This article first appeared in Digital Edge, The Edge Malaysia Weekly on February 24, 2025 - March 2, 2025
Asean’s digital economy is experiencing unprecedented growth, with a compound annual growth rate exceeding 20%, making it one of the fastest expanding digital markets globally.
By 2022, its value had reached US$194 billion and it is projected to soar to US$600 billion by 2030. According to the e-Conomy SEA report by Google, Temasek and Bain & Co, this rapid growth places Asean at the forefront of digital transformation in the developing world.
The region, home to 680 million people — half of whom are under 30 — and a burgeoning middle class, is primed to become a global hub for entrepreneurial dynamism. Recognised as one of the most stable and peaceful regions worldwide, Asean offers an environment conducive to long-term investment and innovation.
This extraordinary growth underscores the immense potential for start-ups to drive transformative change in Asean. Beyond economic expansion, start-ups have the opportunity to address critical social and environmental challenges.
Fintech platforms like Cropital in the Philippines are tackling inequality by connecting investors with smallholder farmers to improve their livelihoods. Climate change mitigation is advancing through renewable energy start-ups such as Xurya in Indonesia, which pioneers solar solutions for businesses and communities. Agri-tech platforms like Freshket in Thailand are addressing food security by streamlining supply chains between farmers and consumers, reducing waste and promoting sustainable agricultural practices.
These shared challenges across Asean nations provide a powerful incentive for regional collaboration. By working together, member countries can harness digital innovation to deliver profound social, economic and environmental benefits, paving the way for sustainable development.
Governments across Asean have played a pivotal role in nurturing the region’s entrepreneurial ecosystem. Agencies such as Cradle in Malaysia, Enterprise Singapore, Indonesia’s Movement of 1,000 Digital Startups by the Ministry of Communication and Informatics, Thailand’s National Innovation Agency and Vietnam’s Ministry of Science and Technology have provided funding, training and mentorship to countless start-ups. These efforts, complemented by financial incentives and access to global networks, have laid the foundation for a vibrant and dynamic start-up landscape.
However, a thriving start-up ecosystem requires more than government support or the emergence of unicorns. True vibrancy emerges from a robust base of early-stage start-ups, equitable access to funding and a strong talent pipeline. Addressing these foundational elements is essential to fostering long-term growth and resilience across diverse industries and geographies.
The challenges holding Asean back
While the potential is immense, Asean’s start-up ecosystem faces significant challenges that threaten its ability to fully realise its promise.
Fragmented markets and regulatory environments are among the most critical barriers. Entrepreneurs aiming to scale face a patchwork of national regulations ranging from inconsistent tax policies to varying data protection laws.
This lack of harmonisation creates barriers to regional integration and limits start-ups’ ability to operate across borders. Economic disparities compound these challenges, with the World Bank noting that the richest nation’s per capita gross domestic product is over 45 times that of the poorest, making equitable market access an uphill task.
Access to funding remains another critical bottleneck. Venture capital is disproportionately concentrated in major hubs like Singapore and Jakarta, leaving smaller markets and rural areas underserved. Early-stage start-ups, in particular, struggle to secure capital, which limits their ability to innovate and scale.
While Asean’s total start-up funding is projected to reach US$200 billion by 2030, much of this capital remains inaccessible to start-ups outside major cities. Investor preference for later-stage ventures exacerbates this issue, sidelining early-stage ideas that have the potential to drive transformative change.
The region also grapples with talent and infrastructure gaps. Despite its young and growing population, a significant digital skills gap leaves the workforce underprepared for the demands of a start-up driven economy.
While urban areas in Asean are experiencing rapid digital adoption, rural regions continue to lag, highlighting the need for more inclusive digital policies. Inadequate infrastructure, including limited high-speed internet and co-working spaces, further marginalises rural entrepreneurs. Compounding these issues, brain drain continues to deplete the region’s talent pool as skilled professionals seek opportunities in more established ecosystems abroad.
Strategies for developing a thriving ecosystem
To overcome these challenges, Asean must focus on harmonising regulations, expanding funding access and fostering talent development through inclusive and collaborative frameworks.
The region can draw inspiration from global frameworks like the European Union’s General Data Protection Regulation, which demonstrates how harmonised data protection laws can facilitate cross-border operations.
Adapting such an approach to Asean’s unique regulatory landscape could foster seamless integration and empower start-ups to scale regionally. Harmonising e-commerce policies and other trade regulations would further remove key barriers to regional integration. Pilot programmes among select member states could showcase the value of regulatory alignment and serve as a model for broader implementation.
Creating a unified digital trade hub would also connect start-ups with customers, investors and partners across the region, further enhancing collaboration.
Addressing funding disparities requires deliberate action. Governments should incentivise venture capital investments by offering tax benefits and co-investment schemes targeting underserved regions.
Establishing a regional fund that pools resources from member states, development banks and private investors could ensure that start-ups in smaller markets receive equitable support. The European Investment Fund offers a valuable model of how pooled resources can be effectively deployed to support early-stage ventures across a region.
Events such as regional pitch competitions and innovation expos could attract cross-border venture capital and spotlight promising start-ups. Additionally, scaling crowdfunding platforms and other alternative financing mechanisms would democratise access to capital, empowering entrepreneurs from diverse backgrounds.
Investing in talent development and infrastructure is critical to addressing systemic gaps. Universities, governments, industries and the public should collaborate through a quadruple innovation helix model to create joint programmes that integrate entrepreneurship, digital skills and innovation into their curricula.
Amartya Sen, Nobel laureate and renowned economist, emphasises the importance of empowering individuals and communities as a cornerstone of development. He writes in Development as Freedom: “Development consists of the removal of various types of unfreedoms that leave people with little choice and little opportunity to exercise their reasoned agency”. This perspective underscores Asean’s need to ensure equitable access to opportunities, empowering diverse communities to actively participate in the region’s entrepreneurial ecosystem.
Establishing digital innovation hubs and accelerators in rural areas would decentralise opportunities and provide critical resources such as high-speed internet, co-working spaces and mentorship networks, fostering inclusivity and equity across Asean.
By prioritising these strategies, the region can address its challenges and build a thriving, inclusive and globally competitive start-up ecosystem.
Asean’s start-ups are poised to transform the region by addressing some of its most pressing challenges. Digital innovation has the potential to drive solutions for inequality, climate change and food security, propelling Asean toward a more inclusive and sustainable future.
Stability, shared goals and a spirit of collaboration among member nations provide a solid foundation for achieving this vision.
To fully unlock its potential, Asean must harmonise regulations, expand funding opportunities and invest in talent and infrastructure. These efforts will enable the region’s start-ups to thrive economically and contribute meaningfully to solving critical social and environmental challenges.
The time to act is now. Bold and coordinated actions today will ensure that Asean’s entrepreneurial community becomes a beacon of innovation, sustainability and inclusivity for generations to come.
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