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Industry Voices

Commentary: My problem with ‘emerging markets’

The terms "emerging markets," "developing nations" and the antiquated "Third World" have always rubbed me the wrong way and not just because I grew up in Mumbai, live in Singapore and do business across Southeast Asia. These terms bother me because they prevent people from seeing how dramatically the world has changed, especially over the last decade. For investors, this means not just missing the train but not even realizing that there is one.

The traditional view of Southeast Asia, for example, is that it's a fragmented region of countries with more differences than similarities. The practice of labeling some countries as emerging and others as developed prevents investors and policymakers from seeing the opportunities. If investors look at what these countries have in common, rather than what they don't, the opportunities become obvious.

Consider the skyrocketing use of the internet and social media in the region thanks to the increasing ubiquity of smartphone and mobile technologies. Now the region has the third-largest number of internet users in the world with 350 million, more than the population of the U.S., according to a study published Nov. 18 by Google and Singapore's Temasek Holdings. Over the last three years, more than 3 million Southeast Asians have gone online for the first time every month, according to the study. Internet users in Thailand, Indonesia, the Philippines and Malaysia spend four hours or more on mobile internet, "among the top 10 globally in terms of engagement," according to the study, compared with just two hours in the U.S. The region's internet economy is expected to more than triple to $240 billion over the next seven years, according to the Google-Temasek study.

A young middle-class woman in Singapore today probably has more in common with her counterpart in Ho Chi Minh City, in terms of consumer behavior, than with someone from a different socioeconomic class in her own country. There is now a huge, increasingly mobile- and internet-savvy potential market of young consumers in Southeast Asia that didn't exist less than a decade ago. This digitally native and highly connected generation of Southeast Asians is becoming a key driver of consumption-led growth. We're witnessing the creation of new category leaders that use technology to transcend geographic fragmentation in many industries.

Successful startups

Take iflix, which launched in 2015 in Malaysia and the Philippines and which Jungle Ventures invested in a $133 million round in August 2017, as well as in earlier rounds. It was created to serve a projected 1 billion global middle-class consumers who may not be able to afford Netflix but can pay a lower cost — the price of a cup of coffee — to access content from their mobile phones on a pay-as-you-go plan. Iflix now has more than 15 million subscribers across nearly 30 countries in Southeast Asia, Africa and the Middle East following 250% growth over the first two quarters of this year. This is a $40 billion market opportunity that didn't exist just a few years ago.

FinAccel, launched in 2016 in Indonesia, is on its way to becoming the preferred digital credit card provider for millennials of Southeast Asia. (Jungle Ventures participated in the latest $30 million round in July and also invested in the company previously.) The company's flagship product, "Kredivo Buy Now, Pay Later" product gives e-commerce buyers an easy way to access instant credit via an app. The company is focused on consumers who primarily use mobile phones in countries with a scarcity of consumer credit. The market size is an estimated $150 billion across Indonesia alone.

Go-Jek, recently valued at $5 billion, launched its motorbike-hailing app in Indonesia just three years ago and now offers food delivery, housekeeping, consignment shipping, auto repair and electronic bill payment, among other services. Its target market is young urban professionals who used to go to brick-and-mortar stores for these services. Go-Jek has 20 million monthly users on its app, operates in 25 Indonesian cities, recently expanded to Ho Chi Minh City, and is looking next to the Philippines, Singapore and Thailand as the region's ride-hailing market more than triples to $28 billion by 2025.

Each of these companies — and many others across the region — is proof of opportunities that investors miss if they categorize entire regions like Southeast Asia as an emerging market. When we try to put the world into these neat, but inaccurate, binary buckets, we miss the tremendous promise of horizontal markets that cross borders.

Amit Anand is co-founder of Jungle Ventures, Singapore, an early-stage venture capital firm and an early investor in iflix and FinAccel. This content represents the views of the authors. It was submitted and edited under P&I guidelines but is not a product of P&I's editorial team.