According to a recent UBS Global Research investment report, the ASEAN nations (Indonesia, Malaysia, the Philippines, Singapore and Thailand) are on the cusp of rapid acceleration in mobile commerce. UBS argues that despite minimal credit card penetration, inefficient supply chains, inhibitory regulations (both customs and taxes) and limited internet coverage, that the ASEAN nations are now reaching an inflection point for internet penetration and ecommerce due to the rollout of 3G and more affordable devices leading to mobile devices representing over 50% of internet traffic.
UBS thinks that internet users in Southeast Asia are generally underestimated. ComScore reports online penetration could be as low as 62 million users or 11.6% penetration, whereas UBS estimates the region has close to 200 million internet users or 32%+ penetration. This figure is likely to increase to 294m or 48% penetration within the next three years.
According to their proprietary big data algorithms, they estimate business to consumer ecommerce in Southeast Asia amounts to US$500,000 to US$1 billion, less than 25 bps of total retail sales. However growth rates are high with expectations that this number will reach US$35 billion by 2020.
This could spell a boon for Southeast Asia venture capital as it continues to see a home for increasing amounts of venture capital funds dedicated to the region. In singular markets, focused funds and strategies take a more secular stance such as a focus on Vietnam venture capital or Thailand venture capital.
ASEAN Region Analogous to China Circa 2006 to 2008
China’s internet penetration grew dramatically from 2006 to 2008, fueled by booming PC sales and the rapid growth of broadband, that increased internet penetration from 11% to 22% during the three-year period. Moreover, 3G rollout beginning in early 2009 led to another doubling of the penetration rate to 45.5% (2013) over the next few years. Thailand is also on a very rapid internet penetration growth curve and could overtake China in terms of penetration rate by 2015. UBS highlights that in just a few years, internet penetration will no longer be a bottleneck.
“In our local ASEAN markets, the rapid expansion of the 3G and 4G wireless network and availability of increasing cheaper smart phones from China are leading to a “perfect storm” scenario for mobile ecommerce,” says Tony Williams, Co-Founder and Partner at Inspire Ventures. “ASEAN venture capital has driven a substantial amount of the funding for the business development around this perfect storm even in the case of Vietnam and Thailand.”