The South-east Asian digital economy is expected to exceed US$300 billion (S$390 billion) by the end of 2025, with Singapore as its leading artificial intelligence (AI) hub.
The region’s gross merchandise value (GMV) and revenue have both seen a steady growth of 15 per cent since the previous year.
GMV refers to the total value of all goods sold over a specific period, through a platform.
These findings were part of an annual report released on Tuesday (Nov 11) by Temasek, Google as well as consultancy firm Bain and Company.
It usually covers Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — but was expanded this year to include Brunei, Cambodia, Laos and Myanmar.
With the expansion, revenue for the region hit US$100 billion while GMV reached US$305 billion — exceeding the inaugural report’s forecast of US$200 billion made a decade ago.
The rise of artificial intelligence (AI) is expected to make South-east Asia ripe for transformation, especially due to the region’s large internet population and keen interest in AI, the report said.
Singapore is the leader with about 495 AI start-ups out of the region’s 680 start-ups being located here. It has also secured US$1.31 billion in private AI funding this year, the highest in the region.
A total of over US$2.3 billion has been invested in AI-related start-ups in the region, said the report.
Google’s vice-president for South-east Asia and South Asia Frontier Sapna Chadha said that Singapore’s strength lies in its dual focus — driving relentless digital innovation while building a robust framework for AI governance.
“As a global hub, its pioneering approach to responsible AI and its stable, mature ecosystem are setting an important benchmark for the rest of South-east Asia.”
Fock Wai Hong, Head of South-east Asia at Temasek, echoed similar sentiments. He stated that Singapore is “attracting AI companies across South-east Asia to establish their regional or global operations here”.
Florian Hoppe, partner at Bain and Company, also said that Singapore’s early momentum in scaling AI capabilities can unlock more opportunities — such as funding — for the region in the future.
Other sectors also saw growth in past year
Aside from the growing AI sector, the report also noted that video commerce has evolved from a niche channel into a mainstream force.
It is now driven by “shoppertainment”, where content and commerce combine to make online shopping immersive and entertaining.
GMV for food delivery has also grown steadily, by 14 per cent since the previous year, showing that it has shifted from being considered a luxury to routine, said the report.
The GMV for such services is projected to reach US$23 billion, with revenue nearing US$2.4 billion in 2025.
“Platforms are increasingly targeting segments that value affordability by introducing new products and diverse menu options, shifting the service from a discretionary luxury to a more accessible option for a broader consumer base,” the report added.
Moreover, the transport segment — such as ride-hailing services — also grew by 16 per cent. Autonomous vehicles are expected to increase and take off in the next three to five years, said Hoppe.
Projections show the GMV for transport reaching US$11.5 billion and revenue climbing to US$1.9 billion in 2025.
Online travel GMV continues to grow and is projected to hit US$51 billion. Revenue is set to reach US$24 billion, with travel volume recovering and increased airfares.
“Although passenger numbers have yet to fully return to pre-pandemic levels, the steady climb of passenger volumes in both foreign arrivals and outbound travel has kept pricing power strong,” the report stated.
The accommodation sector is also experiencing strong growth too, underpinned by a sharp increase in hotel room rates across the region, the report said.
According to the report, hoteliers — especially in high-demand markets like Singapore and Malaysia — have raised average rates by over 20 per cent.
Among investors, there has also been “a cautious uptick” in interest, especially in late-stage deals and the digital financial services sector, the report said.
Private funding rose 15 per cent to US$7.7 billion in the last 12 months from the prior period, but remain at about 70 per cent of the high they hit in 2021.
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bhavya.rawat@asiaone.com