"Two things stood out this year. First, the continued positive momentum. Many expected growth to slow due to global economic headwinds and several high-profile issues in Southeast Asia’s digital economy, yet we still saw double-digit growth in GMV and revenue, more sectors turning profitable, and major platform players performing strongly. Competition remains intense, with constant shifts and new trends emerging, but the overall trajectory stays clearly positive. Second, the focus on AI in Southeast Asia. What stands out is the region’s strong optimism toward AI, with interest levels three times the global average and net positivity higher than any other region." - Florian Hoppe, Partner at Bain
"The headwinds came mainly from global macro trends, including trade wars and tariffs. Southeast Asia largely escaped these impacts, even though there was a moment in April and May when uncertainty was high. GDP continues to trend up, and the digital economy has held up well, with double-digit growth across all sectors we examined. While some markets saw high-profile startup failures and audit issues, these did not detract from overall momentum. Beneath the surface, competition remains intense, especially in e-commerce where platform market shares shifted significantly, but the broader direction is still clearly positive." - Florian Hoppe, Partner at Bain
"Once the infrastructure layers are built, essentially laying the rails and pavement, we see a massive boom in data center investment across the region, alongside the emergence of strong local talent. The real opportunity sits in the enabling layer, which can unlock significant new business opportunities in the digital economy over the next decade. AI will reshape and enhance existing digital sectors, but it will also open new growth in areas that were previously constrained, especially healthcare and education." - Florian Hoppe, Partner at Bain
Florian Hoppe, Partner at Bain, joins Jeremy Au to unpack insights from the Bain Southeast Asia Digital Economy Report 2025 and explain why the region’s digital economy keeps growing despite global uncertainty and negative headlines. They explore the long-term forces behind this resilience, including consumer adoption, payments and logistics infrastructure, and sustained middle-class demand. The conversation covers the expansion from ASEAN six to ASEAN ten, how regional scale really works for founders, and why competition from China and global players continues to fuel innovation. Florian also explains why AI and data centers should be seen as foundational utilities, how local AI solutions create real value in healthcare and education, and what investors, policymakers, and parents should focus on as Southeast Asia enters its next digital decade.
03:03 Adoption drives resilience: Smartphone penetration, payments, logistics, and trust infrastructure enabled durable digital behavior over time.
05:52 ASEAN expanded from six to ten countries: New markets added population and long-term upside, even with limited short-term GMV impact.
08:51 Regional strategy depends on product depth: High-end offerings cluster in major cities, while mass-market products still scale across ASEAN.
14:18 AI growth starts with infrastructure: Data centers and talent form the base layer before real business value emerges.
15:52 AI in Southeast Asia prioritizes quality and access: Lower labor costs shift focus from cost cutting to better healthcare and education outcomes.
22:17 Digital economy reached policy relevance: It now represents a meaningful share of GDP and employs tens of millions across the region.
29:50 Preparing the next generation for an AI economy: Florian argues parents should train curiosity, abstract thinking, and learning ability, rather than over-optimizing for specific technical skills too early.
Jeremy Au (01:05) Hey Florian, I'm so excited to have you!
Florian Hoppe (01:07) Thanks for having me, Jeremy. I really appreciate it!
Jeremy Au (01:09) For those who don't know you yet, could you introduce yourself?
Florian Hoppe (01:12) Sure. I'm Florian, partner at Bain. I've been out here in Singapore for about 20 years now and have pretty much focused my entire career around technology in this part of the world, and particularly the trends in the digital economy, which has been an exciting journey for the last 10 years.
Jeremy Au (01:25) Yeah. Fantastic. I think I've known you for the past two decades, watching you build out and really understand this technology sector. I'm curious because in this report, there are so many interesting highlights ranging from talking about artificial intelligence and the data center boom to expanding from the ASEAN-6 to the ASEAN-10. What would you say are your favorite or top highlights about this report?
Florian Hoppe (01:49) Yeah, good question. It's funny, actually; five years or so ago, we were thinking: do we even have enough stuff to talk about over the coming years with this report? Or will we start running out of steam? And it's actually been quite cool to see that every year there have been a lot of new topics that came up, keeping this report really interesting. I think this year there are really two things that stood out. One is just the continued positive momentum. I think everybody was expecting things to slow down a bit. We're seeing a bit of broader economic headwinds globally, and we had a few high-profile issues in the Southeast Asian digital economy, but despite all that, we've seen double-digit growth on GMV and on revenue. We are seeing some sectors turning to profits, and some of the big platform players are doing incredibly well. There is still a lot of motion in the competitive environment, so it's quite exciting to see the shifts going on there and new trends emerging in the market. Broadly, I think there is a very positive trajectory for the digital economy out here.
