The e-Conomy Southeast Asia 2024 Report with Sapna Chadha, Fock Wai Hoong & Florian Hoppe

Leong Chung Wei Bernard -

Fresh out of the studio at Google, Bernard Leong led a discussion on the 2024 Southeast Asia Digital Economy Report, joined by Sapna Chadha (Google), Florian Hope (Bain & Company), and Wai Hoong (Temasek). The panel delved into Southeast Asia's impressive digital growth, with the region’s economy reaching $263 billion in GMV and significant strides in profitability. The panellists examined the key themes, including Southeast Asia’s emergence as an AI hub, driven by $30 billion in AI investments, the rise of video commerce, and the region’s booming digital financial services specifically on embedded insurance. The conversation highlights challenges and opportunities in digital inclusion, AI infrastructure, and regional integration, providing a nuanced outlook on Southeast Asia’s potential. The episode concludes with each panellist sharing their vision for Southeast Asia’s digital future and success metrics for the next decade, emphasizing the region’s unique strengths and long-term global impact.

"The key message of the report is that the fundamentals of this region are critical, they’re clear, and businesses are doing exactly, I think, what they need to do for us to move ahead." - Sapna Chadha
"Given that one of the other themes we’ve had this year is trust, having a strong regulatory foundation and good constructs around that for digital financial services is critical to unlocking the next wave of growth here." - Florian Hoppe
"All 10 ASEAN nations have announced their own national strategic AI initiatives or plans, and ASEAN itself has actually released a report and guide on AI governance and ethics. So, I think if you put all that together, it’s very natural that Southeast Asia is, quite frankly, well-positioned to capitalize on the AI trend." - Fock Wai Hoong

You can read the full report here.

Panellists Profile:

  • Sapna Chadha, Vice President, Southeast Asia Google (LinkedIn).
  • Florian Hoppe, Partner, Bain and Company (LinkedIn).
  • Fock Wai Hoong, Head of Southeast Asia, Temasek (LinkedIn).

Here is the edited transcript of our conversation:

Bernard Leong: Welcome to Analyse Asia, the premier podcast dedicated to dissecting the pulse of business technology and media in Asia I'm Bernard Leong and this is the fourth time in a row that I will be doing the e-Conomy Southeast Asia Report 2024 by Google, Temasek, and Bain & Company. I can do this using Google NotebookLM, which I used to prepare for this report, but I decided to go retro today and bring all my guests into a single studio and do the report in a conversational style. So with me today, Sapna Chadha, Vice President, Southeast Asia Google; Florent Hope, the partner from Bain Company, and, Fok Wai Hoong, head of Southeast Asia, Temasek. All of you, welcome to the show today.

So, I'm going to start. Can you just briefly give us a short introduction of yourself, your current role, and coverage? Maybe we'll start with Sapna first.

Sapna Chadha: I'm Sapna. I lead our Southeast Asia and South Asia frontier business at Google. I am responsible for the growth and impact of this region. Everything from government affairs, [regional] coverage to driving the growth of the business.

Florian Hoppe: [I'm] Florian with Bain Company, the consulting firm. I cover technology for Bain in the [Southeast Asia] region. I have been out here in Asia for a while going on 20 years.

Fock Wai Hoong: My name is Wai Hoong I wear two hats at Temasek. I lead our Southeast Asia business and also lead our technology and consumer investments across the Asia Pacific.

Bernard Leong: Thank you for providing the report in advance. Let me first summarize the most interesting numbers from the report.

