$30 billion has been committed to AI-ready data centres across Singapore, Malaysia and Thailand in the first half of 2024 alone.

Google is building its first data centre and cloud region in Malaysia with a US$2 billion investment. Microsoft has committed US$2.2 billion to accelerate AI infrastructure there. AWS is investing US$9 billion on cloud infrastructure in Singapore. Indonesia is constructing Asia’s first quantum AI data centre. Vietnam is scaling up its semiconductor strategy. The Philippines is attracting hyperscaler cloud investments to serve its rapidly growing e-commerce and digital services sector.

The signal is clear: Global firms are not just serving the region, but also building from it.

A testbed for models, not just markets

With over 660 million people, more than half under the age of 35, hundreds of languages, 10 unique currencies and multifaceted cultural layers, South-east Asia offers something no sandbox or simulator can: real-world complexity.

This makes it an ideal proving ground for AI models, payment systems, consumer platforms and entirely new business models.

It’s where algorithmic diversity meets market volatility. And that’s a feature, not a bug. Fintech apps in the Philippines are leapfrogging traditional credit. Social commerce in Thailand and Vietnam is redefining retail. Indonesia is piloting autonomous technologies in coal mining operations – an early sign of how automation is reshaping traditional industries in the region. And homegrown digital leaders like Grab, Sea, and GoTo are building models from South-east Asia that others are beginning to emulate.

The region isn’t just mobile-first, it’s experiment-first.

A call for bold capital and creative risk

If the region is to reach its full potential, it needs bold ambition. Too often, South-east Asian startups chase growth abroad. Even founders and engineers find their path overseas. What if the next great AI model, the next viral consumer app, or the next climate-tech unicorn could be backed – and built – right here?

This requires risk capital. A bolder appetite for experimentation. A culture that rewards original thinking over perfect planning. And leadership that isn’t afraid to move early and quickly.

South-east Asia is already a hotbed of entrepreneurial energy – driven by private sector dynamism and longstanding family owned businesses ready to make bold bets.

In nearly 30 years operating in this region, we’ve seen what’s possible when capital, talent, and timing align. But today, the stakes are higher, and the opportunity more urgent.

Forget cautious exploration. It’s an invitation to reimagine what’s possible. The real question for CEOs and founders across South-east Asia is no longer: “Should we?”. Instead, it’s “What’s our next bold move?”

In practice, this could mean:

• Launching AI-native businesses that accelerate economic growth
• Transforming current business models to embed locally relevant contextual AI
• Building platforms shaped by local behaviour – spanning payments, media, design, and IP
• Investing in creativity, design, and original IP beyond delivery and scale
• Creating local venture vehicles to fund breakout ideas instead of waiting for global investors to validate them first

Making South-east Asia a first market, not a follow-on expansion

With the ground now shifting beneath our feet, South-east Asia is no longer waiting in the wings.

The stage is set for us to realise our full potential, as a new focal point for global growth, powerful by any lens, old or new. And for those of us who live, work, and build in this region every day, the opportunity goes beyond the professional – it’s personal.

All roads may not yet lead through South-east Asia. But the ones that matter just might.

Both writers are senior partners at McKinsey & Company. Albert Chang leads the Southeast Asia Offices; Michael Park leads the global Technology, Media & Telecommunications Practice