SMEs Going Digital Can Boost Asean GDP by $1 Trillion

Bringing Southeast Asia’s small businesses into the digital economy could raise the region’s gross domestic product by between $780 billion and $1.13 trillion, an industry study has found.

This is up from about $200 billion today, or 7% of Asean GDP, the authors noted in a media briefing on Monday, CNA reported.

But non-tariff barriers such as logistics and cross-border digital regulations such as data localization continue to be challenges, especially for small and medium-sized enterprises, said the report from consultancy Bain & Co.

The trillion-dollar GDP boost could come by 2025, on the back of trade and growth within the region, with productivity improvements in sectors such as manufacturing, as well as expansion of digital markets and the growth of “enabling sectors” such as information communications technology, said the Bain researchers.

Findings from the poll of more than 2,300 small businesses in Asean showed, for instance, that SMEs in the retail sector saw sales go up by 15% on average after turning to e-commerce.

Bain partner Florian Hoppe, who jointly leads the company’s digital practice in the Asia-Pacific, told the briefing: “Digital at a macro level obviously will cause some disruption to the economy, just like any wave of change, like the rise of computers. You will see shifts in the values generated and how companies operate, what people need to be skilled in.”

He added: “Overall, retail GDP actually has been growing... in pretty much all economies—in particular, emerging economies all over the world.”

Still, about one-quarter of SMEs fingered limited cross-border payment options as the key barrier to selling online internationally, while close to three-fifths said that logistics and export processes were obstacles to cross-border trade.

Another issue highlighted in the report is the skills gap in the workforce, with two-fifths of SMEs saying that they did not have the necessary digital skills.

The authors, who presented their work at the Asean Economics Ministers Meeting in end-August, wrote: “In order to accelerate results, Asean member states should partner with the private sector in designing the most relevant digital skills road maps—building off the work that has been done in Singapore and Malaysia—and accelerate the roll-out of these programs for prioritized sectors.”