Asean GDP could soar by US$1 trillion as SMEs go digital

SINGAPORE — Getting more of Southeast Asia’s small businesses into the digital economy could significantly raise the region’s gross domestic product (GDP), an industry study has found.

It noted that the region’s digital economy is worth about US$200 billion (S$274 billion) today, or 7 per cent of total Asean GDP. More integration could send that rocketing by an additional US$780 billion to US$1.13 trillion over the next seven years with Asean GDP projected to hit US$5.1 trillion by 2025.

But non-tariff barriers such as logistics and cross-border digital regulations such as data localization continue to be challenges, especially for small and medium-sized enterprises (SMEs), said the report from consultancy Bain & Co.

The trillion-dollar GDP boost could come by 2025, on the back of trade and growth within the region, with productivity improvements in sectors such as manufacturing, as well as expansion of digital markets and the growth of “enabling sectors” such as information communications technology, it noted.

Findings from a poll of more than 2,300 small businesses in Asean showed, for instance, that SMEs in the retail sector saw sales go up by 15 per cent on average after turning to e-commerce.

Bain partner Florian Hoppe, who jointly leads the company’s digital practice in the Asia-Pacific, told a briefing yesterday: “Digital at a macro level obviously will cause some disruption to the economy, just like any wave of change, like the rise of computers. You will see shifts in the values generated and how companies operate, what people need to be skilled in.

“Overall, retail GDP actually has been growing… in pretty much all economies – in particular, emerging economies all over the world.”

Still, about a quarter of SMEs pointed to limited cross-border payment options as the key barrier to selling online internationally, while close to three-fifths said that logistics and export processes were obstacles to cross-border trade. Another issue highlighted in the report was the skills gap, with two-fifths of SMEs saying that they did not have staff with the necessary digital skills.

The report, which was presented at the Asean Economics Ministers Meeting at the end of August and released yesterday, also noted: “In order to accelerate results, Asean member states should partner with the private sector in designing the most relevant digital skills road maps – building off the work that has been done in Singapore and Malaysia – and accelerate the roll-out of these programs for prioritized sectors.”

The Bain report was done in association with technology companies Google and Sea, as well as Ms Rebecca Fatima Sta Maria, former secretary-general of Malaysia’s International Trade and Industry Ministry.