SE Asia urged to implement better e-commerce policies

SOUTHEAST ASIA should create a more conducive environment for e-commerce to maximize the gains and potential growth of the sector, the Asian Development Bank (ADB) said.

“Although the e-commerce ecosystem in the Southeast Asian subregion is still nascent, the market has been growing rapidly and outpaces the rest of its Asian neighboring economies,” the multilateral lender said in its “E-Commerce Evolution in Asia and the Pacific” report.

“With the creation of better digital infrastructure, e-commerce business models, and digital policies, among others, the subregion has vast potential for expansion,” it added.

The compound annual growth rate (CAGR) of e-commerce revenue in developing Asian economies is seen to grow rapidly from 2019 to 2024.

“Markets in Central Asia, South Asia, and Southeast Asia that are estimated to grow at a CAGR above 17% in the 5-year period include India, Indonesia, Malaysia, Pakistan, the Philippines, and Thailand,” it said, citing data from Statista.

In Southeast Asia alone, the e-commerce market’s value is projected to reach $211 billion by 2025.

“The subregion’s growth of 20.6% in retail e-commerce in 2022 stands out among all other economies and regions globally. In addition, only four economies reported faster growth rates than the combined figure of Southeast Asia. Two of these, however, still belong in the subregion, namely the Philippines and Indonesia,” the ADB said.

Last year, the Philippines had the fastest growth in retail e-commerce in the region at 25.9%.

“Five economies within the region — Indonesia, Malaysia, the Philippines, Thailand, and Vietnam — will rank among the top 10 markets worldwide measured by retail e-commerce sales growth by the end of 2022,” it added.

The ADB said that the rapid growth in e-commerce was due to the accelerated shift to digital platforms during the COVID-19 pandemic.

“According to a Google report, the aggregate internet penetration in Southeast Asia grew to 75% by the end of 2021,” it added.

Other growth drivers include the region’s high internet and smartphone penetration, which have supported mobile commerce.

“The Philippines and Thailand are also within the top five economies with the most time per day spent using the internet, with users aged 16 to 64 spending over five hours a day online in the Philippines and over four hours a day in Thailand.”

However, the ADB also noted challenges to developing e-commerce in the region.

“Asia and the Pacific, despite being the fastest-growing market by global standards, experiences varied levels of development and readiness across its subregions,” it said.

“While pandemic measures such as lockdowns and social distancing ramped up the role of digitalization in economic activities, their enforcement also magnified glaring digital divides within and across economies. Indeed, digital technology, while improving the inclusiveness of economic opportunities, also underpins exacerbating inequality problems across and within economies,” it added.

The ADB cited the region’s inadequate delivery system as a challenge to the further development of e-commerce.

“Upgrading the delivery systems may be complex when geographic factors are involved. For example, Indonesia has more than 17,500 islands — of which, about 6,000 are inhabited. The Philippines has 7,641,” it said. 

“In the case of economies where millions of consumers live in archipelagoes or a significant part of the population lives in rural areas, the delivery of products with cost-efficiency in mind is a challenge,” it added.

The Philippines ranked 96th in terms of e-commerce business-to-consumer readiness, according to a 2020 survey by the United Nations Conference on Trade and Development.

Other barriers include lack of internet access, disparity across e-payment platforms, and challenges to cross-border e-commerce.

“Appropriate legislative and regulatory mechanisms protect all e-commerce market actors and can foster an inclusive and enabling environment for expansion beyond national borders,” the ADB said.

The ADB said countries should implement measures that would ensure the affordability and accessibility of e-commerce.

“Most Asian economies have some form of legislation on electronic transaction and cybercrime, while many have yet to enact legislation related to consumer protection and privacy and data protection. Compared to the worldwide average, however, the region still has a lower percentage of economies with legislation on these areas,” it added.

The Philippines’ digital economy is projected to reach as high as $150 billion by 2030, according to an earlier report by Google, Temasek Holdings and Bain & Company.

The country’s internet economy will be the fastest growing in Southeast Asia along with Vietnam, as it is expected to grow by an annual 20% to reach $35 billion by 2025. — Luisa Maria Jacinta C. Jocson