Edges of South-east Asia

The digital developing economy: South-east Asia in five objects

This is the first article of a four-part series, The Edges of South-east Asia, that shines a light on the bright spots of creativity and innovation in the region. A joint project of Deloitte, the Singapore Economic Development Board and the US-Asean Business Council, the articles focus each week on a specific 'edge' or customer segment, geographic market or product that offers high growth potential opportunities in Asean. The exploration begins with the rapidly growing digital economy.

It is the motorcycle (alongside the mobile phone) that powers South-east Asia’s digital economy.PHOTO: EPA-EFE

The throwing axe

It is 10 pm. You are at a Bangkok night market, throwing axes with a client. A fee equivalent to the price of two Starbucks Frappucinos gets you one hour of unlimited axe throwing - at a target on a wooden board, of course. This isn't that kind of place.

The experience, while novel, isn't new. Axe-throwing competitions, after all, are rumoured to have originated with North American frontiersmen, or with the Celts in Europe. There are now axe-throwing clubs all over the world. How the practice travelled halfway around the world, you will never know.

This is globalisation, you think to yourself as you quaff your Full Moon Chalawan beer from a plastic cup. This is South-east Asia.

The mobile phone

Inner warrior placated, you call it a night. The median age of South-east Asia's population is 30 years, but unlike them, you aren't as young and dynamic. So you do what everyone in South-east Asia does when they need something - whip out your mobile phone.

Four hundred million of South-east Asia's 649 million population are online, and 90 per cent of them are mobile-first. Many have no desktop or laptops at home. Four out of the world's top 10 countries by mobile Internet usage are from the region - Thailand, Indonesia, Malaysia and the Philippines. Some of the most popular Instagram and TikTok experts are here.

At this moment, you're using your mobile to hail a GrabCar - but in South-east Asia, you can also use it for just about everything. It's not just about social media and e-commerce. In Indonesia, you can see the doctor on Halodoc, a mobile app. It is not just cheaper - 10 minutes for about US$1 (S$1.35) but it is probably the only means for most Indonesians to see a doctor, as traffic and large distances make physical consultations impossible. Halodoc now has over 16 million monthly active users.

Elsewhere, Te-Food, a Vietnamese-Hungarian joint venture, has developed a farm-to-fork, blockchain-based food traceability app for pork, chicken, and egg supply chains in Vietnam; consumers scan a QR code on their favourite supermarket produce to verify where the food came from. It's something that might have been hatched by Whole Foods in Austin, Texas - only it was born in Ho Chi Minh City.

But South-east Asia's mobile future is no utopia. There is a digital divide growing between highly connected countries, and others like Indonesia, Thailand and Myanmar with less than 60 per cent Internet penetration. Within countries, people in urban areas enjoy more reliable Internet connections, while rural consumers make do with sub-par 3G speeds.

The motorcycle

It has been 10 minutes. Your Grab ride is late. On the superapp, you see that your driver hasn't moved since you last checked.

This is your first misjudgment of the evening - assuming that Bangkok traffic is like New York. But no. The city's arteries are clogged with interminable rows of cars, dead ends, and flooded carriageways. Perhaps five more rounds of axe-throwing?

You cancel the ride and call a GrabBike instead. Within minutes, a motorcycle rider in the familiar black and green windbreaker appears and hands you a helmet. You strap it on, and soon you are zooming down Royal City Avenue.

You are not the only one. There are 20.5 million registered motorcycles in Thailand - two for every three people - and many of them are on the streets of Bangkok tonight. This does not surprise you, not in South-east Asia, where nine out of 10 households own a motorcycle, and where much of the urban population likes to be out and about all night long.

It is the motorcycle (alongside the mobile phone) that powers South-east Asia's digital economy. GoJek, Grab's biggest competitor, was born out of building a ride-hailing platform for Indonesia's ubiquitous ojek, or motorcycle taxis.

