Cashless payments have become a popular trend among Vietnamese people, with many increasingly opting to transfer funds or scan QR codes for both big and small transactions. — VNA/VNS Photo

By Amanda Murphy, Head of Commercial Banking for South and Southeast Asia, HSBC & Ahmed Yeganeh, Head of Wholesale Banking, HSBC Vietnam

HCM CITY — Việt Nam has been the fastest growing digital economy in ASEAN in 2022, 2023 and expected to maintain this position until 2025, with the forecast of smartphones users reaching 67.3 million by 2026, accounting for 96.9 per cent internet users, according to Google, Temasek, Bain & Company and Insider Intelligence.

The growth of the digital economy in Việt Nam continues to impress, last year it contributed to 16.5 per cent to the GDP, with over 1,500 Vietnamese digital technology enterprises gaining revenues from foreign markets, an increase of more than 7 per cent compared to 2022.

In a recent survey 60 per cent of businesses operating in Việt Nam said that they plan to invest in technology and digitalisation of their existing business, with the focus on digital payments, e-commerce, AI. Those companies believe that adopting and enhancing digital services will help them meet customers’ expectations for digital convenience and improve efficiencies.

In this context, capital has become the lifeblood of innovative companies. Against that backdrop, HSBC has enhanced our offering to digital-economy companies, launching a dedicated US$1 billion ASEAN Growth Fund that can help finance platform companies with a proven track record in generating sustainable cashflows, even if they do not meet traditional financing criteria.

Amanda said “profitability may not always reflect a company’s potential in its early stages, hence we take a long-term view of potential growth by evaluating companies based on key operating metrics, growth plans and customer-acquisition strategies”.

Thriving spring ahead

Despite a so-called “funding winter”, Southeast Asia remains home to the world’s fastest-growing digital economy: the region’s digital economy expanded by 12 per cent last year and is expected to record a compound annual growth rate of 16 per cent until 2030, reaching to almost US$1 trillion value by that year. This potential is partly driven by ASEAN’s growing population of 700 million, gathering a large portion of young, educated and tech-savvy people as well as growing middle-class consumers.

According the report “We’re also increasingly seeing ASEAN’s growing appeal to investors in our discussions with clients, including at the recent Global Investment Summit, hosted by HSBC this April. This sentiment is also borne out in a recent HSBC survey of businesses operating in ASEAN, 74 per cent of whom intend to increase their investment in the region in 2024.

The acceleration of digitalisation in the region has been boosted by Government programmes, from Singapore to Indonesia, Việt Nam, Thailand, the Philippines and Malaysia. A new US$1.3 billion government fund was unveiled during an ASEAN-Australia summit in Melbourne early March, providing loans, guarantees, equity and insurance for projects that will boost the ASEAN-Australia corridor.

These factors all create fantastic opportunities for digital economy companies. There are particularly bright prospects for e-commerce, digital financial services, health tech, green tech, the clean mobility ecosystem and artificial intelligence.

Smart strategy

To sustain their growth, digital economy companies will need to focus on controlling costs and lifting revenues. They must also reconsider their approach to funding to manage their cost of capital and secure their long-term viability.

Exploring partnerships with firms in other markets can also allow them to expand across borders or develop their capabilities without having to make substantial investments themselves. Securing the right partner can also boost their credibility, enhance appeal to customers and—particularly relevant in the current climate—make them more attractive to potential investors.

Such intra-regional initiatives also align with the aims set out in ASEAN’s digital masterplan to 2025, which was reaffirmed at a meeting of the bloc’s digital ministers earlier this year.

As ASEAN’s digital economy expands, cross-border e-commerce is also creating growth opportunities for new- and traditional-economy firms. Making it easier for customers to pay through a company’s digital platforms can be an important revenue driver over the years ahead.

While the past two years have been challenging for many digital economy firms looking to raise capital, there are reasons to be more optimistic in 2024. Progressive approaches to financing, and the region’s strong fundamentals will all help drive the growth ambitions of businesses in ASEAN. And Vietnam, as one of the bloc’s members, will definitely benefit, according to experts. — VNS