Florian Hoppe (02:37) And then one particular call-out this year that the report picked up on is we spent a lot of time profiling what's happening in AI in Southeast Asia. Again there, I think what's exciting is just the extreme positivity in this part of the world towards AI. General interest levels are three times the global average for Southeast Asian markets, but there is also a net positivity towards AI that is above just about any other part of the world.
Jeremy Au (02:59) Let's talk about the first piece, which is the fundamental internet economy. So we're seeing e-commerce, we're seeing transactions, we are seeing fintech payments. Lots of it is going on, but you also said there were some headwinds as well. Could you share a little bit more about what that means?
Florian Hoppe (03:13) So the headwinds, if anything, were more some of the macro trends that we faced globally with trade wars and everything coming in. Now, actually, overall Southeast Asia has escaped relatively unscathed. We all had a kind of moment in April or May where we caught our breath and wondered what was going to come next, but we see GDP trending up well, and the digital economy sectors have lasted very well through that. Again, there is double-digit growth momentum in all the sectors that we've been looking at. We had, obviously, in some markets, some high-profile startup failures and, frankly, audit issues in startups, but that hasn't really detracted from the world's growth momentum. I think the sectors are pointing up. There has been a lot of competitive churn under the hood; we saw, especially in e-commerce, a big shift of platform market shares. But again, overall, I think there is very positive momentum.
Jeremy Au (03:56) Yeah. So what are the drivers of this fundamental resilience? Is it the rising middle class? Is it GDP per capita, national policies? What is driving this resilience?
Florian Hoppe (04:08) So I would just say it's a secular adoption trend. We've seen this over the years. If you think about Southeast Asia, broadly in the digital economy, we were actually very delayed to the whole phenomenon. We hit 50% plus smartphone penetration in Southeast Asia only around the mid-2010s. On the back of this, people first started experimenting and exploring. The first few years were spent getting your accounts in place and starting to look things up on the internet. And on the back of this, I think we started the data boom in the consumer economy. People started doing their first digital purchase two or three years in. And then we saw this rapid rise in wallet penetration.
Florian Hoppe (04:47) Now we've seen a lot of the hurdles drop. The digital platforms, in particular, have invested a lot into building the infrastructure around the digital economy to make this all work. This is both physical—think about logistics—but also non-physical, like digital payments and payment rails in general, and trust infrastructure. On the back of that, increasingly, I think we're seeing this taking wallet share from physical transactions in department stores, for example, as people opt for the ease of online transactions or use other digital services.
Jeremy Au (05:11) I think what's interesting is that, as you said, it's a surprise because I think the trade war dynamics and tariffs were seen as a very strong macro shock to overall economies. If it doesn't seem to have trickled into the technology or the digitization piece, are there any areas where we are seeing some impact, or is this not something to be concerned about moving forward?
Florian Hoppe (05:34) So I would say not for now. I think what we've seen, not just in the digital economy, but also if you look at the macro GDP numbers for this part of the world, has been actually still fairly healthy. Investments are still possible. You're generally open for business to all sides. In the back of this, I think there is good, positive growth momentum in the markets that we have here. The growth momentum, I think, obviously needs to be closely watched, because both the US and China have dynamics that may end up not playing out too healthy for Southeast Asia. And it's something for every sector, where slightly different trends that we have to stay quite close to over the coming year or two.
Jeremy Au (06:05) What should policymakers in Southeast Asia be mindful of regarding those US or China dynamics that may change how they assess this?
Florian Hoppe (06:14) I think, in particular, getting caught up on either topic or either side becomes a challenging dynamic to manage. That's not my area of deep expertise; I focus on the business side of things. But that could end up being quite tricky for this part of the world, because historically, I think Southeast Asia has been good at playing with all parties. It has been a big trade partner to China but also the US, and has played a big role in building good economic ties with both regions.
Jeremy Au (06:38) Yeah. And what's interesting from my perspective was that you also expanded from the ASEAN-6—the big six—now to the ASEAN-10. So could you share a little bit more about what was driving this expansion of coverage and what some of the learnings were along the way?
