Vietnam fastest growing digital economy in Southeast Asia

By Thuy Nguyen
Thu, October 27, 2022 | 3:09 pm GMT+7

Vietnam is the fastest expanding digital economy in Southeast Asia, crossing Indonesia, Malaysia, the Philippines, Singapore, and Thailand, says a report by Google, Temasek and Bain & Company.

The e-Conomy SEA 2022 report by Google, Temasek and Bain & Company, October 27, 2022.

The e-Conomy SEA 2022 report by Google, Temasek and Bain & Company, October 27, 2022.

The Vietnamese digital economy’s gross merchandise value (GMV) is projected to grow 28% year-on-year to $23 billion this year, up from $18 billion in 2021, bolstered by a 26% year-on-year growth in e-commerce, the report released Thursday notes.

“Vietnam tops the chart as the fastest growing digital economy and the fastest growing e-commerce sector in Southeast Asia,” said Stephanie Davis, vice president of Google Southeast Asia.

Despite the current economic headwinds, the country’s GMV is on course to reach approximately $50 billion in 2025, according to the analysis.

“Fundamentals for Vietnam’s digital future remain solid, thanks to its high quality homegrown tech workforce and growing adoption of digital services across both urban and suburban areas. The growing awareness around environmental, social and governance considerations will help Vietnam and Southeast Asia build a sustainable growth plan for the digital decade,” Davis added.

High-rise buildings in Hanoi. Photo courtesy of the government's portal.

High-rise buildings in Hanoi. Photo courtesy of the government's portal.

According to the report, post-pandemic Vietnam is among the countries that are on the fast track to resume its “back to normal” activities. However, some consumer habits and trends that were built and accelerated during the pandemic have remained and continued to grow.

E-commerce is the key driver for the growth of Vietnam's digital economy, and 90% of digital consumers intend to maintain or even further their usage of e-commerce platforms in the next 12 months. Majority of consumers who plan to maintain the same usage across food delivery (up to 60%) and groceries (54%).

Urban digital users are the heaviest adopters of digital services in Vietnam, with e-commerce, food and groceries having the highest adoption rates, up to 96%, 85%, and 85%, respectively.

On the contrary, Vietnamese consume online media content less frequently than what the regional average is, the study showed. Video, music and gaming consumption are all 10-12% below the average consumption. Just 23% of the surveyed people said they watched video on demand at least once a week, followed by 19% for gaming and on demand and 16% for music.

This also shows that Vietnam still has great potential for substantial growth in the long run, the study notes.

Digital financial services continue to flourish in Vietnam. “Digital lending grew the fastest at 114% combined annual growth rate, and investment is projected to take the biggest leap by 2025 with projected 106% CAGR (compounded annual growth rate).”

Moreover, Vietnam tops among the venture capital long-term growth markets, with 83% of VC firms expecting deal activities in the nation to grow in the long term. This ratio is the region’s highest.

“Vietnam’s digital economy will be a hot spot for growth because of its growing population and highly skilled local tech workforce,” said Fock Wai Hoong, deputy head, Technology & Consumer and Southeast Asia, Temasek.

Willy Chang, associate partner at Bain & Company, said: “Vietnam’s digital economy recovered strongly after a delayed impact from Covid in 2021. We expect continued strong growth momentum over the next decade given its high-quality homegrown tech talent pool, significant efforts by the government to accelerate digital transformation across sectors, and investor focus in the country.”

The “e-Conomy SEA 2022” report deep dives into trends and insights of the five mainstay digital sectors, namely e-commerce, online media, transport and food, online media and digital financial services. It covers the state and outlook of Southeast Asia’s technology funding landscape.

In an inaugural section on environmental, social, and governance (ESG) considerations, the report discusses the environmental and social impact of the digital economy and highlights the role of consumers, business, investors and governments in improving environmental and social sustainability.

The Google, Temasek and Bain & Company study says tech funding maintains strong momentum despite investors’ prudent disposition. With a 15% growth in deal value from H1/2021 to H1/2022, technology funding remains robust and Southeast Asia continues to be a hotbed for tech investments, despite investors becoming more cautious in the current macroeconomic environment.

Singapore and Indonesia remain primary investment destinations in 2022, while Vietnam and the Philippines are seeing growing investors’ interest over the longer term.

Google is a global tech giant, Temasek is Singapore’s state investor, and Bain & Company is a global consultancy.

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