When it comes to Vietnam, its always been a forward-looking country. The government has always been aggressively laying out plans to get its citizens to purchase goods online. At least 50% of the 96 million population is on track to buy things online come 2025. The Vietnamese government wants to see the e-commerce sector to grow by at least 25% each year. Reaching US$35 billion in sales by 2025 is an achievable goal.
A recent report from Google and Temasek lists Vietnam as the second-fastest growing economy in South East Asia after Indonesia. Southeast Asia’s internet economy hits US$100 billion in 2019, and is expected to hit US$300 billion by 2025. The Internet economies in Malaysia, Thailand, Singapore and the Philippines are growing by between 20% and 30% annually, with no signs of slowing down.
This is a remarkable feat compared to other regions, but hardly the best showing in Southeast Asia. The two pacesetters in the region are Indonesia and Vietnam, which lead the pack with growth rates in excess of 40% a year. The adoption of Digital Payments has finally reached the inflection point and is expected to cross $1 trillion by 2025, accounting for almost one in every two dollars spent in the region.
Other Digital Financial Services are still nascent but gaining traction. These technology-enabled business models are best positioned to give Southeast Asia’s underbanked population access to Financial Services. While new entrants and established players are competing and partnering to tackle this opportunity, supportive regulations will play a critical role. More than $37 billion of capital has flowed into the Internet economy over the last four years. While the majority has gone to e-Commerce and Ride Hailing Unicorns, investments in nearly 3,000 startups in the region remain sizable.
Vietnam’s Internet economy is booming as well, as it reaches for $12 billion in 2019 on a 38% annualised growth rate since 2015. With the GMV of its Internet economy set to account for over 5% of the country’s GDP in 2019,10 Vietnam is emerging as the most digital of all economies in the region. e-Commerce is a key driver behind the impressive numbers, where homegrown marketplaces like Sendo and Tiki compete with regional players like Lazada and Shopee.
These dynamics are unlocking opportunities for entrepreneurial Vietnamese SMBs, which have jumped onboard the Internet economy to do business. Investor confidence in Vietnam, the third most-funded economy in the region after Indonesia and Singapore, is on the rise. Over the last four years, Vietnam’s Internet economy has attracted almost $1 billion in funding, with 2019 in line to be a record year.
In the more developed economies like Malaysia and Thailand, the spread in per capita spending between Metros and Non-Metro areas is three to four times. In Indonesia, the Philippines and Vietnam, the difference is more than five-fold, amid a wider gap in living standards and infrastructure between those living in Metros and elsewhere.
Investors remain bullish on Southeast Asia largely because of structural drivers in place that will continue to support the growth of the Internet economy: a young population, growing Internet connectivity and
rising income levels.
In total, close to $37 billion flowed into Southeast Asia’s Internet economy between 2015 and the first half of 2019. We had estimated in our original report, “e-Conomy SEA — Unlocking the $200B digital opportunity in Southeast Asia”, that to grow a $200 billion Internet economy, the region will require between $40 billion and $50 billion in funding by 2025. Six years ahead of that estimate, the region is already close to meeting that mark.
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Anil started his career in journalism all the way back in 2003. After traversing the sphere of editorial, corporate communications and advertising, he has now come full circle and is back in the world of journalism. He believes in the power of the written word, and its ability to enthrall, delight and inform the reader.
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