South and Southeast Asia are becoming development engines as a result of digitization.

• In South and Southeast Asia, the booming digital economy aided the recovery from the pandemic.
  
• In these areas, high smartphone penetration is helping digitization.
• To accelerate the digitalization process, more government help is required.

Globally, digital transformation was already transforming how businesses create and offer products, as well as how they connect with their customers. However, the COVID-19 pandemic has heightened this trend, with technology emerging as a vital tool for addressing public health issues and facilitating the new online consumer scenario. The world's economy is being disrupted by rapid digitalization, which has become one of the most important development engines for many emerging countries.

We are already seeing the impact of digitalisation on Asia. South and Southeast Asia's digital transition is providing a plethora of options for its residents, particularly the younger generations. Many Asian countries are even leading the world in specific digitization industries. The Philippines and Malaysia, for example, have become the top two nations in terms of e-commerce retail growth, with annual increases of 25% and 23%, respectively.

Exporting online labour to the West is a new opportunity for both the Philippines and the Philippines. In Bangladesh, for example, the digital economy is providing work to previously unemployed people.

The impact of the pandemic

During the COVID-19 epidemic, Asia's digital connectedness was critical in overcoming the challenges of traditional trading. According to the Observer Research Foundation, the digital economy was a crucial enabler in Asia's resurgence. According to Nikkei Asia, the pandemic had a significant impact on Southeast Asia's digital economy: at this time, 60 million individuals in the region became internet shoppers. During the pandemic, practically all e-commerce increased, with solid growth in sports equipment and grocery items, owing to this rapid adoption of technology.

Asia now accounts for roughly 60% of all online retail transactions worldwide. According to Euromonitor International, Asian-Pacific e-commerce is anticipated to nearly treble by 2025, hitting $2 trillion. This digital revolution is altering practically every element of business and social life in this region, from online retail to ride-sharing services to the export of online labour.

The doorway for smartphones

Asia, the world's most populous continent, has the greatest number of mobile phone users; almost two-thirds of the population uses mobile services, and there is still opportunity for growth. South and Southeast Asian countries have the fastest growth rates.

Smartphones are widely used in the majority of emerging economies. Smartphone penetration is higher in countries like Singapore (87 percent), Malaysia (83 percent), and Thailand (75 percent). In terms of smartphone market growth in 2020, however, the Philippines has the biggest increase: more than 90%. According to the GSMA, mobile data usage in South and Southeast Asia will triple by 2025, from 9.2 GB per month per user to 28.9 GB per month per user.

According to the United Nations Economic and Social Commission for Asia and the Pacific (UN-ESCAP), Asia is the fastest-growing region in the global e-commerce sector. In reality, the graph below shows that mobile phones account for almost 78 percent of Asia's $2.448 trillion in e-commerce retail sales.

Southeast Asia is the most active on social media.

Another driving force in digitalization on the continent has been social media, however the penetration rate in Southeast Asia is significantly higher than in South Asia. Malaysia, for example, has the greatest social media penetration rate in Southeast Asia (81 percent), followed by Singapore (79 percent), the Philippines (67 percent), and Indonesia (59 percent). However, the highest-ranking countries in South Asia, India and Bangladesh, only have penetration rates of 29% and 22%, respectively.

The Philippines spends more time on social media than other countries in the region in terms of duration: about three hours and 53 minutes every day.

Digital consumption is increasing.

The rapid growth of digital consumption in South and Southeast Asia is due to four causes. To begin with, the sector's expansion has been aided by a large youth population who are digital natives. Second, millions of individuals are making digital payments thanks to the increased acceptance of financial services available via smartphones. Third, because the region has such high mobile penetration, people frequently use e-commerce and social networking sites to purchase goods and services. In fact, according to McKinsey & Company, Asia's share of digital payments will reach 65 percent in 2024 (compared to 52 percent globally), making the continent the world's consumer growth engine.

Finally, the majority of governments in South and Southeast Asia have enacted policies to assist the digital economy and infrastructure.

Asia's digital future

There is little doubt that digital growth is accelerating throughout South and Southeast Asia. However, numerous areas need to be improved in order for the region to reach its full potential: digital infrastructure, new consumer development, information security, and effective digital governance. Furthermore, many experts now contend that digitalization benefits individual customers rather than SMEs.

More cross-country collaborations, such as Go Digital ASEAN, should be adopted across the area. These kind of activities certainly broaden the digital economy's environment and strengthen relevant infrastructures in the region. In the meanwhile, national-level policies such as India's National Digital Communication Policy (2018), Pakistan's First Policy for Digital Pakistan (2018), and Bangladesh's National ICT Strategy must be effectively implemented and monitored. Finally, governments in South and Southeast Asia should promote digital start-ups, remove entry barriers, develop human capital, and establish national regulatory frameworks for the digital economy in order to create a more sustainable digital ecosystem.