  • Today, Southeast Asia’s digital economy stands as proof that robust growth can indeed coexist with profitability. This year, we’ve seen remarkable advancements, with the sector reaching a GMV of $263 billion, reflecting a 15% year-on-year increase, along with $89 billion in revenue and $11 billion in profits – a figure that’s more than doubled over just two years.
  • Beyond the numbers, Southeast Asia is becoming a powerhouse for AI innovation. This region is attracting significant attention as a global AI hub, with $30 billion invested in AI infrastructure in the first half of 2024 alone. We’re seeing an incredibly dynamic ecosystem of startups and developers, positioning Southeast Asia to compete in areas like data centres and consumer applications. It’s worth noting that Singapore, Malaysia, and the Philippines are now among the top 10 countries globally in AI-related searches, demonstrating the enthusiasm and digital literacy fueling this trend and creating a ripe market for AI-driven solutions.
  • E-commerce, too, is reaccelerating, propelled by the rise of video commerce. This format has rapidly grown to account for 20% of e-commerce GMV, up from less than 5% in 2022 – a testament to the thriving creator economy and a clear signal of the evolving digital landscape here.

Given all these key numbers, what would you say are the most significant takeaways from the report for businesses and investors operating in Southeast Asia?

Sapna Chadha: Sure, I can start. You've done an excellent job summarizing all the key points. You've been doing this for four years. I think we've been at this for nine now. This is our ninth edition of the report. We've come a long way in terms of what we've been looking at in terms of metrics. We started with GMV, which you mentioned, which was growing very much in leaps and bounds.

Some of our predictions we were behind on, right? We've seen now the incredible growth in GMV. Last year we introduced revenue for the first time and this year we went even a step further on profitability. I think this is the main message of the report, is profitability. The businesses in Southeast Asia have done an incredible job of looking at things from tightening incentives, looking at commissions, How do you, how are they using online advertising in a really interesting way?

That has led to, you said it, its growth from in the last two years, 4 billion in 2022 to 9 billion last year. And now this year, 11 billion, which is just tremendous. So that is. The key message of the report, that is the fundamentals of this region are critical. They're clear, and businesses are doing exactly what they need to do for us to move ahead.

The AI piece is the other part that I think is really interesting, and AI will help in this profitability journey. What we're seeing is that businesses can reach a return on investment in just 12 months of investing in AI. Okay. That's incredible, right? So 71% of businesses are reaching positive ROI from their investments.

So we're seeing them do really interesting things to make sure that their businesses continue to be healthy. I think we're just in this excellent region, which has a tech-savvy, young population. Governments are very positive around. The positivity around A. I. and we're just getting started. So that's what I would say to start us off.

No, I think Sapna summarized it well. And what we're impressed by is the continued dynamism of this industry. Despite all the headline news you may be hearing about issues in various pockets of the digital economy, we're still seeing double-digit growth in GMV.

Florian Hoppe: We're seeing double-digit revenue growth, and we're seeing even higher double-digit growth in profitability. So, while this part of the economy in Southeast Asia has matured, and it's coming into its own, it's still on a significant growth trajectory and doing well across the region.

It's true for all markets here. So, all markets in Southeast Asia are also showing double-digit growth on these metrics. So, quite excited that this continues to go well. Now, the funding landscape is, obviously still, A bit more challenging but with our companies hitting profitability and developing their own flag wheel of growth, we're quite positive about where this is going over the coming years.

Bernard Leong: Wai Hoong, how would you see the report from the investor lens?

Fock Wai Hoong: I think Sapna and Florian have both summarized it pretty well. I'd say if there's anything to add if there's one thing that investors should probably take away from the report. I think it's the sense of quiet optimism that the co-authors have for the digital economy.

Last year we spent a lot of time talking about the funding winter. Now, this year we look across the last 12 months. while, as Florian mentioned, the funding environment remains reasonably subdued. Having said that, we are seeing some green shoots and some positive funding momentum.

If you look at seed through series C for the first half of 2024 versus, the last half of last year. We're seeing total funding values go up about 8%. If you look and double-click into that, into the average deal sizes, there is greater conviction behind the companies that are doing well. So the average deal sizes have gone up about 20%, half and half. Now I think underlying all that is there's a continuing sense of innovation and entrepreneurship across the region. With core digital economy verticals starting to mature a little bit, you are seeing some newer, more nascent sectors start to spark investor interest.

Areas such as enterprise software, and sustainability tech are coming up and beginning to track some investment dollars. So, I think, you combine all of that sense of innovation and entrepreneurship, the notion that business fundamentals are improving profitability, you know, moving in the right direction. All that is really what gives us that sense of quiet optimism. Now, I don't think we're ready to make the call that spring has sprung, but I do think that it's certainly getting warmer.

