Tech change brings about wave of opportunities in S-E Asia

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The biggest in the region, Indonesia’s Internet economy is estimated at US$40 billion in terms of gross merchandise value in 2019.  It is expected to further grow to US$133 billion in 2025, according to the joint report by Google, Temasek, and Bain & Company. 
JANUARY 15, 2020 - 7:00 AM

As companies turn to technology to improve their operational efficiency and better serve their customers, South-east Asia offers new opportunities for Singapore firms looking to expand in the region. 

Interest in the region is not new. According to the Singapore Business Federation National Business Survey 2019/2020, 76 per cent of firms who indicated that they intended to expand were keen to venture into the Asean region, similar to 2018/2019 levels. The top three destinations in the survey were Vietnam, Indonesia, and Malaysia. 

Meanwhile, a global trade navigator report released by HSBC in Nov 2019 showed that Singapore firms picked Indonesia as the second most important growth market globally (16 per cent) - just after China - in the next three to five years, while Malaysia (15 per cent) took the third place.

Rising interest in the region comes amid rapid technological advancement which is quickly transforming the way consumers behave.  

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Over the past four years, the number of Internet users in South-east Asia has increased by 100 million — many of whom are young users aged 15 to 19, according to a joint report on South-east Asia’s Internet economy by Google, Temasek, and Bain & Company.

“As more of these young, digital-savvy and mobile-first South-east Asians come of age over the next 15 years, they will further fuel the growth of the region’s Internet economy,” stated the report in 2019.

The report projects that the region’s Internet economy will triple its current size by 2025, reaching US$300 billion, with Indonesia and Vietnam as star players. 

Push for digital transformation

Regional firms are riding this trend and pushing for digital transformation in a bid to improve operational efficiency and better serve digital-first customers. 

“Companies in retail, e-commerce, logistics and transportation have really felt the push to provide the best online experience for customers in comparison to other alternative services, and that has been a great impetus for them to change,” said Evan Tan, chief of staff, Holistics Software.

Holistics, which provides a data analytics platform for companies to prepare and manage their databases, told BT that over 50 per cent of its current customers are from South-east Asia. 

For example, it has helped an Indonesian Artificial Intelligence (AI) chatbot company to access internal big data sources without requiring the assistance of a technical team, hence improving the company’s operational efficiency. 

Enterprise Singapore has also helped Holistics connect with other regional firms, including a large retail company in Thailand, to help the firm improve its business efficiency.

This eagerness to try out new technologies by regional companies was not a common sight a few years ago, said Oliver Tan, chief executive officer and co-founder of ViSenze. 

ViSenze powers the visual search function for e-commerce companies and physical retailers such as Asos and Uniqlo. The startup tried to expand into South-east Asia after its inception in Singapore in 2012, to no avail. 

Looking back, Mr Tan said: “Maybe we were a bit ahead of our time.”

But things are different now. With Singaporean customers like HipVan and Zalora, and Indonesian partners like Matahari Mall and Tokopedia, ViSenze sees growing potential in the region.

Mr Tan praised Indonesia in particular for its openness to try new technologies, its improved digital infrastructure, and its huge e-commerce potential. 

The biggest in the region, Indonesia’s Internet economy is estimated at US$40 billion in terms of gross merchandise value in 2019.  It is expected to further grow to US$133 billion in 2025, according to the joint report by Google, Temasek, and Bain & Company. 

“(Singapore) is a good place for us to do initial research and development, and prototyping,” ViSenze’s Mr Tan said. “But when you need to scale very quickly, you need big consumer markets.”

ViSenze announced in February 2019 a partnership with Samsung Electronics in South-east Asia and Oceania, which allows Samsung consumers to search for products online with real-life images or existing pictures via Bixby Vision Shopping. 

Shobhit Shukla, chief revenue officer and co-founder of Near, was also pleasantly surprised by the rapid technological change in the region.

“South-east Asia actually completely skipped an entire generational development,” said Mr Shukla. “Connectivity by 4G and 5G and smartphones help them bypass the broadband (stage) into the smartphone (stage). Who would have thought that companies like Gojek would emerge in a developing economy?”

Near is a Singapore-based AI platform which analyses data to understand the real world behaviour of consumers. 

Interestingly, while more brick and mortar companies in South-east Asia start to venture into e-commerce, e-commerce players are also starting to build offline capabilities, added Mr Shukla. 

These companies are keen to better understand their consumers, hence the growing need for data to connect consumers’ online and offline behaviour and to provide a “360 degree view of the consumers,” he said. 