Florian Hoppe (06:51) Yeah, sure. So we had a request from ASEAN, actually, to extend coverage to all 10 countries because they always wanted to make sure it was inclusive and, given the report's relevance, they wanted to make sure we covered the whole market. So this year we chose to expand to all 10 countries for the 10th edition. Now, turns out we were a bit too fast to close, because now we've got 11 ASEAN countries; we'll fix it next year. But we extended coverage to Brunei, Laos, Cambodia, and Myanmar as well. Broadly, I would think it's a very similar story to what we've seen in the early ASEAN markets already. It didn't move GMV and revenue that much—only about a 2% addition on the GMV side—but it does add north of 10% in population and, I would say, potential to the ASEAN economy. Like all the less urbanized areas of the rest of ASEAN, these four markets have a lot of untapped potential, but also require a lot more investment to unlock their growth. A lot of this has to do with logistics, payment infrastructure, and regulations that are different and somewhat complicated. It's a lot to unlock, but obviously just bodes well for the future for ASEAN because it means there's more market to be tapped and more population to be included in the digital economy. It's important that's done right because we should never have "haves" and "have-nots" in the ASEAN digital economy. We talked last year about the "digital left-behind," and pulling them into the digital economy is super important and something that we continue to track as well.
Jeremy Au (08:05) Yeah, I recently had an opportunity to host some Cambodian founders visiting Singapore, and I thought it was fascinating because the caliber of the talent is there. What I was surprised by was twofold. One is the sensation that Cambodia is a decent market, but obviously a very weak ecosystem from their perspective, and that's why they're coming to Singapore to learn more about the ecosystem and the funding ecosystem. Two, of course, is they're a bit trapped by the "Cambodia scam" aura that's happening. They find it difficult, for example, to access banking services or funding services even across Southeast Asia. I thought it was an interesting dynamic. Any learnings that you have about these individual countries like Cambodia, Brunei, Laos, and Myanmar?
Florian Hoppe (08:46) I think I was somewhat surprised by how early-stage the markets are. We didn't expect them to be big to begin with. And obviously, as you say, a lot of basic services and utilities are not at the level that we're used to in the other ASEAN-6 markets. So I think that's a big opportunity for ASEAN in unlocking this and helping these countries on the journey. I think regulation has been in place in many other markets here, but also in the back of this, the services that are linked to this regulation. Again, this is where some of the ASEAN players have opportunities to extend into those markets and help fix some of the basic rails. And then obviously, Cambodian founders building on that and growing from them.
Jeremy Au (09:19) You know what's interesting is that there's some debate about whether the regional ASEAN story makes sense for a company. It feels like some founders are being told from Singapore that you should target the American market—the tier-one developed markets. Other people are saying the push is to go deep into a single country. So if in Cambodia, stay in Cambodia and do as many businesses as you can as a mini conglomerate or super-app. And then some people are feeling like the regionalization story is much more difficult; it's more city-by-city and so forth. Do you have any thoughts about that?
Florian Hoppe (09:50) So that's a good question. And I would argue generally I think the regional story is very much there, but obviously, it depends on what your product and your service is. So if you have a fairly high-end product or service, then obviously this becomes a story of a few big cities in ASEAN very quickly. Because if you do the math, especially for the ASEAN-6, there's always a dominant city and that city is actually probably a bit more of a regional cluster that plays a differentially important role in the economy in those markets. It's true for Indonesia, Thailand, Malaysia, Singapore, Philippines, and to some degree for Vietnam, although there at least it's two as well. Playing in those markets gives you differential access to the core customers that drive a lot of the GMV or revenue for more high-end products. Now, wider market products also tend to be more applicable to a wider population. And I guess depending on where you aim in the population pyramid, if you're a very narrow, very high-end product, then yes, this is a handful of cities at best in ASEAN and you're better off looking, potentially, more regionally. This could be Hong Kong, Taiwan, Japan, or even the US.
Florian Hoppe (10:50) If it's a wider market product, then I think the ASEAN regional story is very much intact. I also think this part of the world tends to be a bit underestimated because of fragmentation, which from a complexity perspective is not that different from tackling different regions in India or tackling different markets in China where you also deal with a variety of different languages and regional regulations that are very different. And the market potential here is very much there. If you think about just take e-commerce GMV, the e-commerce GMV in Indonesia is still larger, last I checked, than the e-commerce GMV in all of India. So there's definitely market potential here. Yes, it's different countries, but it's not unmanageable, and a number of companies have shown how to compete across ASEAN at this stage.
