For a long time, Silicon Valley captured the mind of the global tech innovation and investment scene. In recent years, however, this has started to change – and the pace of that change has accelerated. With closer ties to more than half of the world’s population, southeast Asia is now thriving. And, with it comes billions of dollars’ worth of venture capital (VC) funding.
In the first half of 2019, Chinese VC groups invested $667m into southeast Asian start-ups – a four-fold increase on the same period in 2018. Inward investment was already booming, but it is thought that the Chinese “big hug” could power the region further ahead of the US. Leading the charge is Singapore – but it has plenty of company as far as tech hubs are concerned.
Singapore: The jewel in a ‘star-studded crown’?
The city-state of Singapore has a prominent position across many different sectors. As one of the world’s leading financial centres, it has long benefited from the inward – and unrestricted – flow of capital. And this is helping to fuel the growth of the Singaporean tech sector. Now, 80 out of the world’s top 100 tech firms are based in Singapore.
A low tax regime and a favourable climate for overseas investors is attracting that VC funding, together with watertight IP laws. But there may be threats to Singapore’s position at the head of the southeast Asian tech vanguard. And that creates opportunities for other cities to swoop in – such as Ho Chi Minh City (Vietnam), Kuala Lumpur (Malaysia) and Jakarta (Indonesia).
The implications of falling international demand
While pro-business in its outlook, Singapore is somewhat exposed to global markets – perhaps more so than other southeast Asian tech capitals. Falling demand for oil and metals in the first half of 2020 could undermine the city-state’s economic resilience as an important commodities trading hub. But it’s appeal to overseas investors should help Singapore weather the storm.
Other locations that are enjoying a tech renaissance include Ho Chi Minh City, the commercial centre of Vietnam. For the first time, Vietnamese start-ups attracted more inward investment than Singaporean counterparts in 2019. Elsewhere, Malaysia is now reaping the rewards of its two-decade-old strategies brought in to support the country’s tech businesses too.
The challenges of maintaining Asian tech growth
From an economic point of view, one of the main challenges against the backdrop of Covid-19 is preserving the climate for investment. Each respective economy will take unilateral steps to deal with the expected pressures and challenges. And there could be a reduction in how much VC firms and business angels are willing to invest.
But, certainly, recent times show that governments and authorities in southeast Asia see tech as a significant economic driver. If there is to be a contraction of the global economy over the months and years ahead, it could be close geographical links to willing investors that wins the day. And, if that is being led by China, then southeast Asia is in the position to benefit most.