Opportunities for logistics players

The logistics sector is also actively looking to merge technology into its operations. 

Demand for technology solutions comes as Southeast Asia seeks to improve its connectivity to boost mobility of manpower, resources and technology, even as it is plagued by an infrastructure gap. 

Kumaran Rajaram, a senior lecturer at Nanyang Technological University’s Nanyang Business School, told The Business Times that the underdeveloped infrastructure in the region “serves as an opportunity that enables companies to offer their expert services to address this gap.”

Regional governments have also launched projects to improve infrastructure and trade, such as Thailand’s Eastern Economic Corridor (EEC) and the China-led Southern Transport Corridor connecting China to Asean. 

These initiatives present golden opportunities for Singapore’s investment and logistics companies to support new setups and manufacturing activities in the region, said Tan Soon Kim, assistant chief executive officer at Enterprise Singapore. 

Comprising Chachoengsao, Chonburi and Rayong, the EEC aims to improve connectivity and drive manufacturing and innovation activities.

Haulio, a Singapore-based tech startup, recently piloted a software in the EEC. The software, which equips drivers with navigational tools and electronic proof-of-delivery, aims to help Thai trucking companies better manage and communicate with their drivers. 

Alvin Ea, chief executive officer and co-founder of Haulio, said he hoped to address the “highly fragmented and low-tech” logistics sector in Thailand, and that his software will enable trucking companies to gain better insights into driver behaviour and optimise their truck efficiency.

Interestingly, Haulio has found itself more readily accepted by Thai hauling companies than the Singaporean counterparts.

Mr Ea told BT that this is partly because the logistics market size in Thailand is too big. As such, Thai trucking companies don’t feel the threat of competition from their peers. 

Singapore, on the other hand, is a much smaller market with more intense competition, leading to a more defensive mindset against technological disruption, he said.

Another reason for the divergent reception could lie in the different natures of Haulio’s products in these two markets.

Haulio’s software seeks to help Thai trucking companies track the behaviour of their drivers, whereas its web platform in Singapore aims to help businesses find available trucking containers to transport their goods in.

Consequently, while the Thai truckers generally appreciate Haulio’s tech solutions, their Singaporean counterparts tend to view Haulio with suspicion. This is despite Haulio’s stance that it is trying to improve the overall efficiency of the trucking industry. 

Elsewhere, the Vietnamese government is encouraging investors to contribute their technical expertise and project management experience in infrastructure projects to help speed up their development, noted Enterprise Singapore’s Mr Tan.

Indeed, YCH, a Singapore-based logistics giant, told BT that following a memorandum of understanding signed in 2018, it is partnering with T&T Group, a Vietnamese multi-industry conglomerate, to build Superports in Hanoi, Ho Chi Minh City, and possibly the Philippines this year. 

Connected to major rail, road, and freight networks, these Superports are expected to use technology to coordinate cargo movements and to form an effective network for distribution into the cities and beyond. 

Yvonne Wong, public relations and marketing manager, YCH, noted that while there has been a “high number” of supply chain shifts to Vietnam, many rail and road networks around ports remain “underdeveloped, leading to increased costs and delays in transportation”. 

The Superport project by YCH and T&T will help to promote infrastructure development and to address the need for a chain of distribution centres in the Southern Transport Corridor, said Ms Wong.

Banking on the Singapore brand

With the boom in the regional digital economy, Enterprise Singapore’s Mr Tan said Singapore companies can address growing market needs in e-commerce marketplaces, supporting services for e-commerce like payments, and supporting infrastructure for e-commerce like data centres.   

“Our companies, entrepreneurs and startups can connect to the growing innovation and business community in South-east Asia to seek partners for market access or to co-create solutions,” Mr Tan added.

Companies that have expanded into the region said the Singapore brand eased their entry on various fronts. 

“The Singapore brand speaks a lot. They (overseas companies) see Singapore as a benchmark in terms of quality and assurance,” said Haulio’s Mr Ea. 

“Singapore has always been seen as trusted, efficient, and most importantly, respected.”

Mr Tan of ViSenze echoed this sentiment, adding that the need to comply with Singapore’s more stringent data protection laws gives ViSenze “the right level of pressure” and makes it a more trusted partner to regional customers. 

“There is strong familiarity with Singapore brands due to the high number of visitors from the various Southeast Asian markets to Singapore each year,” added Enterprise Singapore’s Mr Tan.

If you enjoyed this story, we recommend you check our accompanying piece “Go local when expanding into S-E Asia”.