How Emerging Asia’s five economies will set the pace of world growth
And how the region’s preparation for, and management of, that leadership pace is inextricably linked to global world views.
The economy of Emerging Asia—defined by the Organization for Economic Cooperation and Development as South-east Asia, China and India—now accounts for 22.5% of the global gross domestic product, which is even larger than that of the European Union.
However, aside from the regular economy of Asia, is the vast untapped potential its internet economy.
This is not inconceivable, given that technology wields influence over the conventional economy. Just to put things into context: a report on the South-east Asian Internet Economy1 by Google, Bain & Company and Singapore’s Temasek Holdings last year revealed that in Southeast Asia alone, there are 400 million internet users, with 40 million coming online just recently. In terms of monetary value, the region’s internet economy crossed USD$100bn in 2019, and is set to cross US$300bn by 2025.
Obviously, the phenomenal growth in Asia is partly due to its 60% share of the world’s youth population2 and 1/3 share of the world’s internet population3. Factor-in the one billion unbanked and underbanked people propelling the proliferation of digital finance as well.
All these factors power the growth of e-commerce—expected to reach US$172bn by 2025—due to the multiplier effect of the pandemic, amid ever-savvier audiences with refined tastes and greater disposable incomes, access to a global marketplace and the disruption of digitalisation. Five markets within Asia stand out in particular:
- They have the largest population in the world.
- They are a key cog in global manufacturing and supply chains, driven by low production costs, a comprehensive manufacturing ecosystem, abundant supply of skilled workers and a burgeoning domestic consumer market.
- Baidu, Alibaba and Tencent are a force to be reckoned with, ranking4 amongst the top 10 companies globally when it comes to market capitalisation, and commanding 70% of all search engine market share in China.
- Chinese tech giants are looking beyond their borders to latch onto new growth streams:
- Alibaba is looking to invest5 US$3 billion into Grab.
- Tencent recently made plans to open6 up its regional HQ in Singapore.
- Bytedance and Ant Financial have stakes in Singapore’s digital bank licensing race7.
- They have the world’s second largest population.
- They are a top exporter of ICT talent globally.
- Huge investments are attracted to its technology sector:
- Walmart increased its majority stake in India’s largest e-commerce player Flipkart with a US$1.2bn investment round.
- Facebook invested US$5.7bn in Reliance Jio Platforms, India’s biggest telco.
- They are a global trade hub.
- The city is a landing point and favored by many logistics, finance and technology MNCs for siting their regional headquarters.
- There is access to a highly skilled talent base.
- They offer political stability and a concerted, nationwide digital transformation and technology adoption push.
- They are an emerging manufacturing powerhouse set at a crossroads between China and India, with improving infrastructure such as fast rail links and new airports.
- Their growing digital infrastructure is powered by a highly skilled workforce and a nationwide Industry 4.0 initiative.
- They have the largest population, economy and internet economy in South-east Asia.
- There are a growing number of unicorns: Gojek (super app), Traveloka (travel aggregator), Bukalapak (e-commerce), Tokopedia (e-commerce), OVO (fintech).
- The country is predicted to become the fifth largest economy in the world by 2024, according to the World Economic Forum.
Challenges and opportunities ahead
The pandemic has laid bare the need for businesses and economies to embrace innovation and technology: it is no surprise that technology stocks are the ones that are holding firm despite the market volatility. And these five Asian markets of growth and innovation are blazing a trail for the rest of the region and the world to follow.
As the world grapples with uncertain future, Asia’s agile leverage on technology to transform lives and embrace the greater world in growth and innovation will be notable. A signal of Asia’s prowess: two of the 10 largest companies in the world by market capitalisation are Chinese technology firms running on ‘super apps’—a uniquely Asian concept that the rest of the world is catching on to.
However, how Asia’s bright tech-driven future pans out is also subject to risks and governance. In an age where environmental responsibility is a global priority, the spotlight will firmly be on the likes of data centre operators. How will they responsibly manage their excessive energy consumption while servicing the imminent explosion of data needs arising from accelerated global digitalisation8?
With mounting data generated will be the greater strain placed on energy resources and in turn, the environment. Even if that hurdle is crossed, there will still be the issue of talent crunches. In a market that is experiencing tightening labour laws and skills sets, how will organisations remain healthily staffed? The confluence of environmental stewardship and talent management agendas will be critical in providing the robust platform required for Asian tech sector to scale to meet the burgeoning demands of customers.
How Emerging Asia tackles this and other multi-faceted issues will greatly influence its rate of progress in the years to come, and it is something that needs addressing now as we sit on the cusp of the new decade.
As featured on DigiconAsia.