During the COVID-19 pandemic, small and medium-sized businesses (SMEs) in key digital sectors in Southeast Asia managed to flourish and even surge at a time when, in many other regions, they struggled. In particular non-cyclical industries such as online shopping, food delivery, and ordering services, and online media and entertainment went from strength to strength, despite lockdowns and economic contractions.
To put this in context, in the Asia-Pacific region, SMEs account for 98% of all businesses, therefore their success and ongoing profitability are essential to both national, and regional economic health.
This is in line with the growing momentum of digital sectors in the region, outpacing other more ‘traditional’ industries that were suddenly in need of digital transformation. A recent study by Google, Bain & Company and Temasek Holdings reported that the population of the area spent around one hour more per day online. How they spent their time was most important, as it was often researching healthcare-related topics, on education, entertainment and streaming services, and of course, shopping.
Helping SMEs go digital is crucial to a stronger economy
Another of the big social factors that led to some small business success during the pandemic is the ongoing trend for supporting local and family-owned businesses. For example, on social media hashtags like #shoplocal #supportlocalbusinesses, and campaigns to shop at standalone stores rather than large chains, have been constant.
While this is great news for certain SME segments, it could also lead to a “scaling back” in retail stocks as companies of a larger size fall out of favour with customers.
Let’s explore some of the changes that have had an impact on the SME segment in Southeast Asia.
More internet users than ever before
This was encouraged by increased internet access and social media usage. An additional 40 million people gained Internet access in Asia during 2020 and more than 90% of them say they will continue using the internet, even when life returns to normal. They were predominantly from countries like Thailand, Malaysia, Singapore, Indonesia, and Vietnam. This brings the total number of internet users in Southeast Asia to more than 400 million.
This has led to an increase in online shopping, digital app usage and more. Even more encouraging were the reports that the gross merchandise value (GMV) surpassed $100 billion, growing at a rate of 63%. This could grow to $300 billion in the next four years, despite the pandemic.
All of these factors, and more, suggest that the transition to a more digital economy is here to stay, even after COVID-19 cases subside. The pandemic helped lower the resistance to change and necessity ensured that people had to adapt to a more digital world.
Ongoing support is needed
While the signs look promising for certain sectors, the continued growth and success in the region is tenuous. The success hinges on government support to capitalise on the growing digital economy and create a nurturing environment for SMEs to continue to bring their businesses online.
Some of the hardest-hit sectors of the pandemic include international travel and transport. As airports, trains, and ferries shut down or drastically reduced their services, many companies continued to be worried about what the future would hold for them. There is some good news for the Asia region, as it’s estimated that the sector will bounce back and exceed $60 billion by the end of 2025. This shows that while there are difficult times still ahead, there is hope on the horizon.
But the success of these markets will depend on the way in which governments support their citizens. The use of furlough schemes, tax breaks, and other fiscal incentives will be key in driving forward growth and sustainability across all sectors. Small to medium startups will need protection from risk and help to raise funds. Established businesses will need incentives to keep going, to expand, and to bring on new staff.
What’s next for SMEs in Southeast Asia?
The region continues to rebound from the pandemic, even though it isn’t over yet – the general consensus is that the rebuild is around the corner. It is obvious that the need for digitalisation remains a priority, but given the significant economic impact and how many SME industries have been hit, it is still a long way from a full recovery.
However, there continues to be a sense of optimism for many in the region, so hopefully, we are a short time away from a reopening of the regions’ economies.
This article was contributed by freelance writer Alice Taylor
About the author
I am a professional journalist, content writer, ghostwriter, and PR specialist with over 13 years of marketing and business development experience gained in the UK, Malta, Cyprus, and Albania. My specialist areas include technology, blockchain and crypto, politics, travel, society, human rights, lifestyle, fintech, legal and corporate services. I work extensively for a number of reputable media outlets, as well as running a viral blog, and regularly appearing as a public speaker in schools, colleges, and seminars.