Southeast Asia’s Internet Economy: Powering Through The Pandemic


The global economic havoc triggered by the COVID-19 pandemic created unique growth opportunities for certain regions and industries. Ongoing government lockdowns, lengthy quarantine periods and extensive travel restrictions drove consumers globally to embrace the convenience of online offerings, notably internet commerce and delivery services. As employers worldwide convert temporary remote positions to permanent while individual preference for all things clickable and quick has become ingrained, the explosive growth of digital offerings shows no signs of waning.

One such pandemic success story is that of Southeast Asia’s internet economy. Expected to reach a staggering $1 trillion by the end of the decade, its growth is the product of both fate and planning. Countries in the midst of this economic transformation include Indonesia, Thailand, Vietnam, Singapore, Malaysia, and the Philippines. Their STEM savvy, young and urbanized workforces are producing technological offerings which are consumed by a growing middle class. Southeast Asia’s internet economy offers investment allure for American private equity firms, hedge funds and venture capital and it can be expected that more of the region’s tech giants will seek out US listings either through traditional IPOs or merging with US SPACs. 

While Q2 M&A activity in Southeast Asia is projected to drop slightly from Q1, deal volume is expected to be on par with last year’s robustness, in part due to ongoing consumer interest in all things digital. A key differentiator between this year and last is the resumption in business travel by Zoom fatigued investors which should result in an uptick in dealmaking. A positive M&A indicator is preparation by the Southeast Asian banking sector for increased regional deal flow stemming from continued tech sector growth. A sub sector to watch in the coming weeks is climate tech as the region seeks to boost crop yields while investors remain interested in ESG offerings. 

A common misconception of first time American investors in the region is the ability to translate existing international investment success into Southeast Asia with little to no due diligence; however, this is far from the case. The region poses unique risks that should be holistically approached. Below are three areas tied to Southeast Asia’s internet economy that should be evaluated as part of any potential transaction.  

Data Localization Deliberations

A topic dominating regional technology sector concerns is data localization. Namely, China is at the forefront of regarding data as an object of national sovereignty with other regional governments following suit. As part of their pre-investment due diligence process, American firms keen to enter Southeast Asia’s technology sector should investigate existing government access to locally stored data as well as obtain insight from regional experts that sheds light on the possibility of additional demands on personal or corporate data in the future

Acquiring Impactful Intelligence

Southeast Asian tech companies looking to go public via a traditional IPO or merge with a US SPAC warrant the same level of due diligence as a Western company. This includes evaluating the management team’s credentials, past performance, and uncovering any risk issues such as regulatory violations, litigation, or those tied to ESG. However, Southeast Asian countries still lack readily available public records making it harder to quickly evaluate a company and its management. In these scenarios, it is advisable to deploy in-country source inquiries to speak with industry experts and players who can comment on the company as well as offer insight into emerging trends and risk issues. 

Assessing ESG and ABC Obstacles 

The internet economy cannot function without warehousing and logistics which rely on local labor and partners supplied through third parties, whether they be agents, distributors or suppliers. American investors evaluating Southeast Asian tech companies should assess those companies’ exposure to a variety of related supply chain risks, including potential human rights and labor standards violations, environmental issues, and bribery and corruption exposure linked to the licensing and permitting process.

Picking a Proven Partner

As industries worldwide continue to suffer from COVID-19 induced supply chain disruption and labor shortages, Southeast Asia’s internet economy has proven remarkably resilient and is well positioned to continue its dynamic growth. Another factor fueling this growth is geopolitical tension between Washington and Beijing that is driving American technology investment interest further south towards well-positioned Southeast Asian digital developers. By addressing region-specific investment challenges in the due diligence process, including governmental data localization demands, limited public records availability as well as ESG and ABC concerns, American investors can both identify lucrative opportunities and avoid the associated risks. 

Reach out to the Vcheck Intelligence team to speak with an expert and learn more about our Southeast Asia diligence capabilities and how we can assist in your pre-investment process.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

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