Jeremy Au (11:25) I think what's interesting as people think about that regional story is they're seeing that Southeast Asian companies are going regional. We're also seeing the entrance of Chinese companies into Southeast Asia to compete as well. Classic examples would be F&B chains going into Singapore and Indonesia. I think we see a lot of technology companies going to Vietnam and Indonesia, so I'm just curious how you see this fight or competition?
Florian Hoppe (11:47) Yeah, in some ways I think it's actually extremely positive because Southeast Asia has always been very fertile ground for innovation. I think a big part of this has been this "east meets west" kind of ecosystem of innovation. And again, my favorite story is always e-commerce. I think many of us grew up in the one-click shopping experience of Amazon. There's a simplified Western model of e-commerce, which is actually very linear. Make your shopping experience UI/UX as simple as possible, get through to the purchase and transact. The Chinese model was always more complicated. There was a ton of vouchers, extra codes on top, and that's a lot of what the e-commerce platforms in Southeast Asia initially adopted. And now we're seeing this all blending together. We're seeing video platforms coming into the mix and video commerce coming into the mix. There is actually a very dynamic innovation ecosystem around how shopping happens and what drives shopping habits, which I think also offers lessons for other parts of the world. And you see some of the Southeast Asian platforms now branching out beyond Southeast Asia, which I think is going to be really interesting. In general, competition is great for the market. Obviously, what needs to be managed a bit is potential price dumping in Southeast Asia, so that's something where the regulator has to watch. But short of that, I think innovation is great for the market and Southeast Asia benefits from this very unique innovation ecosystem, which is really showing the benefits of all different models side by side.
Jeremy Au (13:02) Yeah, definitely. The Southeast Asia consumer benefits from very cheap goods as well. It was interesting that you mentioned video commerce; I think there's something that a report called out as something that has grown tremendously over the past couple of years. What are your thoughts about video commerce?
Florian Hoppe (13:14) For starters, it makes me feel really old because my first reaction was that it looks like teleshopping in the '80s. But it turns out it's a bit more than that. Obviously, the rise of video commerce has been very much triggered by a few large video platforms that have become very big in this part of the world. But also I think it's a sign of just evolving shopper habits. People have different types of interests. There's a desire for better product information, where video can play a critical role. There's actually a desire for authenticity. I think the question of "Is this really real?" or "Do I trust the creator who can recommend a product?" plays a big role in video commerce as well. And all of those have driven a fairly large uptake in Southeast Asia. There is a really interesting phenomenon in this part of the world, and we actually expect this to play a pretty important role across the region in the coming years as well.
Jeremy Au (13:55) I think what's been interesting is I feel like TikTok Shop primarily has really driven a lot of this video commerce on one side, and we also see Google and YouTube pushing as well. I'm just curious about what you think about video commerce. Do you think it's going to eat up most of the share at this rate? Or how do you see that trend?
Florian Hoppe (14:13) It's hard to see video commerce only taking over the market. There are a lot of purchases that are just more convenient without video commerce. And frankly, video commerce takes different form factors as well. If I shop on a platform and watch a video to get informed about the product, that in some form also constitutes e-commerce or video commerce, versus actually having a recommendation straight through from a creator video. All of these are video commerce. Some of those are live commerce, some of those are video-informed commerce. And so that will play an important role, but it won't take over the world because there are also the simple convenience purchases of a new hammer or a new saw where, frankly, I don't need to watch a video to go through the purchase journey.
Jeremy Au (14:52) I'm just imagining where you want to buy a hammer and then you have to pause and search for a one-minute video. I think what's interesting is that you also talked about how the "digital decade" is shifting toward the AI reality. We were discussing it as an emerging topic and how it's a share of GDP versus the share of investments. So I'm just curious about your thoughts on this AI thesis for Southeast Asia.
