Australia’s government launched its latest Digital Economy Strategy in October with a focus on leveraging digital technologies to boost economic growth and create jobs.
The strategy has four key pillars:
Strengthening cybersecurity measures;
Developing a skilled workforce;
Enhancing high-speed broadband connectivity; and
Empowering Australian businesses to excel in the digital era.
To achieve these goals, the government will improve the regulatory environment for tech companies and startups, develop opportunities for digital entrepreneurship, as well as expand international digital trade. As trade transitions towards more cross-border data flows, Australian businesses need to align by adopting new technologies that can help minimize border friction.
This therefore presents opportunities in digital trade with ASEAN states. Moreover, ASEAN and Australia signed the ASEAN-Australia Digital Trade Standards (DTS) Initiative in 2018 to support the greater implementation of digital trade between the two and to seek awareness of the role of international standards in enabling such digital trade to occur.
Southeast Asia’s huge digital economy
Southeast Asia’s huge digital economy can bring huge economic opportunities for Australian businesses. The e-Conomy report compiled by Google, Temasek, and Bain & Company states that there are some 460 million internet users in the region as of 2022, with the digital economy having a gross merchandise value of US$194 billion – a 20 percent year-on-year growth. This figure is expected to reach US$330 billion by 2025.
Furthermore, the region has over 23,000 digital or tech startups with Singapore and Indonesia having the largest concentration of these startups.
Australian businesses will see opportunities in cybersecurity, e-commerce, software development, digital services, fintech solutions, and cloud services.
The fintech industry in Southeast Asia is one of the most alluring in the world with enormous opportunities for value creation for Australian investors. The region is already home to a large number of unicorns and decacorns such as GoTo Group and Grab.
Fintech investments in Southeast Asia reached over US$4 billion in the first nine months of 2022. There is massive opportunity for value creation such as through financial inclusion initiatives. The majority of the region’s workforce is in the informal sector, and many micro, small, and medium-sized enterprises (MSMEs) have little access to financing from banks, as they too are mostly operating in the informal sector. This is because most MSMEs have business models that are not compatible with the characteristics of the banks’ financial products. That includes aspects such as payment terms for loan schemes, forms of collateral, and credit quality, among others.
Fintech firms can plug this gap through new financing models that potentially serve Southeast Asia’s huge number of unbanked or underbanked — an estimated 50 percent of the region’s population remains unbanked.
Through these loan schemes, borrowers receive not more than US$100 which is normally returned within a few weeks.
The COVID-19 pandemic propelled Southeast Asia’s e-commerce industry as more people used e-commerce platforms. However, most of this growth has been targeted in urban areas, and as such, there are untapped opportunities in serving consumers in the region’s second and tertiary cities. The next battleground will be collaborations of big regional suppliers with micro businesses to serve these outlying communities.
Notable e-commerce platforms that have taken advantage of the region’s large consumer market are Singapore’s Lazada and Shopee, which garner hundreds of millions of monthly visits between them.
In conclusion, Australia stands on the precipice of a mutually beneficial relationship with Southeast Asia’s digital economy. Embracing this synergy offers boundless prospects for economic growth, technological innovation, and cross-border collaborations, propelling both regions into a new era of digital prosperity.
Source: ASEAN Briefing