Bernard Leong: We're in the right direction then. Based on this, Southeast Asia's digital economy's impressive performance, we already talked about the GMV revenue and profit. What are the key factors that are driving this robust growth amidst the sort of global economic challenges there?

Florian Hoppe: Well, I mean, first of all, I think it's important to put the economic challenges into context. Now, globally, I think the economy is doing quite well. If you look at the U.S. economy, which has just been exceptional, the Asian markets have also been doing well. In the markets around us, India and China, but especially Southeast Asia, most markets have had growth rates above 5% in GDP growth. So it's, again, despite the high interest rate environment we're in, it's been a fairly healthy, broader economic environment. The digital economy in Southeast Asia just reflects that. We're seeing a continued shift into digital transaction channels, talk about digital financial services a bit more later, but payments [and] lending, all are going up quite sizably. People are gearing to the convenience of digital engagement, which has further lifted up the digital economy in the region.

Bernard Leong: One thing is the 2024 Economy SEA report highlights several notable trends, we already talked about the e-commerce growth and the AI infrastructure. considering these developments, what key insights from the 2024 report have caused you to shift your perspectives into thinking about the Southeast Asia digital economy compared to your outlook in the 2023 report?

Fock Wai Hoong: Yeah, so, you know, I think that there probably sounds like there are two questions in there. The first one, if you think about it from a funding perspective, we mentioned last year that four items were critical for us to exit the funding winter.

You know, obviously, number one, there was a need for reasonable and rational evaluation expectations. There is a need for a proven monetization model. There is a need to drive towards the path to profitability. And lastly, there needed to be dependable exits. Now, the really good news, I think you start to see in the report this year, is that we've made great progress on three of those four.

I think from a valuation expectation perspective, we've started seeing that both entrepreneurs and investors all recognize the economic reality we are in today with regard to where the interest rate environment is and the macro dynamics. And then certainly as you think about business fundamentals, businesses now at that early stage are being built with monetization as a key principle, and through all stages, you are seeing that path to profitability, that drive towards profitability being focused on in a way that is appropriate for their stage of development, all of which I think is quite promising.

Sapna Chadha: I have to talk about AI. So last year, we were in early discussions around this, right? You would have said, why didn't we cover it as much last year? I think that we've seen a big shift in people talking about AI as a concept to now actually how they're putting it into place.

That's why chunks of the report now focus on that shift and that change. We're seeing businesses leverage AI to have a positive impact on their business, and not just monetarily; they're doing things that are expanding their reach. For example, Gaming developers or online transport players can do things with language that they couldn't have done previously.

So now they can reach new audiences, inbound and export, and they're able to look at things like batch routing and efficiency in the online transport space. Again, we've just seen a big shift, and that is not a coincidence, and that's what this report talks about.

Fundamentals of Southeast Asia that are different. A lot of people may underestimate Southeast Asia's opportunities here. There is openness, you mentioned curiosity, so people are searching more. Not just consumers, but businesses as well. 11x increase in search interest in this space of AI. But outside of that, I would say beyond interest, you see, the opportunity that from tech positivity, the government's having a productive conversation around this and they're making investments and giving incentives such that more players are investing locally here.

I think Southeast Asia is in a sweet spot. I'm sure we'll talk about it more in your coming questions, but that's really, I would say, the big difference and shift in how much things have changed in just one year.

Florian Hoppe: Well, those were my two main talking points. Profitability [and] AI. I do have one more, which I do think is great to see is the continued business dynamic we see for companies in this part of the world.

One is the fact that despite the kind of evolution we've been through, there continues to be this high growth momentum that I mentioned. And two, I think how these companies are also growing on their own as they go international outside Southeast Asia. So a lot of activity with the big platform companies that reach beyond Southeast Asia, game developers from the region, which are playing a role way beyond Southeast Asia.

So it's quite exciting to see actually that Southeast Asia is starting to play a bit more beyond its shores.

