What did Chinese tech investors ask us about Southeast Asia?

Momentum Works hosted a private sharing session on 6 Nov 2020 on 2020 Southeast Asia Industry Enabler Report. The briefing was conducted in mandarin and saw the participation of 30 investors and corporate decision makers attending. 

In briefing, Alfonso de los Reyes, MW’s head of insights, walked the participants through the fundamentals of Southeast Asia economic development, distilled into three major areas: infrastructure, connectivity and human capital. 

During the 2nd half of the session, a number of questions were asked, ranging from pitfalls in agricultural supply chain to livestreaming ecommerce. 

We are sharing some of these discussions here: 

Cross-regional and cross-cultural challenges

Localization is a topic that is often discussed because Southeast Asia has different laws, regulations, and market environments among the countries. In some countries, the internal regions are quite different from a unified market like China. 

It is important to note that these challenges are not specific to Chinese companies. European, US, Japanese and Korean firms faced the same challenges when they entered or expanded in the region. Some have learnt the lessons, adapted and prospered; while some others had to withdraw or shut down.

The Toyota Group, which now ranks first in the Indonesian auto market, was once one of the Japanese companies most ostracized by Indonesian society in the 1970s.

Although companies now have much more ways to obtain information compared to 20-30 years ago, readily available intelligence for accurate decision making still takes effort to find, connect and analyse.  

For companies to enter Southeast Asia, localisation is important in a few aspects: product, people and organisation. These aspects are interrelated and it is hard to succeed without addressing all of them properly. 

In addition, a common mistake is to expand too rapidly across all the countries in Southeast Asia. The complexity of the region will compound the challenges you need to deal with, and without good preparations, right people and a coherent organisational structure, you actually end up spending all the efforts plugging holes, rather than growing. 

The expansion of live streaming commerce in Southeast Asia

Live streaming commerce, which has gained a lot of popularity this year in China, has also been explored in Southeast Asia. Facebook live streaming is already quite popular in Malaysia, and major ecommerce players (including Shopee, Lazada and Tokopedia), are all experimenting with it through their platforms.

Regarding some of China’s business models going overseas in Southeast Asia, whether in terms of consumption power, population education level, regulatory freedom, or the Internet infrastructure and other indicators, Malaysia is a very suitable market to test the business model. 

Besides the factors we already shared, Malaysia also has the highest digital device penetration in the region (by households).

The acceleration of regional digitalization caused by the impact of the COVID-19 pandemic will also promote the overseas expansion of some Chinese business models and the active changes of some small and medium-sized enterprises in Southeast Asia, especially in the retail ecommerce field.

At the same time, it should also be noted that the influx of emerging business models will also bring certain impact and changes to the local ecosystem. 

For example, in recent years, Tokopedia, Bukalapak, and other ecommerce companies have also launched new products that we have already seen (and proved) in China. 

Prospects for the future new economy in Southeast Asia

In terms of GDP growth, with the exception of PH and VN, Southeast Asia is generally expecting a gradual slow down. At the same time, infrastructure, connectivity and human capital are all improving fast (although at different degrees of ‘fast’ in different countries).  

It will be a test for companies to seize the right opportunity at the right timing, with the right people, product and organisation to ride the wave. 

Leading conglomerates in Southeast Asia are continuously exploring opportunities in/for the digital economy. For companies/investors/entrepreneurs seeking to partner with some of them, it is important to understand the leadership, organizational structure and critically, key incentives of these conglomerates. 

When you partner with the right resources but the wrong incentive, it might not work out to your advantage. We have enough examples of that. 

Here’s the video of the session (with live translation). Enjoy!