Like the motorcycle to the family, ride-hailing is merely an enabler to bigger things. GoJek is in many businesses, including less intuitive ones, like on-demand facials and hairstyling. Halodoc, the telemedicine startup, now uses GoJek's motorcycle fleet to deliver medicine prescriptions to patients.

In 2020, one in three digital service consumers in South-east Asia were new to the service due to Covid-19, and according to Google, Temasek and Bain, almost all of these new users will be digital users for life.

The interaction between online and offline, digital and physical, is only going to become more intimate in the next few years, meaning that the demand for motorcycles, much like the driver around whose waist your arms are anxiously ensconced, will continue to accelerate.

The (e)-wallet

You arrive at your hotel, safe and peckish. Refusing to pay "tourist prices" at the hotel for a pack of chips, you buy a bowl of Mama Instant Cup Noodles from the mom-and-pop store around the corner. Instead of holding her hand out for cash, the proprietor taps her finger on a laminated sheet of paper with a QR code. You know what to do; within seconds, you whip out your mobile phone, open your superapp, and scan the code to pay with your e-wallet.

In South-east Asia, e-payments predates Covid-19. Seven out of 10 South-east Asians are either underbanked or unbanked, meaning they do not have access to credit cards, bank accounts or other fundamental financial services. While lesser businesses might call this a barrier to entry, many others call this an opportunity.

Grab and GoJek have been quickest to react. First, they accepted cash payments for ride-hailing and other digital services to grow their user base. Then, they created e-wallets within their apps that can be topped up digitally and with cash at warungs, mom-and-pop stores, and fast-food chains across the region. Finally, with a critical mass of consumers and cash, they started offering payments-adjacent services such as peer-to-peer funds transfer, remittance, micro-loans, insurance and even options to invest in third-party funds.

Many of these services are offered in collaboration with financial institutions like DBS Bank, China's Zhong An, and Kasikornbank (Thailand's fourth-largest bank). In fact, Gojek just became a 22 per cent shareholder of technology-based Bank Jago, so now GoJek users instantly have a bank account with Jago and access to capital.

The trend is coming to a head in Singapore, which has just issued four digital bank licences, three of which went to consortiums led by tech companies, including Alibaba's Ant Financial Group. Soon, these companies will be offering financial services to underserved consumer and small and medium-sized business segments.

If successful, they will scale these services to the rest of South-east Asia, meaning greater access to precious seed capital, which could result in more Halodocs or Te-Foods. Beyond that, greater access to credit means more consumer purchases of mobile phones, motorcycles, and other objects that allow them to participate in the growth of South-east Asia's digital developing economy.

Even purveyors of instant noodles stand to benefit. Companies like Growsari in the Philippines and Warung Pintar in Indonesia are modernising mom-and-pop stores, starting with e-payments, but moving quickly into digital procurement systems, free Wi-Fi for customers, and more.

This is the secret sauce in South-east Asia's digital growth recipe, and one of the biggest opportunities in the region.

The beer

You want one more beer to cool yourself down before you turn in for the night. Blame the spicy basil-flavoured noodles.

In the mom-and-pop store, you spot what looks like a growler of the excellent Full Moon Chalawan you had at the night market. You whip out your e-wallet again without a second look, and within minutes, you're back in your hotel room, ready for your nightcap.

To your surprise, though, what you thought was a Thai craft beer is in fact an Oregonian IPA.

Perhaps this is what's truly unique here - the unexpected connections between South-east Asia and the world. This is how the region will succeed - by taking advantage of these connections to close the digital divide, solve existing socio-economic problems, and tackle emerging ones like sustainable and green growth.

Maybe some of the innovators of the world are, like yourself, already in the region making these connections.

Microloans on your mobile phone; medicine delivered by motorcycle; beer drinking and axe-throwing in a night market. This is globalisation. This is South-east Asia.

• Chng Kai Fong is managing director, and Brandon Chew, regional vice-president of the Singapore Economic Development Board.