The logistics funding scene in Southeast Asia rebounded last year after declining for two years. According to DealStreetAsia’s State of Logistics in SE Asia 2024 report, the sector saw an increase in deal volume at 21.4% year over year (YoY) in the first nine months of the year, reaching 19 transactions. Also, deal value went up 83.4% to USD 95.8 million.

DealStreetAsia’s report noted that the Indonesia logistics hub remained the top investment destination in the Association of Southeast Asian Nations (ASEAN). Between January 2020 and September 2024, the country accounted for 37.7% of the deal volume and 71% of the total deal value in the region. One of last year’s most significant deals was by Jakarta-based Kargo Technologies, which acquired Malaysia’s logistics platform TheLorry.

We take a deep look into the evolving logistics landscape in Southeast Asia with Clarence Leong from EasyParcel

Challenges in the logistics sector

Even though Southeast Asia’s logistics sector is growing rapidly and can become a significant player on the global stage, it still faces various challenges. The State of Logistics in SE Asia 2024 report highlighted a few of them, including:

  • Capital flow concerns: The report pointed to the uncertainty among investors, which has led to declining late-stage funding. Between 2021 and 2023, the share of later-stage capital inflows in startups dropped from 93.6% to 37.7%, and there were no deals in the first nine months of 2024.

In Indonesia, the VC trends showed evolving investor behaviour, whereby venture capital firms aggressively competed for strategic deals and negotiated valuable exits. They also divested to seek out potentially profitable partnerships.

  • Liquidity crunch: Investors worldwide have been dealing with funding issues because of the dwindling state of the global economy, brought down by inflation and other factors. Ninja Van CEO Chang Wen Lai told DealStreetAsia that there was overinvestment during the COVID-19 pandemic, creating an unrealistic market situation. 

Companies had a lot of liquidity and heavily invested in research, purchasing technologies, expanding their businesses, and over-hiring employees. Ultimately, a market correction followed, leading to funding winters.

  • Pressure for startup profitability: Southeast Asian startups’ aggressive push for business reforms targets achieving sustainability and profitability. An analysis of regional companies showed only 17% managed to get profits in 2023. Even more shocking was that the list had no logistics companies, meaning the industry needs more positive change.
  • High supply chain costs: Venture capital firm East Ventures pointed out that inflation, geopolitical tensions, economic uncertainties, and growing market demands caused the high logistics costs in the global supply chain. 

Furthermore, the region’s shift toward sustainability has added more costs, such as the move from non-biodegradable plastic bags to reusable or easy-to-recycle shopping bags. Regulatory concerns are also responsible for increasing prices as companies try to comply with the rules. The cost of maintaining a storage facility can be high, and it is up to business leaders to decide whether to invest. 

Logistics funding segment rebounds in Southeast Asia 

Even though the share of logistics funding in ASEAN dropped by 3% of the overall startup capital inflows, there was a rebound in deal value and volume in 2024. This trend coincided with the resurgence of eCommerce gross merchandise value (GMV) compared to previous years. Online shopping has become the preferred method for the population in the region, increasing the need for reliable transportation.

Indonesia has received 70% of logistics funding since 2020 and raked in USD 41 million in the first nine months of 2024. Singapore had the lowest percentage in Southeast Asia at 14.6%. DealStreetAsia noted that Indonesia had become a viable investment destination thanks to its robust economic growth, young, tech-savvy citizens, and soaring eCommerce market.

ASEAN’s outlook for the logistics sector in 2025

The ASEAN Freight and Logistics market is on target to reach USD 390 billion by 2030, rising from USD 269.5 billion in 2024. Indonesia is already leading the way by formulating a plan to enhance its national logistics ecosystem. Moreover, it has been working to reduce the supply chain costs from 24% to 17% by the end of 2024 and to enhance port efficiency.

Tiger Fang, Kargo co-founder and CEO, told DealStreetAsia that he believes mergers and acquisitions (M&A) in the logistics sector will increase in 2025. He cited market conditions as playing a role in influencing investors to engage in M&A activities. eCommerce consolidation will likely happen, pushing last-mile providers—the companies involved in final-stage deliveries—to do more in the sector.

The logistics funding scene Southeast Asia is experiencing bodes well for the future. Statista Research predicted that the industry’s value will rise to USD 0.72 trillion by 2029, and third-party supply chains will reach USD 53.9 billion. Additionally, the Indonesia logistics hub will look to be more efficient and reduce the fragmentation in the sector. 

Integrating technology into logistics businesses may take a while, but it will be worth it in the long term.