Fock Wai Hoong: Maybe I can just add to a little bit, to build on what I've not mentioned earlier as well. I think, at some level, there is a shift, but it's a very natural shift.

If you think about ultimately what we've been talking about all these years behind why Southeast Asia is one of the fastest growing digital economies in the world. You think about that digitally savvy population. You think about the fast-growing middle-class demographic. And you think then, a little bit around, as Sapna mentioned and alluded to, and now the government engagement around AI.

Just an interesting fact, all 10 ASEAN nations have announced, their national strategic AI, initiatives or plans. ASEAN itself has released a report and a guide on AI governance and ethics. So you put all that together, it's very natural that Southeast Asia is quite frankly well positioned to capitalize on the AI trend.

Bernard Leong: I'm going to switch gears and we're going to talk first about e-commerce. E-commerce has reaccelerated in Southeast Asia, fueled by video commerce. Can you elaborate on the impact of video commerce on the SEA e-commerce landscape and its potential for future growth?

Sapna Chadha: I can start. what's, I think, tremendous to see is that 20% of e-commerce is now video-based, right? And that is That's unique to this. The trends start in this world and I feel like catching up elsewhere. This is why as Google, we've just launched YouTube shopping in several markets in Southeast Asia because you see the aptitude of the creators in this space, but also the general lean-in from the consumer base. They're loving the videos. They're finding the information that they need from influencers, who are not just doing it to make money. They're doing it in terms of being helpful to the audiences, and you're seeing everyone lean in from the big commerce players that we work with, the creator ecosystems, the agency ecosystem, and so you're seeing a big shift in this. But I think that truly stands out, that 20%.

Florian Hoppe: Well, I think the other support effect, as we mentioned earlier, is that e-commerce is probably one of the oldest and most mature sectors in this space, and it's just become ingrained in people's behaviour patterns. So we see two [or] three times transactions per month is now common for e-commerce.

A lot of e-commerce users in Southeast Asia, of which there are hundreds of millions, which is just providing a great base to build on. We're seeing now the last boundaries unlocked. Some existing categories like electronics and fashion are highly penetrated, but you now see the move unlocking the last pieces of logistics around the cold chain for grocery, around bulky logistics for white goods and furniture, which will provide some further growth momentum for e-commerce over the coming years.

Bernard Leong: Moving from e-commerce, I want to talk about the continued growth of digital financial services. I think digital payments are now getting a lot more widespread. I think last year was cash is no longer king. I remember that comment from Sapna and digital lending is now gaining traction. Can you talk about what are the factors driving this growth and what are the key challenges and opportunities for, say, digital financial service providers in Southeast Asia?

Florian Hoppe: Yeah, good question. I mean, again, you mentioned payments already. Payments, at the end of the day, unlock this whole ecosystem. Cash on a mattress is never going to be in any type of other digital financial services product. We continue to see that trend playing out nicely.

So going from 52% last year to 56% of total GTV this year. So actually growing. quite fast and widespread across markets as well. If you look at the penetration of QR codes, and just the adoption of account-to-account payment in different countries around the region, it also drives down the cost of payment, which has been a great overall story.

On the back of this, you see lending and insurance doing well. And the key here we think is just solid regulatory frameworks that further drive consumer adoption, and driving consumer use cases. Consumers are keen to use these services. They often provide. Better value proposition, easier access and usability or lower cost than established channels.

But given one of the other themes we've had this year is trust. Given the trust part of the equation, I think having a strong regulatory foundation and having kind of good constructs around that for digital financial services is critical to unlocking the next wave of growth here.

Fock Wai Hoong: I think the only thing you have to ask your audience is how often they go to the ATM (automated teller machines). Have they gone to the ATM in the last 12 months compared to 5 years ago? The reality is digital payments and digital cash.

Bernard Leong: I've got out a couple of times without my wallet and taken just the phone. Your phone does the payments as well. But one interesting thing that came out from this report this year was the concept of embedded insurance. I think this happens a lot in e-commerce and transport services. What is the potential impact of embedded insurance for digital financial service providers in Southeast Asia, and how would traditional insurance have to adapt to this new trend? Are they still part of, or do these providers also work with traditional insurance providers?

