New report touts potential of Southeast Asia’s e-commerce

Although a new study by Google and Singapore’s sovereign wealth fund Temasek projects the  Southeast Asian e-commerce market to reach US$200 billion by 2025, the region’s air cargo capabilities remain underdeveloped, according to Cainiao, the logistics unit of Chinese e-commerce giant Alibaba.

This week’s Temasek-Google report underscores just how important the market will become in the next decade, and increases pressure on both policy makers and airfreight companies to respond. Currently, the region is adding 3.8 million new internet users a month. The report raises a number of challenges to e-commerce over the next decade, and highlights inconsistent regional logistics as a major impediment. However, it also contends that, with between  $40 billion and $50 billion in investment, Southeast Asia’s digital economy can make significant strides over the next decade and meet these projections. Most of the projected growth is the product of three important factors: about 70 percent of the population is under the age of 40, the region lacks big-box retail capacity and the middle class is growing rapidly.

Alibaba Group Executive Vice Chairman Joseph Tsai told the audience at an event put on by Temasek and Google in Singapore this week that Indonesia’s per-capita GDP of about $2,900 was roughly the same as China’s in 2009. As the world’s fourth most populous country, Indonesia is expected to drive a large share of anticipated growth as living standards rise and regional investors are already getting on board. In April, Alibaba invested about $1 billion in Singapore-based Lazada Group which operates shopping websites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Speaking at the Cargo Facts Asia conference in Hong Kong in April, Steven Li, Cainiao’s director of Strategic Partnerships explained that, “air freight companies need to integrate more with other logistics companies, market places and transactions.” He added that, “IT capabilities will be very important in the future.”

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