Florian Hoppe (15:16) It's at an early stage right now, which is not too surprising. The share of GDP is a bit lower than the investments at this stage, but that's actually not abnormal. I think the same is true anywhere else except for the US, where obviously the investment in some of the growth has surged ahead. And I think what's interesting here is once you've got the infrastructure layers built—again, this is a bit like building the rails and the pavement again—you see this massive boom in data center investment in this part of the world. You're seeing a lot of talent emerging in this part of the world who is looking at that. I think the interesting story will be in the enabling layer and how it will unlock a significant amount of new business opportunities in the digital economy over the coming decade. Now there are the existing digital economy sectors where AI will reshape and enhance the models that are already in place, but also there are new sectors which may finally face a significant unlock. Think of deep potential in things like healthcare, education, and some of the emerging markets around here where, frankly, it's very tough to send a high-quality teacher into a rural part of Southeast Asia. But if you have this all AI-enabled, you have a very different teaching proposition, potentially. Same with healthcare—doctor access and video access for medical advice. Once it's safe and ordered in the right way, you can really scale in a very different way than you've been able to do historically.
Jeremy Au (16:27) I like what you said about quality because when we look at the West and how they think about AI, a lot is really thinking in terms of cost savings, right? Because the cost of labor is high, therefore AI automating the job of a marketer offers significant cost savings for the same level of output, if not higher. But it feels like in Southeast Asia, there's also a quality dimension because the cost of labor is relatively low compared to America. What are your thoughts about how AI will be localized or scale across Southeast Asia?
Florian Hoppe (16:56) Yeah, maybe that's also partially what's driving a little more positivity out here. AI is helping to transform how work is done. Now, the easy way to transform how work is done is always to automate things that are there today. And that's obviously easier if you've got high labor costs, but I think it's quite shortsighted. At the end of the day, it's an unlocked story for new business models as well. And yes, it will augment workers that are there today, but it also means these workers can do more and unlock new market growth potential. Potentially sell competing services and provide better services in a much wider coverage range. If you think about topics like banking, education, or healthcare, those were always restricted by the ability to pay and afford them in different geographies. AI can help stretch a lot of this much further out into the economy, which we think is a net positive for Southeast Asia over the long term.
Jeremy Au (17:46) There's a little bit of debate and concern because people feel like America is in the lead for AI, and China's also in the lead for AI. And the Europeans are also building their own AI. And then now it feels like India is saying, "Where is our AI?" and Southeast Asia is saying, "Where is our AI?" How do you feel about that point of view? Or do you think it's something that we'll just figure out?
Florian Hoppe (18:06) Arguably, a lot of the enabling layers—the chips layer and some of the LLM layers—those are global battlefields. I think it's very hard to compete in this if you're not willing to put the chips on the table, which are running into billions of dollars. And so it's very hard to see that becoming a big story in Southeast Asia. But just because you're not an arms trader doesn't mean that you can't compete once the systems are in place. If anything, I think what we're beginning to see now is that LLMs have different use cases where they're a little bit stronger, and generally you want to build solutions that are LLM-agnostic. We're now hitting the point where the solution game becomes much more important, and that solution game will always have a local or regional lens because it requires a regulatory understanding. It requires understanding local culture and how to link into the respective business community. So that's the thing where we see the opportunity for Southeast Asia, and that's only just beginning.
Florian Hoppe (19:10) We're seeing an early wave of AI startups in this part of the world. But once that actually scales, that's where the real opportunity for AI lies because you're building new businesses and transforming existing businesses with those solutions in place. All the early wave right now is all around these enabling investments, and that's where Southeast Asia is not exactly at the forefront. We're getting the infrastructure in place, but we don't have leading companies in that space out here. But I would absolutely expect us to have companies that build on this in this part of the world.
Jeremy Au (19:31) Yeah, and you know what's also interesting is that you talk about data centers. I think it's interesting because there's a little bit of a data center boom, but I also feel like there are a lot of mixed feelings about data center construction. Can you talk a little bit more about how data centers are being built across Southeast Asia right now?
Florian Hoppe (19:46) Yeah, we are seeing a massive data center boom. Capacity is being built out here. Now the positive of this is the infrastructure is coming into place. The negative, I want to say, is that these are effectively the warehouses. And we shouldn't end up just like in e-commerce; we shouldn't just have the warehouses here. We shouldn't just have the data centers in Southeast Asia. I think the important part is local use of those data centers and businesses that start to utilize them, which will naturally develop as these infrastructure assets come into play.
Jeremy Au (20:15) I think one debate that people have is whether the data center industry is a good industry to have. Singapore, for example, has a net-carbon-zero mandate and power is in short supply. Malaysia, on the other hand, decided to go full steam ahead with data centers. Obviously, there are energy and water usage issues. So how should we think about some of the trade-offs for the data center industry?
