Startups power Southeast Asia’s economy

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HE Asian Development Bank (ADB) believes that conditions for a particularly positive development in Southeast Asia’s economy are present. This came from the half-yearly report that the organization published in September last year. The 224-page report includes 60 pages about innovation and entrepreneurship that the ADB considers a significant factor behind economic growth in the coming years.

The ADB’s primary focus is on digital entrepreneurship — partially due to the digital evolution it has observed develop through the Covid-19 crisis — and the simple fact that digitized businesses and services can be scaled infinitely.

Very briefly described, Southeast Asian companies also tapped into the digital space during the Covid-19 crisis. For example, shops switched to online sales and restaurants got their food deliveries organized.

The ADB predicted that the digitization wave during the Covid-19 crisis was simply set in motion and is so noticeable that it will become a new driving force behind GDP (gross domestic product) growth of 4.5 percent this year and beyond. However, in a number of Southeast Asian countries, another remarkable development is also taking place, and it is connected with the type of entrepreneurship that is initiated.

The development those countries are experiencing is that entrepreneurship is moving from being a necessity to being based on opportunities. It has been seen, for example, that a street-food seller develops the business from being a one-man business to something big. The truth behind that kind of entrepreneurship is most often derived from no work to be found. By setting up a street-food stall, needed income is generated, which is extremely respectable.

However, in Southeast Asia, many households now have enough savings to set up their own business if they see opportunities and not because they must survive economically. The growing wave of new companies with capital and ideas will generate the coming new economic growth and future giant corporations.

That development has its own inertia because, as the ADB very strongly points out, the private share of the economy increases, which is a necessity for strong and healthy growth. Not all official economic organizations are so clear in their communication on that point.

On a general level, I strongly agree with the ADB’s positive assessment of the many opportunities that Southeast Asian countries have in their hands. This is one of several reasons why I assess that Asean (Association of Southeast Asian Nations) countries should have an overweight in an investment portfolio.

Do I, as a professional, recognize exciting entrepreneurship on my way? Yes, I do, and my experience garnered from my observation in the entrepreneurial world consists of several components. In our company, we get visits from many growth companies, and we choose to work for some of them. I have also been a global jury member in what is believed to be the world’s largest independent award for growth companies for several years. Additionally, our company is itself a growth company on equal footing with other growth companies, and we even create startups within our company.

If I apply that filter to Southeast Asia, I consider Malaysia to be particularly interesting, where I see opportunities wider than just IT (information technology) and digital companies. Basically, the Philippines also has a few interesting factors, namely a tendency toward strong domestic growth and demand, which can give startup companies a good domestic base for growth. There are also interesting initiatives regarding raising capital for startup and growth companies.

The country’s finance authority has now not only approved three financing platforms that growth companies can use for raising capital, but also stands up together with the platforms to emphasize the validity toward private investors. In this way, a healthy attempt is made to attract private money for companies that are the healthiest investors, instead of the growth companies receiving funds from state funds or other official funding sources.

Of course, there are negative factors in Southeast Asian countries that should not be overlooked. All experience and statistics show that corruption is destructive to entrepreneurship, so it must be fought in a number of countries. It is good to demand excellent English skills, which the Philippines offers, but countries in Southeast Asia must maximize investments in their internet infrastructure. This is happening continuously in several countries, and Southeast Asia is a region with growing and positive entrepreneurial vibrations.

Peter Lundgreen is the founding CEO of Lundgreen’s Capital. He is a professional investment advisor with over 30 years of experience and a power entrepreneur in investment and finance. Peter is an international columnist and speaker on topics about the global financial markets.