A range of evidence suggests start-up businesses based in Association of South-East Asian Nation (ASEAN) member states, could be set to register significant growth next year. Htet Tayza examines this evidence to ask: will 2017 be the year of ASEAN start-ups?
It’s important to note that ASEAN is projected to become the world’s fourth largest economy by 2030, providing new opportunities for entrepreneurs. ASEAN is also increasingly focusing on providing the resources young companies need to secure business. In 2016, ASEAN created an online academy, to provide small businesses with the resources and knowledge they require to expand operations.
Meanwhile, big global names are turning their attention to ASEAN. Most notably, Google has been investigating opportunities in ASEAN for some time, finding that the bloc’s e-commerce market is set to expand 16-fold by 2025, hitting US$88bn. Commenting, Google’s New Emerging Markets Head, Sajith Sivanandan, said that ASEAN has the potential to create a US$200bn online economy.
Also, the ASEAN start-up funding market is growing exponentially, providing entrepreneurs with the necessary capital, to develop new businesses in the region. For instance, one of the bloc’s most prolific venture-capital firms, 500 Startups, recently made US$10m pools of cash available to new firms in Vietnam and Thailand and will soon do the same in the Philippines. But ASEAN territories, a Bloomberg editorial (via Manilla Bulletin) argues, should address three key issues, to ensure their start-ups thrive.
First, the scope of investment needs to be broadened across the ASEAN region. Data indicates that previously, most investment has gone to start-ups in ASEAN’s largest (Indonesia) and richest (Singapore) states. However, the editorial argues, it is normal for the most prominent nations to attract early interest from investors. As long as capital is disseminated among other territories going forward, this should not serve as a barrier in the quest to turn ASEAN into a global start-ups hub.
Second, ASEAN needs to promote innovation, to create high demand products and services. The three most funded start-ups in the area are based on existing ideas, suggesting that ASEAN boasts a copycat culture. But mimicry is the first step towards innovation, allowing entrepreneurs to improve on existing ideas. For example, the piece shows, Indonesia’s Go-Jek may have been modelled on ride-hailing services, but it has now added motorbikes and trucks, providing extra value to local consumers.
The third challenge is “connecting disparate economies so that doing business is made easier.” A successful business in Singapore, for instance, would have to practically start again in Malaysia, due to differing customs, regulations and taxation. But ASEAN politicians are starting to confront this issue. Malaysia’s Trade Minister, for instance, recently noted that ASEAN is making progress on ending trade barriers, through measures like supplying cross-country certification of products and services.
Htet Tayza’s commentary
The editorial makes a good case, in suggesting that 2017 could be the year of ASEAN start-ups. However ASEAN governments must overcome significant domestic challenges to create the environment entrepreneurs need to develop lucrative products. Also, they will need to contend with a shaky global economy and an unstable geopolitical environment. For example, the election of anti-globalist Donald Trump as US President, suggests that South-East Asian start-ups may face tighter US trade barriers next year, making it harder for them to access world’s most lucrative economy.