The rapid advance of technology is transforming economies and societies across the globe, including in Southeast Asia, as Adrian Ashurst, CEO of Worldbox Business Intelligence, explains in this article. The profound impact of the current technological revolution is also why Worldbox Business Intelligence will be including a special section on technology in its Southeast Asian Country Risk Reports from November onwards.
Advances in technology are taking place at a remarkable pace and are changing almost every aspect of life and nearly every economic sector, including transport, energy, communications, healthcare, manufacturing, entertainment, business and education. In all these areas and more, technology is spurring improvements in quality or productivity, boosting competitiveness and spurring expansion
Moreover, the most profound changes may still lie ahead, as the power of artificial intelligence (AI) is unleashed in the coming years. Indeed, according to an International Monetary Fund (IMF) article published earlier this year, AI will transform the global economy, affecting almost 40% of jobs, replacing some and complementing others. (1)
In Southeast Asia, AI is projected to generate considerable economic and social value. By 2030, AI adoption could improve the region’s total gross domestic product (GDP) by between 13% and 18%, a value nearing US$1 trillion, according to the Southeast Asia Public Policy Institute. (2)
The research institute argues that, by buoying a burgeoning digital economy and a young, tech-savvy demographic, AI can play a major role in the region’s next phase of industrial development, from energy systems to warehouse management, as well as facilitating positive social outcomes such as financial inclusion and improved public services.
Malaysia at the forefront of the AI revolution
The positive impact of AI can already be seen clearly in Malaysia (in fact, so clearly that we are devoting the next article to Malaysia and the turbo-boosting effect of AI on the country’s growth). Malaysia is emerging as a data-centre powerhouse in Southeast Asia as demand surges for cloud computing and AI, and the country attracts billions of dollars in investment.
The country’s strategic location, favourable government policies, proximity to Singapore, and attractively priced land, power and water have turned it into the fastest-growing Southeast Asian market for data centres.
Malaysia’s position as a hub in the global chip supply chain is also boosting its economy – and the country stands to gain from companies relocating operations amid escalating trade tensions between the US and China. Computer chips, or semiconductors, play a crucial yet often overlooked role in the technological revolution currently underway in so many areas. Modern cars, for example, contain up to 3000 semiconductor chips and their use is expected to grow even more as hybrid and electric vehicles become more common on our roads. (3)
Investment bonanza
Other countries in the region are also benefiting enormously from the rise of technology. In May 2024, Amazon Web Services announced a US$9 billion investment over the next five years to expand its cloud infrastructure and services in Singapore. Apple, Microsoft and Nvidia are also committing billions of dollars in investment in the region.
According to the Japan Times, this surge in investment reflects the fact that “after decades of playing second fiddle to China and Japan, the region of about 675 million people is drawing more tech investment than ever”. The newspaper adds that data centres alone will attract up to US$60 billion over the next few years as Southeast Asia’s young populations embrace video streaming, online shopping and generative AI.
The Japan Times adds that:
“The region’s growing workforce is making it a viable alternative to China as a center of talent to support companies’ global operations. As its governments pushed for improvements in education and infrastructure, it’s become an attractive base for everything from manufacturing and data centers to research and design.” (4)
Apart from AI and semiconductors, other tech areas that are advancing rapidly in Southeast Asia include:
E-commerce: Companies like Shopee, Lazada and Tokopedia have become household names, providing a platform for businesses to reach consumers and vice versa. The increased penetration of the internet and a growing middle class have fuelled a surge in online shopping, making Southeast Asia a hotbed for e-commerce innovation, according to the online publication Tech Collective.
Figure 1: Southeast Asia’s online economy continues to grow rapidly
Healthcare: COVID-19 resulted in an unprecedented uptake in digital health technologies. The region’s digital healthcare market is expected to grow to just under US$6.1 billion in revenue in 2024, fuelled partly by new developments in AI, according to Singapore’s CNA. The news network adds that “from detecting disease to driving diagnoses, AI is streamlining systems and changing approaches to patient care”.
Fintech: The fintech industry in the region has boomed, reflecting rapidly rising living standards and the fact that a large proportion of the population is unbanked or underbanked. A new study by UnaFinancial reveals that mobile fintech app adoption in Southeast Asia is on track to reach 60% by 2030, up from 49% in 2024. The research highlights significant growth in the region’s digital financial services sector, with some countries, such as the Philippines, poised for particularly high penetration rates.
Edtech: Education technology (edtech) is among the top sectors in Southeast Asia for raising venture capital, according to a report from the market-research firm Tracxn. A rising middle class and more interest in digital learning following the COVID pandemic are the main drivers of this growth. The market ranges in size from Singapore, where US$2.2 billion is forecast to be spent on edtech by 2027, to Vietnam, where the market could reach a size of US$5.4 billion by 2028.
Smart cities: Various Southeast Asian cities are embracing smart-city initiatives to enhance urban living through technology. Initiatives include the implementation of smart infrastructure, IoT (Internet of Things) solutions, and data-driven urban planning. Singapore, for example, has been a pioneer in adopting smart-city technologies, with projects such as smart transportation systems and sustainable urban planning, according to Tech Collective.
Industry: From production to logistics and marketing, technological innovations are revolutionising manufacturing, services and office life in general in the region. That reflects hefty investments by local businesses as they strive to maintain competitiveness. Digital transformation investment in Industry 4.0 (or the Fourth Industry Revolution) solutions by Southeast Asian manufacturers is expected to grow steadily to reach US$301.6 billion in 2028, marking a 32.9% compound annual rate.
This growth in spending will significantly improve the efficiency and impact of manufacturing in the region, with the proportion of manufacturing factories that have implemented smart solutions growing from 6.3% currently to 32.8% by 2028 (representing an average year-on-year growth of 31.6%), according to AB Research.
In conclusion, Southeast Asia is likely to reap enormous benefits from the technological revolution in the coming years, and Worldbox Business Intelligence intends to be at the forefront of analysing the impact on local economies and businesses.
Sources
3 - https://polarsemi.com/blog/blog-semiconductor-chips-in-a-car/
4 - https://www.japantimes.co.jp/business/2024/05/11/tech/tech-giants-southeast-asia/
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