Region's internet economy on track to hit $1t as e-commerce, logistics boom

Southeast Asia is embracing its "digital decade" with the region's internet economy expected to soar on the back of a fast-growing base of digital consumers and merchants.

A report released by Google, Temasek and Bain & Company said Southeast Asia is on track to become a $1 trillion digital economy by 2030.

Accelerating in e-commerce and food delivery, the region is estimated to reach $360 billion in gross merchandise volume, outgrowing an earlier projection of $300 billion, according to the report.

GDEX is among the foremost beneficiaries of growth in the e-commerce space in Malaysia. The delivery company recorded revenue at 430.5 million ringgit ($68 million), a jump of 18 percent year-on-year.

Founded in 1997 in Malaysia, GDEX provides express delivery services for the domestic and international markets. By December 2021, services at the 4,400-employee company spanned more than 1,300 network points in Malaysia and Singapore.

The company's performance in the segment was largely due to the increase in demand for courier services brought by the boom in e-commerce spending amid the pandemic, said Teong Teck Lean, the company's managing director and group CEO.

He said that even as COVID-19 exacts a bitter toll on the economy, it is catalyzing digital transformation across business models and channels from banks to professional services like doctors.

Since the pandemic began, Southeast Asia has added 60 million new digital consumers, with 20 million of them joining in the first half of 2021 alone.

Becoming more internet-reliant, customers seek seamless connectivity between e-commerce platforms and other social commerce platforms with logistics services too, he said, adding that providing more comprehensive digital solutions is an area of focus. This would be pursued while strengthening the current core business, alongside new complementary business ventures in order for the company to emerge as a stronger last-mile delivery company with a regional presence, Teong said.

With the Regional Comprehensive Economic Partnership taking effect this year, the company sees more opportunities with China and other countries in the region.

"We deliver for Cainiao Network (the logistics arm of China's Alibaba Group) and we also provide one-stop solutions (involving warehouse, fulfillment and last-mile delivery solutions) for some tech companies from China," he said.

"With the booming of e-commerce, customers are buying online directly from China. We do see more opportunities with China and other countries in Southeast Asia under the framework of the RCEP."

Mammoth undertaking

But he also said it's a mammoth undertaking and one that won't be achieved overnight "because the rules, laws and ways of thinking" of Southeast Asian countries are so different.

"It may take years to change. It's a gradual process. We would be very thankful if the RCEP can be fully implemented in five to 10 years," the CEO said.

James Tan, a Singaporean businessman with more than 10 years' experience in the digital economy, said Southeast Asian countries are at different levels of development in their digital industries.

"In the Philippines, for example, online shopping is no rare thing. But people can do a lot more things on the internet in some other places such as Indonesia's Jakarta. Digitization of small and medium enterprises in Jakarta has made progress over the recent years," said Tan, the managing partner and founder of Quest Ventures, a venture capital firm focusing on the digital economy industry across Asia.

Digital technology innovations are happening in Singapore and parts of Vietnam, said Tan, adding that many digitalized companies are developing and commercializing their products in Singapore before expanding and landing in other countries across Southeast Asia.

The development of the digital economy in Southeast Asia is uneven, as the different countries have their unique advantages and weaknesses, said Tan.

"The RECP could serve as a boost with China's involvement. Another thing to bear in mind is that only when countries in Southeast Asia give full play of their unique strengths, digital industry development and regional integration could go further in the future."