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What is the Digital Economy? Learn How Digitalization is Making SEA an Engine of Growth!

By Tim Blog Amartha - 16 May 2024 - 3 min membaca

Now, we are living in an interconnected world with all the digital advancements. In this aspect, the digital economy has a crucial role in shaping the growth of certain regions across the globe. But, do you know what is the digital economy?

Also, how can the digitalization of the economy make Southeast Asian (SEA) countries like Indonesia grow? To understand more, read this article and explore the definition, along with the reason why and how SEA is emerging as a vibrant hub of digital growth.

What is the Digital Economy?

The digital economy consists of two words: digital and economy. So, as the name suggests, it refers to the vast array of economic activities that are conducted using digital technologies and the internet.

From online shopping and digital payments to remote work and social media engagement, it encompasses everything. In simpler terms, it's all about how we use technology to buy, sell, work, and interact in the modern world.

Let's see this example to help you understand better. For instance, when you are scrolling through your favorite online store via gadgets, making purchases with just a few clicks, or transferring money to a friend through a mobile app, those are what we know as the digital economy in action.

How Digitalization is Making Southeast Asia an Engine of Growth?

Now that you understand what is the digital economy and its example, let's learn about its importance. Firstly, it drives economic growth by creating new opportunities for businesses and individuals. With the rise of online platforms and digital technologies, companies can reach a global audience and operate more efficiently.

Next, it also promotes inclusivity by providing access to services and opportunities for people from all around the globe, from Western countries to Asian. This is the reason why the digital economy has been rapidly growing, including in developing regions like Southeast Asia.

According to the World Economic Forum, Southeast Asia's digital transformation has led to significant growth, with countries like the Philippines and Malaysia seeing remarkable increases in e-commerce retail. But how can? Here are the detailed explanations:

1. The Effects of COVID-19

As countries grappled with the challenges posed by the pandemic, digital technologies emerged as essential tools for overcoming obstacles and ensuring business continuity, especially in the economy of ASEAN.

This unprecedented situation compelled companies to rapidly adopt digital strategies to navigate the new normal, leading to an exponential increase in online activities, as what is the digital economy concept.

For instance, Southeast Asian banks experienced a surge in new users for their online platforms as people turned to cashless payment options to adhere to social distancing measures. Similarly, e-commerce platforms witnessed a significant uptick in transactions as consumer behavior shifted towards online shopping.

So, the pandemic highlighted the urgency of digitization across various industries, from financial services to retail, as companies recognized the need to adapt to changing consumer preferences and market dynamics.

2. The Smartphone Penetration

According to the definition of what is the digital economy, gadgets like smartphones play a crucial role. In this aspect, Southeast Asia has one of the highest smartphone penetration rates globally, with countries like Singapore, Malaysia, and Thailand leading, with the percentage of 87%, 83%, and 75%, respectively.

This widespread use of smartphones has democratized access to digital services and enabled millions of people to engage in online activities seamlessly.

Also, the proliferation of smartphones has facilitated the uptake of digital services, from e-commerce to social media, driving economic growth and consumer engagement.

Additionally, projections from GSMA indicate a significant increase in mobile data consumption across Southeast Asia by three times by 2025 (up to 28.9 GB/month, from 9.2 GB/month). It highlights ASEAN countries' high demand for digital connectivity.

As mobile devices become ubiquitous, they serve as gateways to a vibrant digital ecosystem, empowering individuals and businesses to participate in the digital economy actively.

3. The Social Media Usage

Similar to what is the digital economy concept, social media usage also plays an important role, as it has emerged as a powerful force in driving digitalization and fostering connectivity across Southeast Asia.

Compared to others, countries like Malaysia (81%), Singapore (79%), Philippines (67%), and Indonesia (59%) boast high social media penetration rates, indicating the widespread adoption of digital platforms for communication and interaction.

As individuals spend more time on social media, businesses have recognized the potential of these platforms for marketing, customer engagement, and brand building. The rise of influencer marketing and targeted advertising has transformed the way businesses reach their target audiences, driving sales and fostering brand loyalty. 

Moreover, social media serves as a catalyst for digital entrepreneurship, enabling individuals to monetize their online presence and create new economic opportunities. As ASEAN countries lead the way in social media usage, it underscores the region's dynamism and potential as a thriving digital economy.

4. The Digital Consumption

Overall, the rapid growth of digital consumption in the economy of ASEAN is fueled by several factors, including a youthful population, increasing smartphone penetration, and the widespread adoption of digital payment solutions.

The region's digital natives, who are accustomed to accessing services and content online, drive demand for digital products and services. Moreover, the convenience and accessibility of digital payment platforms have spurred the growth of e-commerce and digital financial services, enabling individuals to transact seamlessly across borders.

To support this phenomenon, McKinsey & Company estimates that digital payments will account for 65% of transactions in Asia by 2024, underscoring the region's transition towards a cashless economy.

The Digital Horizon of Asia

According to the data, In the ASEAN-6 countries, out of 570 million people, more than 390 million use the internet regularly. For example, Filipinos spend the most time online, about 10 hours every day in 2019. Thailand comes next, with people spending about 9 hours online daily, and then Indonesia with around 8.5 hours.

So, as Southeast Asian (SEA) countries embrace digital transformation, this region emerges as a dynamic force in the global digital economy and is predicted to become a global powerhouse in the digital economy.

However, realizing this vision requires concerted efforts to address key challenges and seize opportunities for growth. Investments in digital infrastructure, education, and innovation are essential to ensure that all segments of society can participate in the digital economy.

Now that you understand what is the digital economy, you can also contribute to empowering micro-entrepreneurs across SEA digitally with Amartha, a microfinance marketplace that empowers small and micro-enterprises through value creation.

Let's embrace the power of innovation and transformation to create a better world for future generations together!


Held in Jakarta, Indonesia, The 2024 Asia Grassroots Forum hosted by Amartha, is in collaboration with SME Finance Forum, Managed by the IFC (International Finance Corporation), Accion, and Women's World Banking, stands as a collaborative beacon of change.

This transformative event marks a groundbreaking milestone as the premier annual grassroots conference in Southeast Asia. At the Forum, a diverse array of grassroots stakeholders converge, uniting voices from across backgrounds and disciplines in a singular opportunity to engage, exchange, and inspire.

Join us for the upcoming discussion on Inclusive Growth in the ASEAN Grassroots Economy, exclusively at the Asia Grassroots Forum 2024 on May 21, 2024!

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