Florian Hoppe: Oh, they participate. What makes embedded insurance interesting is, it's typically embedded in the purchase flow. So it's insuring your car ride. It's insuring your package before it gets delivered. It's travel insurance as you buy a trip somewhere else. So it's a very natural part of the purchase journey. It often plays to consumers' need to protect what they just bought in one form or another. We see that continue to see an uptick in different parts of the region. And for all the platforms, this is an important part of their profitability journey.

So it's one of the adjacent services that they've gone into and that they're monetizing on. Now at the backend of almost every one of these is an insurer. So there are insurance partnerships, uh, which are backing up and subscribing the loan, the books that get built on the back of this, and providing these insurances as well.

So it's very synergistic with the established insurance industry. Will never rival the scale of kind of bigger life and PNC insurance markets as well, but it's an interesting pocket of the insurance market that is emerging there.

Bernard Leong: So I think one question that would come up for lending is regular regulatory changes and also interest rate adjustments Okay, and we just had a rate cut in September that can impact lending revenue. I think about how the digital financial services providers now deal with these challenges to ensure say sustainable growth of digital lending within the region itself.

Florian Hoppe: Yeah, good question. so on the interest rate side, a lot of them have relatively short-term loans still, so it doesn't impact them as much because they can adjust life, uh, kind of with, with the market to kind of, uh, price and changes in the broader interest rate environment.

Regulatory activity has become much higher, and in particular, consumer protection has played a much, much bigger role in all markets in the region which is a big net positive for this part of the world, um, it makes, uh, lending, I think, more secure for everybody who participates in the ecosystem, both the consumer and the companies who are providing the services.

So we think that's actually kind of a big net positive, kind of doing this the right way. You will see that most digital financial services players are very kind of actively engaged in these regulatory dialogues and very supportive of what's coming there.

Bernard Leong: What's the one thing you know about the economy, Southeast Asia, 2024 report that very few do?

Fock Wai Hoong: So I mean, to be fair, I don't think there's anything I know that no one else does. The report is quite transparent and it's been a very collaborative team effort from all of us.

I will say the one thing that, that continues to surprise me about the report, as you mentioned, we've continued to surprise ourselves with regards to the size of the digital economy not in all years, but in quite a number of the years that we put out the report.

This year, in turn, I also continue to be pleasantly surprised. Because if you think about the pace at which companies have pivoted towards profitability, they've improved their business fundamentals. They've driven monetization, and very adeptly found ways to calibrate you know, the delicate balance between growth and profitability. That has been wonderful to see.

Sapna Chadha: People probably don't know how much time we spend on this report, right? We all know: how and when we start in the year. This isn't like a three-month journey. We spend the whole year on it: the number of teams across the board, we all have our unique roles to play in terms of the deep intelligence on the commerce side from Bain, on all the industry side from Bain, the investor side from Temasek, Google has the consumer insights. But I would say even outside of that, it's how we all come together. it's not your typical report or just a report that is done by some analysts and gets stamped with some logos. There's a lot of genuine time and interest, but the one plug I'll say that nobody ever will probably take away and talk about from this year's report is around the state of the developer ecosystem.

We have a few pages on it because it's something I deeply care about. Southeast Asia is very unique and probably doesn't get the credit that it deserves for what's happening in terms of game downloads that are generated by Southeast Asia developers. 12% of all downloads come from Southeast Asia developers, which is three times the share. If you think about GDP, it should have and it's not a coincidence. It's because of the amazing developers that I get to work with in this region every day, particularly in Vietnam, but across the entire region.

Bernard Leong: I have been following this report since the first day it started till now, so I'm very impressed that every year you could churn this report. I just really wonder what is really in the background.

Florian Hoppe: It’s nine years worth of Excel spreadsheets, and each year, some poor soul has to piece it all back together. Being an analyst at heart, I tend to get quite involved in this process, and it’s always an interesting journey.