Florian Hoppe (20:43) I would retort by asking: is utility a good industry to have? At the end of the day, this will become a basic necessity for a future-ready economy over the next 20 years. Not having data centers in place is the same as restricting the power supply to the economy. They are definitely a necessity if you want to compete and participate in the future economy. They should be scaled to what demand you're actually seeing in this part of the world. They are a net positive for the economy out here. And in that sense, I would absolutely say they should be built and ideally spread out relatively well across the region because every country will need the right data center capacity to support their local businesses.
Jeremy Au (21:27) There also seems to be a little bit more of a push from the Malaysia side for data centers and startup investments. I'm just curious about any key things for us to be aware of for the "Malaysia push".
Florian Hoppe (21:37) I think Malaysia has generally done well in the technology industry over the last 20 or 30 years. If you think about the ecosystem up in Penang, for example, data centers have been a very positive story, but Malaysia has also done well in the digital economy more widely. If anything, I think that's a positive for Malaysia for now. I would expect capacity to disperse a bit more across the region in the coming years as well.
Jeremy Au (21:55) Nah, that's interesting. I think we'll see how that plays out. When you look at all of the various countries, are there any specific country insights that you want to mention? For Indonesia, Philippines, Vietnam, or Thailand?
Florian Hoppe (22:16) The report is a profile of what we're seeing happening in all the markets. I think generally you see Philippines and Vietnam continuing to do very well. Indonesia had a bit of a speed bump but is still generally doing quite well. Singapore and Malaysia are obviously more at the mature end of the digital economy already, which has been a net positive for these markets as well. But nothing particular that I would call out. In general, I think everything's humming along quite nicely and all are still very much in positive growth territory, which is great to see.
Jeremy Au (22:44) When you were doing the research, were there any areas that were really interesting for you that you want to dig deeper into for future years?
Florian Hoppe (22:56) Good question. I think we're always on the lookout for what the next sectors we profile in-depth will be. We've talked a lot about healthtech and edtech, for example. Digital financial services continue to be very interesting, in particular the rise of the digital banks, which are continuing to do well and influence what legacy banking looks like in Southeast Asia now. It really has become digital banking as well. And then with all that combined, the increasing role of the digital economy in ASEAN is really interesting to observe. It's at a stage now where it is indirectly employing 25 to 30 million people in this part of the world. This is a big economic factor. And I think it's shifted from what used to be a marketplace where the players would ask for forgiveness to actually having to engage policymakers quite actively.
Jeremy Au (23:46) This is one of multiple annual releases of the report. I'm just curious, when you look at the first report compared to today, have there been any hypotheses or predictions that you feel got updated versus those that continued to shake out?
Florian Hoppe (24:03) No, there were obviously a number that were off. If you think about the very first report, the forecast for 2025 was only 200 billion GMV. We hit that a few years early with 300 billion GMV; if anything, the market has surprised us with a lot of positive dynamics.
Jeremy Au (24:16) Wow. A consultant being too bearish. We saw that.
Florian Hoppe (24:20) The whole fintech and digital services space has been a huge net positive as well. We were also surprised by just how big some of these sectors have grown. If you look at digital media, this part of the world has really shone in that. And just generally, the positive dynamic that has continued to surround that market. We also saw in the early days a number of enablers that were not really in place—payments, logistics. I recall like the very first time we looked at this, cash on delivery was still a big thing. People shopped on desktops. Logistics in the emerging markets hadn't really picked up; now people deliver to your house. We've come a long way on a lot of these enablers in the last 10 years.
Jeremy Au (25:01) I love what you just said, which is when you zoom out, it's been a crazy shift over the past 10 years. But obviously, when I read the daily news, it's always "this company is going bust" or, like you said, about fraud. I'm just curious about the disconnect between these individual headlines versus the macro point of view.
Florian Hoppe (25:25) I would say anytime there's growth, there's churn. So things happen and we still see that despite these headline growth numbers. E-commerce is up by about 15% this year. But under the hood, there are massive double-digit market share shifts still for some players and platforms. So it's not a static marketplace. You have a lot of movement. It's the nature of the digital economy; things move quite fast. If you miss a few trends, you can fall behind quite quickly. That's a net positive because more competition drives more innovation. It is important to zoom out once in a while. One of the things we're trying to achieve with this report is just to take a step back and acknowledge how far we've come as a region. We only get headlines out of bad news. You don't get headlines out of good news. And we're trying to put the good news in the headlines once in a while.
