SE Asian businesses eye tech role in SME boost

By Krista A. M. Montealegre
National Correspondent

AS SOUTHEAST ASIA looks to the next half decade, technology will play a pivotal role in unlocking the economic potential of small and medium enterprises (SME), serving as catalysts for unparalleled growth and development in the region.

At the conclusion of the three-day ASEAN Business and Investment Summit 2017 in Parañaque City on Tuesday, former president Gloria Macapagal Arroyo, currently legislative representative of Pampanga’s second district, cited the importance of harnessing the potential of financial technology in leveling the playing field and reducing greater income disparity — considered the “paramount challenge for development and globalization.”

“This is where SMEs can thrive other than wither under the pressure of economic integration,” Ms. Arroyo said in her speech.

The digital economy is expected to add an incremental $1 trillion to the gross domestic product of Southeast Asia in the next decade, said Mohd Munir Abdul Majid, chairman of the ASEAN Business Advisory Council Malaysia, citing a study made by international consulting firm AT Kearney.

Start-ups and even big companies are finding opportunities in the digital age by engaging in financial technology since 70% of the population in Southeast Asia are unbanked.

Philippine start-up Lenddo uses non-traditional data for credit scoring and online verification, while leading Internet platform Sea Group, Inc. provides e-wallet services to consumers and small businesses.

“ASEAN is able to solve problems through rural entrepreneurship that will take other countries decades to fix,” said Nick Nash, group president of Sea, formerly Garena and now the leading internet platform in Greater Southeast Asia.

For PLDT, Inc. Chairman Manuel V. Pangilinan, establishing payment infrastructure and logistics systems as well as changing the consumer mindset are the key obstacles to realizing the potentials of the digital economy. PLDT has ventured into the mobile payments business through Paymaya. “Part of the challenge of ASEAN, as a community, is to inculcate the consciousness and practice of using digital methods… We have to get more and more people to adopt the digital mindset,” Mr. Pangilinan said.

Southeast Asia has shown tremendous promise because of its young population, growing internet penetration and high mobile ownership, but the varying levels of development across the 10-member states poses a challenge in this period of integration.

While technology will lead to improved productivity and sustained robust economic growth in the medium term, Mario Pezzini, director of the OECD (Organization for Economic Cooperation and Development) Development Center, pointed out that access to the digital economy is uneven across Southeast Asia.

“If countries in Southeast Asia develop at different speeds in the absorption of these opportunities, it will create tension,”Mr. Pezzini said.

“All these technological innovation will facilitate the entry of small-scale investments and if you don’t support SMEs in exploiting this, it will create tension.”

For e-commerce to take off in the region, issues on logistics and customs procedures, Internet infrastructure and lack of capable human resources must be resolved, according to a study by Japan External Trade Organization (JETRO).

Addressing these challenges is crucial to harnessing the opportunities brought about by cross-border e-commerce since most small businesses are focused on their domestic markets, JETRO Executive Vice-President Yuri Sato said.