If I had to highlight one thing I’m particularly excited about, it would be the AI investments and the business opportunities they present for companies. What excites me most about AI is how it allows Southeast Asia to leverage the talent we already have. AI has shifted the landscape in the data space—from relying heavily on deep data science talent, which is still essential, to focusing more on prompt engineering and practical AI applications. This shift leans more toward business skills, which I believe could help alleviate some of the talent shortages we've historically faced in Southeast Asia. Hopefully, this will fuel the next level of growth we're aiming for with startups in the region.

Bernard Leong: That's a great segway to the next conversation we're going to have because AI dominates the conversation everywhere. One key point we really talk about is the significant infrastructure investment of US$30B for AI-ready data centres in Southeast Asia in the first half of 2024. What are the primary motivations behind these large-scale investments and, who are the key players driving this infrastructure development?

Sapna Chadha: Sure, I can start. When it comes to key players, we have the hyperscalers like Google, Microsoft, and Amazon, who play a crucial role in data centre investments, making data centre operators equally essential. Telcos are also key participants. In fact, I would argue that almost every major player is part of this ecosystem.

These investments cover a range of areas, including data centres, cloud regions, and subsea cables. At Google, we’re working on three major subsea cable projects across Asia to bring data closer to home. This localization supports data sovereignty for the region, enhances connection speed, and ultimately improves the customer and consumer experience. Building this infrastructure is essential for the digital economy to flourish.

These developments benefit not only consumers but also governments, which are providing incentives for further investments. We’re pleased to have recently made investments in Malaysia and Thailand, with Singapore already established, and Indonesia is also progressing quickly. This region is truly becoming critical on the global map, and with $30 billion invested in just the first half of this year, it’s clear that Southeast Asia’s significance is growing in a way we haven’t seen before.

Fock Wai Hoong: Just to add to that, the numbers are certainly impressive. The $30 billion committed in the first half of this year aims to expand data centre capacity by about 50%. Underpinning all this investment is AI, which, as we often discuss, functions as a General Purpose Technology (GPT) with extremely broad applications across industries. Sectors ranging from manufacturing to retail to healthcare can all benefit significantly from AI's capabilities.

AI has a profound impact, offering companies opportunities for both revenue generation and cost optimization. Like software, AI applications can be both horizontal, spanning multiple industries, and vertical, tailored to specific sectors—making it fascinating to watch. But to support this broad applicability, a robust AI digital infrastructure is essential.

As an investor, I see two primary opportunity areas in AI: the enablers and the adopters. The enablers focus on building the digital infrastructure, which includes the semiconductor supply chain—a sector where Southeast Asia is starting to play a more meaningful role. Singapore, for example, has developed foundry capabilities, and countries like Thailand, Vietnam, and Malaysia are building capacity within the AI supply chain. This infrastructure growth supports the adopters: companies that will leverage AI to enhance their business operations.

Bernard Leong: The report also highlights Southeast Asia’s unique position to compete in areas like end-layer applications—specifically user applications and data centres. What specific advantages do you see Southeast Asia having in these areas compared to other regions?

Sapna Chadha: I might be biased since I spend a lot of time with startups, but the startup ecosystem here is truly dynamic, with some fascinating innovations emerging across various sectors. For instance, I recently met a startup using computer vision and machine learning to analyze video footage from stores and businesses. They’re applying this technology to proactively detect issues like employee safety risks and security breaches. In Indonesia, I’ve encountered startups focused on agriculture, working to prevent pest infestations and similar challenges. So, the range of innovation spans from agriculture and food to cutting-edge tech.

There’s a clear drive here to address large, fundamental problems, which is one of Southeast Asia’s unique strengths. As a developing region, Southeast Asia has the advantage of “leapfrogging” in technology—similar to how we quickly adopted mobile technology. Now, we’re poised to do the same in AI because there’s a strong motivation to tackle these challenges and adopt new technologies as swiftly as possible.

