BY: Georg Chmiel ·
I believe the countries that provide the best growth environment for startups today are in Southeast Asia.
Usually, the US, China, and India get all the attention, but for startups, Southeast Asia is where the real action is. Indonesia, Thailand, Vietnam, and Malaysia have just the right mix of economic growth, population size, investment, and entrepreneurial ferment to make them the critical countries in the world for these companies.
Southeast asia
These markets are among the fastest growing in the world, and together, they have an average gross domestic product growth rate of 5.3%. Vietnam has the fastest growth, with 7.1% in 2018.
These countries have large populations where the young make up a significant share. Combined, they have a total population of more than 460 million, with tech-oriented under-25s accounting for two out of every five citizens.
This is partly why the internet economies in these four countries are rapidly growing. Research by Google, Temasek, and Bain & Company puts internet economy growth in Indonesia as high as 49% per year since 2015. Even Malaysia, which is at the lower end of the regional spectrum with 20% annual growth rates, is a standout compared to most other countries in the world.
One for all
Business models that work well in Indonesia, Thailand, Vietnam, or Malaysia will often be transferrable to other countries inthe region. That’s not to say that you can afford to underestimate local conditions. Indonesian unicorn Gojek is expanding via local “founder teams” and brand names in other countries, for instance.
But in all four economies, startups are helping solve problems that are common to their populations. That might mean bringing financial services to the previously unbanked or helping farmers get better prices for their goods. It could also mean serving the large fast-growing middle-class market with entertainment, delivery, travel, and other services.
“If you are growing in any one of these countries, you can use the same marketing channels to expand into the others,” Duco van Breemen, general manager of Sydney-based startup hub Haymarket HQ, told me. With his experience in the field, he has advised hundreds of founders.
If your business is located in one of these countries, you could also get a helping hand worth at least US$50,000 a year for an early-stage startup, said van Breemen. Local governments are aggressively courting startups with visas, grants, free co-working spaces, and networking programs.
The Malaysia Digital Hub, for example, offers free or easy visas, company registration, banking, housing, and connections to mentors and entrepreneurs. They make it extremely easy for foreign founders to grow their businesses in Malaysia as well.
Similar programs are on offer in the other countries. In Thailand, for example, the Board of Investment promotes investment with a range of support and services. Indonesia hopes its programs, which include workshops, hackathons, bootcamps, and incubation programs, will help startups succeed in its vast market.
Malaysia
Malaysia’s capital, Kuala Lumpur, has the country’s best startup climate. The successes that have been born there include ride-sharing giant Grab, wedding portal Wedding.com.my, deal site Sale Duck, and fintech firm iMoney.
One of Malaysia’s biggest advantages is that English is the country’s second-most spoken language. Most locals speak it fluently.
Compared to nearby Singapore, labor, housing, and office expenses are significantly cheaper. Statistics on Numbeo show that rent is 308% higher in Singapore than in Kuala Lumpur, eating out costs 120% more, and overall consumer prices are 90% higher. Your funding will go much further in Malaysia.
Meanwhile, Singapore and its wealthy investors are only a 60-minute flight away.
Thailand
Thailand is no longer just a great place for a beach vacation. Its fast-growing internet economy, high quality of life, low cost of living, and regional connectivity provide startups with tremendous opportunities. Thailand has Southeast Asia’s second-largest economy.
Its capital Bangkok is by far the most favorable city for a startup. Personally, I think it has the best pool of recruits, largest investor community, and most extensive startup ecosystem in the country. Regional center Chiang Mai is a distant second.
You can rent a high-quality co-working space in central Bangkok for about US$12 per day, and the monthly cost of living for a single person can be as little as US$650. Your bootstrapping can go much further with lower expenses.
It’s good to note though that Thailand doesn’t have the fastest-growing economy among its Southeast Asian peers. It does offer a large market that’s full of opportunities and a government eager to use startup grants and other assistance to push its country into a future that it calls “Thailand 4.0.”
Vietnam
A 2019 report from StartupBlink shows that of the countries discussed here, Vietnam has the least developed startup ecosystem, and I believe that is true. Despite this, its economy is thriving, thanks to the investment displaced from China due to the trade war.
Foreign direct investment jumped 7.2% in fiscal year 2019 as manufacturers moved production to Vietnam to avoid higher costs and tariffs in China. The northern port city of Haiphong, home to at least 90 companies with Greater China investment, saw its gross domestic product surge by 16% in 2019 alone.
Vietnam has a large population of 95 million. Despite its communist past, I believe the country has an almost national obsession for technology and entrepreneurship.
Take Vietnamese coder Dong Nguyen’s story, for instance. In 2013, the Hanoi native created the game Flappy Bird, which still has the Apple App Store record for the most downloads in a single month. CNET recently named Flappy Bird one of the 25 most important apps of the decade, alongside such giants as Twitter, Facebook, and Google Maps.
Because of success stories like this, Vietnam’s startup ecosystem attracted triple the investment in 2018 and 2017, hitting almost US$900 million. There are huge opportunities in the market. In fintech alone, a recent survey found 120 Vietnamese companies operating in the space. The mobile payments market could also expand by 18% a year to reach nearly US$71 billion by 2025.
Indonesia
In a region full of unpolished gems, Indonesia is the largest of all. Yes, it struggles with poor governance and infrastructure. Even so, it has a bigger population and economy than Thailand, Vietnam, and Malaysia put together, offering businesses unparalleled opportunities.
Francisco Widjojo, managing partner at private investment firm Arkblu Capital, told me that smart entrepreneurs see the challenges of doing business in Indonesia as a barrier to entry. The business environment protects you from new competitors, especially from offshore rivals.
“We focus on businesses that target the mass market,” he said. “Price point is very important. You can build brand loyalty not just in the major cities like Jakarta, but right across the country.”
Mass market strategies make sense in Indonesia because of the huge size of its population, the fourth largest in the world. The country already has four unicorns -Bukalapak, Tokopedia, Traveloka, and Ovo – in addition to the decacorn ride-hailing company, Gojek (see my analysis here). The government wants three more unicorns by 2024, and the internet economy is forecast to grow to US$100 billion by 2025.
For founders, it helps that Indonesia is the second-largest recipient of venture capital in Southeast Asia, behind only Singapore. The government’s push to eliminate poverty and become a prosperous country by 2045 provides many opportunities as well.
Whether you choose Indonesia, Thailand, Malaysia, or Vietnam, or choose to operate across all of these large Southeast Asian economies, I believe they provide the best growth environment in the world today.
SOURCE: https://www.techinasia.com/