Jeremy Au (26:20) Yeah. I love what you say. The good news of "Hey, I'm able to buy something online and get it on time, undamaged, for a fair price" is a very boring headline for a consumer. When you see the different infra layers being built, obviously we see in other countries there was a progression of industries that got built on top. In America, they built out mobile, internet, e-commerce, finance. You build layers on top of layers. When you look at Asia right now, what future layers do you think are emerging?
Florian Hoppe (27:03) The areas I'm excited about are taking existing sectors to the next level but really focusing on what happens around the AI economy. What are new services and business models that may be possible in the future that haven't been cost-effectively possible in the past because you can just scale much further? Again, this would be areas like healthtech and education. And the other big story for me linked to AI is the physical embodiment—AV and robotics. Near term, obviously in the area for AV, you think about some of the trials already running in transport or in delivery, and then robotics down the road as well. Augmenting us and helping do more with less could be a really interesting trend to watch.
Jeremy Au (27:50) Are there any key takeaways for policymakers to be taking from this report?
Florian Hoppe (27:55) Good question. As mentioned, we don't spend much time in the policymaker space, but I would think it's an important level of engagement with these digital platforms and all the big players. They are ultimately a big growth factor and employer. They have already helped advance economies in ways that we didn't fully expect. If you think about what they've done to unlock logistics and the fact that you can now get next-day delivery in pretty much every major city in Southeast Asia. They have unlocked transport, food, and financial services, and taken all that to the next level. For the regulators to engage in the right way and also be cognizant of the impact on the economy. If they drive efficiency to the next level, what will AV do to employment in some markets, and how do we buffer and manage that as an economy? I mentioned the topic of the "digital left-behind"—how do you manage people who are not fully embedded in the digital economy? If you're in the flywheel, you're on a constant learning journey. But if you're in a rural part of Southeast Asia and you're not connected, there's a risk of really diverging economic paths. Helping these parts of the economy with the right incentives to grow and actually be part of this is going to be super important.
Jeremy Au (29:19) Yeah, I totally agree. Every technology revolution creates upside but also dislocation across employment. We're both parents. My kids are generation alpha—three and five years old. If you are a parent today and you're looking at this economy, what would you educate your kids on to prepare them for a good job or to be able to keep up with the technology wave?
Florian Hoppe (29:50) Great question. I still have the luxury of time similar to you. Mine are probably 10 years away from being in the workforce. My view at this stage would be to train for curiosity, intellectual investment, and finding a path in life. It's pretty hard to say where the journey goes from here. If you think about past parenting trends, five or six years ago, coding was all the rage. That's still useful because what you learned was abstract thinking and structuring problems. But the actual coding now has moved very much into the realm of AI. Abstract thinking and curiosity about learning new processes are super important. I do think it's much tougher if you're closer to employment now, because the world around us is evolving quite a bit.
Jeremy Au (30:44) Yeah, I think what's interesting as parents is we have this dynamic where we think we have to be thoughtful about screen time, but we also have to be thoughtful that they need to be ready for large language models. So they need to be learning how to write code, and maybe this job will exist or it won't. It feels like a turbulent time. How are you as a parent discussing this with other parents?
Florian Hoppe (31:07) I give my kids a piece of paper and a pencil and some colored pencils as well.
Jeremy Au (31:12) Yeah.
Florian Hoppe (31:12) And then let them go. I still think media use at younger ages should be fairly constrained. I think over time you start fitting it in. It's great that there's more attention in schools on responsible media use, like Singapore's recent news on restricting smartphones in secondary schools. There's a right age to start getting exposed to this and learning it, but it shouldn't start too young.
Jeremy Au (31:33) How have you seen technology change management consulting?
Florian Hoppe (31:42) In my view, it's very similar to what happens to many other white-collar jobs: it's augmented, not replaced. It's making life easier. There are a lot of tools we can use these days where in the past, if you did a procurement project, you would have someone dig through a pile of contracts and invoices for four months to get the right data together. All of this can now be automated with AI and can get to recommendations much faster. But that doesn't take away the endpoint of the journey—some element of human judgment to figure out what areas are worth pursuing and implementing them. Expertise is still needed for how you deploy AI models. In many ways, the job changes, but the job has changed many times. It helps you do things better, faster, and smarter. Even AI moves incredibly fast. Two years ago, all the talk was about prompt engineers—using AI to write the prompts. But that doesn't take away asking the right questions and figuring out real-world implementation.