Bernard Leong: The report mentions several examples of how generative AI can bring tangible value to Southeast Asian businesses, like in travel planning and merchant onboarding. But let’s look beyond these. What other promising generative AI use cases are emerging in the region that could have significant societal and economic impacts?

Florian Hoppe: Sure, I can suggest a few. I’d consider the opportunities in two areas. First, in the existing enterprise technology layer, generative AI presents immense potential. We often talk about “leapfrogging,” which perfectly describes what AI can enable here. Traditionally, implementing a new system meant extensive data preparation—cleaning and organizing data to ensure accuracy before starting. Now, AI can expedite this process. For instance, in a procurement diagnostic, you can reach meaningful conclusions with less pristine data, something that previously required thorough data cleaning. For businesses in Southeast Asia that may not have advanced data infrastructure, AI can be a transformative tool, creating a major performance boost.

The second area is in startups and new businesses. There are significant opportunities in fields like education and remote healthcare. Imagine an AI-powered doctor on call. While we’re not fully there yet, even a decently trained AI doctor could be invaluable in remote areas, like parts of Sulawesi, where medical access is limited. Such innovations could unlock new business potential and further establish Southeast Asia as a hub for emerging market innovation.

Fock Wai Hoong: I don’t have much to add to what Sapna and Florian have said. However, I’d emphasize that we’re seeing AI applications emerge on both the revenue and cost sides. On the revenue side, it’s particularly valuable for customer acquisition and engagement, broadening companies’ ability to reach, connect, and draw in customers—something I find quite fascinating.

On the cost optimization side, AI is making an impact across various areas, from sales and marketing to procurement and supply chain management. These are all compelling spaces where AI can drive efficiency and enhance operations.

Sapna: I’ll add one example on cost optimization related to coding. Right now, we’re seeing a lot of code being generated with AI, but it’s still reviewed and signed off by engineers. This approach speeds up development and leads to a quicker return on investment. It’s not about jobs disappearing but rather about increasing efficiency and accelerating returns, which ultimately benefits both the top and bottom lines.

Wai Hoong: In fact, I recently saw a headline where Sundar announced that about 25-30% of new code was generated by AI.

Bernard Leong: I believe that! I had an enterprise project that originally took nine months to complete, and I replicated it in just three weeks using a few well-structured prompts. Remembering the entire project myself, I was able to put it together quickly, and it worked as expected.

Now, let me turn to you, Wai Hoong, with this question: What’s the one question you wish more people would ask you about the report?

Fock Wai Hoong: As an investor, I’d love it if people asked how they could collaboratively help improve the exit environment in Southeast Asia.

Bernard Leong: I will ask you this question as a follow-up.

Fock Wai Hoong: So let’s dive into that. Earlier, I highlighted three critical factors—valuation expectations, monetization, and a path to profitability—that we’re now progressing well on. These are foundational to creating viable exit pathways, which is promising.

However, to enhance exit opportunities, we also need greater engagement, especially since investors ultimately aim to see returns, and exits are crucial for that. We’re starting to see more private exit pathways, such as secondary sales between funds at different stages of a company’s lifecycle. But in the public markets, deeper engagement is needed. For instance, there’s been encouraging collaboration between the Singapore Exchange (SGX) and Thailand’s SET, creating depository receipt linkages to improve liquidity across these exchanges. Regulators in countries like Malaysia have also been working to streamline IPO approval timelines. I hope these kinds of initiatives and conversations continue.

Bernard Leong: Absolutely, the discussion on DPI (distributions to paid-in capital) is a major focus among investors I speak with on the podcast. What about you, Sapna?

Sapna Chadha: There’s often an assumption that we’re adding fewer new internet users each year since we had that initial rapid growth phase. While the growth rate may have slowed, we shouldn’t overlook how many new internet consumers are still coming online in this region. This continued influx is a major driver of the digital economy.

This ties directly into the rise of video commerce. Video platforms are helping us reach new geographies and tap into previously underserved areas. Through video commerce, we’re empowering SMBs and small businesses, extending beyond metropolitan areas. As Florian mentioned, this growth isn’t limited to beauty products—people are buying across a wide range of sectors. The excitement and engagement generated by video commerce are enabling small businesses to reach new audiences and thrive.

