With the recent release of the Google e-Conomy SEA 2020 Report on investment trends in Southeast Asia, investors are cautious, yet optimistic, about the financing scene. Previous funding for fintech infrastructure, as well as an unexpected increased migration of users towards online services due to COVID-19, led to this latest report, titled “At Full Velocity: Resilient and Racing Ahead”. It seems the region may be on the road towards what appears to be a robust investment future.

Online usage has skyrocketed in 2020 so that two out of three individuals in Southeast Asia are now online. Moreover, in addition to just browsing, internet users are also buying more online as they most likely wish to remain in the safety of their homes. This increase in sales is thereby boosting eCommerce for newer startups, while unicorns’ share of the pie has fallen slightly

Vietnam’s COVID success story

One example of continued growth is in Vietnam. While already burgeoning in 2019 with $362.5 billion USD in investments, the country has remained relatively stable with funding in the region of $337.9 billion USD as of June 2020. Moreover, the report points out that Vietnam gained around 41% new internet service customers in 2020, 94% of whom, when surveyed, indicated that they would continue to use eCommerce services following the pandemic.

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Part of Vietnam’s success is due to its government’s commitment to investing in the fintech infrastructure, including in the rural areas that might have been overlooked by larger companies. When COVID struck, the infrastructure and investment programmes that had undergirded Vietnam’s financial strategy were already in place, allowing customers to take advantage of small-amount transactions via their mobile phones. The success of its approach was further enhanced on June 16th when a number of its institutions promoted a Cashless Day, wherein customers were encouraged to utilise their eWallets instead of paper or coins to make purchases. Vietnam’s expanding fintech infrastructure is poised for future growth as its travel sector rebounds due to the country’s success in containing COVID.

Sectors to watch: healthtech and edtech

The healthtech and edtech sectors in Southeast Asia also flourished throughout the region during 2020. While Singapore and Indonesia accounted for 93% of healthtech investment in 2019, usage of health apps spurred further investments after the onset of COVID.  Neighbouring countries, India and China remained in the lead in the levels of funding, yet Southeast Asia accounted for 21% of financed projects, with many digital platforms such as contract tracing apps, symptom checking websites and mergers between existing healthcare providers making up the bulk of financed projects.

Similarly, edtech investment spiked as the sector grew and diversified, even though established startups witnessed a slowdown. Edtech saw growth in K-12 through to professional development expansion during the pandemic, especially among lesser-known companies as classes and learning moved online. 

With increased investment, these two nascent sectors are likely to continue to expand over the coming years.  For instance, Indonesian startup Ruangguru made headlines in 2019 with a $150 million USD funding announcement. However, the young company made even more waves following allegations of conflicts of interest amongst some of President Joko Widodo’s staffers.  

Adult educational learning management systems (LMS) became widely utilised throughout the region as learners turned to tech to improve their job prospects. The e-Conomy SEA 2020 Report reveals that even though there was unequal usage of an array of edtech offerings during lockdowns, language learning, reskilling, and STEM apps were heavily utilised by adults as the future appeared uncertain to workers and online learners.  

China trade war beneficiaries

With the US-China trade war in its third year and the election of Joe Biden as a possibly more mollifying influence on the two countries’ trade relations, Southeast Asian economies may benefit from a more normalised partnership between China and the United States.

Indeed, at the time of writing, Southeast Asian countries, neighbouring nations and China have just signed a landmark trade deal through the Regional Comprehensive Economic Partnership (RCEP). While the global economy could grow by as much as $186 billion USD, Southeast Asian countries are likely to dually benefit from both their COVID-spurred eCommerce economies and their new relationships with China. Under the new partnership, there will be a reduction in tariffs between participating countries over 20 years. President-Elect Biden has not yet indicated whether his administration will normalise trade relations with China, but the outlook is hopeful, as he stated that democracies, including those in the RCEP,  need to align with one another in the future.

Overall, the e-Conomy SEA 2020 Report and related research indicate that the current investment trends in Southeast Asia will continue to grow. Although unicorns and other large startups are now refocusing on their basic services – and may lag behind smaller companies – most areas of investment, particularly sectors that sowed the opportunities afforded by COVID-19, will be likely to produce a healthy, robust investment ecosystem for the region.