Jeremy Au (33:00) Looking ahead to the future, what are some interesting trends that people should be thoughtful about?
Florian Hoppe (33:08) Everybody's focused on AI now, but I think the physical implementation is super interesting. AV and robotics have a lot of regulatory hurdles and the technology isn't fully solved, but the Chinese robotics ecosystem probably doesn't get as much attention as it deserves. That's really interesting for the next 10 years.
Jeremy Au (33:32) Switching to the point of view from founders and builders across the region. They are reading the report at the industry level and country level, but many of them are facing a lot of dissonance about the fundraising market because they feel it's a "colder winter" compared to the boom days between 2021 and 2023. What do you see as the funding reality?
Florian Hoppe (33:57) Good question. We haven't gone back to the boom years. The boom years were triggered by maturing large-scale sectors that offered a lot of potential at the time. The reason we haven't seen much funding in that space is because the companies that attracted funding at the time are now hitting levels of profitability where they are self-funding and self-sustaining. So the funding has moved away in a positive way; companies have hit good monetization models. That's also where we see a bit of a pickup on late-stage funding. We have a lot of unicorns and "soonicorns" in Southeast Asia that have actually done fairly well and are self-sustaining. Early stage is still a tough environment, and I think the reason for that is we haven't seen many exits, so some of the VC funds haven't had great DPI, and the money hasn't flown back to investors yet. I don't think it's a fundamental risk-off. There's still a lot of VC money on the sidelines for early-stage investment. As we move from mature sectors like e-commerce into the AI economy, I think you'll hopefully see an uptake on funding in that space as well.
Jeremy Au (35:43) Yeah, there is this rebound for late-stage because those companies are doing better, and then there is an early-stage squeeze happening. One vector that seems to be emerging is the Singapore Stock Exchange pushing to become, hopefully, the "NASDAQ of Southeast Asia". What are you seeing there?
Florian Hoppe (36:10) Singapore has been quite forward-thinking on the need for an extra channel. This part of the world does attract a lot of capital. Deployment of capital shouldn't just occur outside of Southeast Asia; it's about reinvesting in the economy out here. Unlocking that is not an easy equation. You need the companies to list here and you need them to attract valuations that make it attractive for others. That requires multiples and investor confidence. I think globally you see a bit of regionalization of capital markets happening, and this part of the world shouldn't be an exception. It's not only Singapore; other markets in this part of the world are also looking at how they can further unlock stock exchanges and exit channels.
Jeremy Au (37:03) Five years ago, everyone's vision was to go to the US to list on the NASDAQ. Now it feels like the energy is moving to the Singapore Stock Exchange or even the Hong Kong Stock Exchange. Do you have any thoughts about these exit paths?
Florian Hoppe (37:30) Singapore has a long pipeline of potential listings. Hong Kong has done incredibly well on listings for the last 12 months. Again, the proof is in the pudding. Once these listings come through and attract appropriate valuations for high-growth companies, I think you'll see the flywheel really spinning in this part of the world.
Jeremy Au (37:57) Yeah, Hong Kong is at about 37 billion dollars in daily trading volume, while the Singapore Stock Exchange is currently about 1 billion. That's something people are thinking about—not just the IPO process, but whether trading continues to be liquid post-IPO. To wrap things up, any piece of advice you'd give to folks as they process the report?
Florian Hoppe (38:20) Read the chapters that are interesting to you. We try to make this appealing to a broad audience. Do reach out if you've got any questions or specific topics you'd love to dive deep on. We learn a lot from the discussions around this report.
Jeremy Au (38:36) On that note, let me summarize the three big takeaways. First of all, thanks for sharing about the fundamental resilience of the Southeast Asian internet economy despite headlines and bad news. There's a lot to dig into—from structural macro factors and the middle class to the resilience of digital operators and policymakers. Secondly, thanks for digging into the AI and data center boom. It's fresh to hear that we have to look at data centers as a utility—a core part of the economy moving forward. And lastly, thanks for sharing about the new geographies. Sharing the country insights for the additional four countries helps us understand not just the opportunities for growth, but also for founders and policymakers to build. On that note, thank you so much for sharing.
Florian Hoppe (39:41) Cool. Happy to do it; it was great to have this chat.