Sometimes there’s a perception that small businesses are being squeezed out, but I’d argue that these platforms are actually empowering them, providing opportunities they didn’t have before. So, while growth may not be as explosive as it was during COVID, it’s still very exciting—and I find it frustrating when people assume otherwise.

Bernard Leong: How about you, Florian?

Florian Hoppe: The one question? I have a similar point. I often feel frustrated that people don’t fully recognize Southeast Asia’s potential, or they downplay it in a global hierarchy as if it’s underperforming.

Fock Wai Hoong: In reality, Southeast Asia has been an incredible space for the digital economy. For example, the region’s e-commerce GMV still surpasses that of India. While we have a way to go before reaching China’s scale, we’ve made substantial progress in adoption and penetration. This region has evolved significantly, with GDP per capita at levels comparable to many middle-income countries, and it continues to grow rapidly, benefiting from a resurgence in manufacturing and a recent surge in data centre investments.

Long-term, I’m extremely bullish on Southeast Asia. As a group, we’d love to see it gain greater recognition on the global map as a prime area for investment and growth.

To drive that point home, let’s reiterate the numbers Florian mentioned: double-digit growth in GMV, double-digit revenue growth, and even higher double-digit profit growth. This performance is especially impressive given the current global uncertainty, numerous challenges, and significantly higher interest rates across markets.

Bernard Leong: You know, it’s interesting—before reading this report, most reports seemed focused on “resetting expectations.” But with this one, I didn’t feel the need for that; instead, it just calls for the patience to let growth unfold. So, that brings me to my closing question: What’s the outlook, and what would success look like for Southeast Asia as a region over the next decade?

Sapna Chadha: I think what’s most notable is that profitability and growth aren’t coming at the expense of each other, and we see digital businesses in this region doing a fantastic job. I’m confident this trend will continue. This means that as the fundamentals strengthen, we’ll see greater digital inclusion, which has been a longstanding goal. We’re at a pivotal moment where supportive practices and regulations are helping businesses become more efficient and enabling them to expand into new areas. The region’s digital-savvy consumers are also driving new models, like video commerce, which can further boost digital inclusion.

Florian Hoppe: For me, one key success metric in the next five to ten years would be achieving a deeper level of regional integration, particularly at the ASEAN level. Southeast Asia may not become the European Union, but we’re interdependent, and greater collaboration—such as cross-border payment systems and sector integration—would be a huge win. This would raise Southeast Asia’s global profile and help build champions that can compete beyond our borders and make a global impact.

Fock Wai Hoong: I started this conversation noting the report’s optimism, and after today’s discussion, I feel even more confident about Southeast Asia’s digital economy. We’ve made impressive strides in reaching profitability, which is encouraging, but there’s still work to be done, especially in establishing strong exit pathways. AI will play a major role in helping the region leapfrog and accelerate its digital economy.

To me, success means achieving greater regional cooperation and ensuring the availability of affordable and effective digital solutions for both consumers and companies. To make this vision a reality, it’s crucial that we invest in our workforce, ensuring people have the digital literacy, education, and upskilling needed to benefit from this growth. This way, each generation can share in the prosperity.

Bernard Leong: This has been a fantastic conversation on the ninth annual Economy Southeast Asia Report for 2024. As they say, we tend to overestimate what we can achieve in a year but underestimate what we can accomplish in a decade. Next year marks the 10th anniversary of this report, and I’d love to continue this discussion with you all to see how 2025 shapes up.

Thank you all for tuning in. We’ll provide links to the report so you can dive deeper into the evolving digital economy landscape of Southeast Asia. Thanks very much, everyone!

Podcast Information: Bernard Leong (@bernardleong, Linkedin) hosts and produces the show. Proper credits for the intro and end music: "Energetic Sports Drive" and the episode is mixed & edited in both video and audio format by G. Thomas Craig (@gthomascraig, LinkedIn). Here are the links to watch or listen to our podcast.