14 Dec Grab: a bellwether for Asean’s digital growth?
By Jessica Wa’u and Rohini Nambiar
For The Business Times
GRAB’S recent US$40 billion initial public offering (IPO) is the culmination of a long and eventful journey riding on Asean’s digital growth story. While the public listing of a South-east Asian ‘super app’ is a marker of success, it also points to the region’s digital economy potential and the manifesting challenges that will continue to grow.
As the digital economy plays a crucial role in Asean’s recovery process, the key issues of politics, interoperability, talent and sustainability, will need to be addressed.
Geopolitics and local politics
Grab was not the first mover in Asean’s ride-hailing space. Before Grab’s rise, Uber, an American company, started the wave of ride-sharing services in the region in 2013. Uber’s presence in recent years has dwindled as Asian companies have shown their ability to maintain and even grow their market share.
In the case of China, Uber’s affiliate was absorbed by Didi, while for South-east Asia, Uber’s decision to exit the market paved the way for Grab.
While the Sino-American tensions are playing out in the technology space, particularly in the supply of semiconductors, Grab has been able to remain relatively unscathed to thrive in South-east Asia. With its headquarters in Singapore, Grab has capitalised on the city-state’s role as a hub and made inroads into South-east Asia’s key markets. Grab currently operates in 8 out of the 10 Asean markets – Singapore, Indonesia, Cambodia, Malaysia, Thailand, Vietnam, Myanmar and the Philippines.
The company’s ability to navigate the political diversity in the region and make interoperability possible is an achievement in itself. In its early days, Grab faced multiple challenges in its ride-hailing service as it bore stiff competition from dominant taxi companies.
In 2016, for example, taxi drivers in Kuala Lumpur and Jakarta staged protests demanding their respective governments to ban both Grab and Uber. In 2021, the Thai government approved a draft bill that allows the use of personal cars for ride-hailing digital services, a significant milestone for Grab’s operations in Thailand.
Grab navigated tricky regulations in individual Asean markets through various meetings and negotiations with government officials, regulators and union leaders.
Other tech players aspiring to expand in the region will need to learn from Grab’s sensitivity and savviness to politics in Asean’s diverse landscape. As the digital economy gains traction, the geopolitics of technological competition could intensify. The US has placed several Chinese tech firms on blacklists, including quantum computing companies, and the narrative regarding national security will continue.
While Sino-American tensions threaten to divide the technology space, South-east Asian countries have advocated for integration and spoken up against technology bifurcation.
Singapore serves as a hub to 80 of the world’s top 100 tech companies, according to the country’s Economic Development Board (EDB). These companies include American multinationals such as Google, Facebook and LinkedIn. In recent years, Chinese tech giants, such as Huawei, Alibaba, Tencent and Bytedance, have also significantly expanded their presence in Singapore.
While the tech titans from the world’s largest economies maintain their presence in the region, Grab’s achievement to go public shows there is room for Asean’s tech players to join the ranks of major digital players.
The diversity of players also ensures that Asean’s digital space remains open and competitive, and the need for Asean to remain geopolitically neutral is increasingly becoming more critical. To do so, Asean companies need to be able to operate across the region, and not be confined to just a single market.
Interoperability and data
There are policy risks, not just commercial questions. The road for Grab to its IPO has been tumultuous particularly due to the pandemic. Although lockdown restrictions have propelled Grab’s delivery services, which now accounts for more than 50 per cent of its business, its ride-hailing business has been hit significantly.
In our experience as SIIA staffers, travelling around the region in pre-Covid times to engage with Asean stakeholders was relatively easy. Using Grab in Indonesia or Thailand for example, was common. A Grab account created in Singapore worked just as well in the other Asean markets that Grab operates in. This reflects the desired business environment for interoperability and cross-border data flows across markets to foster digital growth in South-east Asia.
Yet, as tech unicorns diversify their services and grow their customer base, the question of data transfers and storage will be a pertinent one. At the end of 2020, Grab was awarded a banking licence from the Monetary Authority of Singapore (MAS) in its partnership with Singtel and plans to venture into digital banking services.
This entry into the financial space aims to serve the under-banked and unbanked in Asean but is fraught with challenges. The tension between sharing data across borders and data localisation laws needed for privacy and security within South-east Asia has an impact on expansion plans. What governments do can enable and create markets, or else crimp opportunities.
Growing pains: talent and sustainability
The success and longevity of South-east Asian unicorns will only be fully evident over time. Grab will likely not be the last of the region’s tech players to go public. Indonesia’s GoTo (the merged entity of Gojek and Tokopedia) is already working on its 2022 listing. Currently, the rapid growth of the technology sector has seen aggressive funding but there are questions of profitability and “cash-burning”, especially when interest rates begin to rise.
Beyond that, the challenges surrounding startups also plague many players in the tech space. These include the growing impact that digital growth has on the environment and the surging demand for tech talent.
The e-Conomy SEA 2021 report by Google, Temasek and Bain & Co forecast that Asean will see a US$1 trillion digital economy by 2030 – driven mainly by e-commerce. This e-commerce boom entails boatloads of packaging and more trash created by delivery services.
Furthermore, the carbon footprint created by ride-hailing services increasingly goes against the growing ethos of environmentally conscious consumers.
Efforts have been taken on this front, with Singapore’s Land Transport Authority (LTA) working with ride-hailing and taxi services to phase out internal combustion engine (ICE) vehicles and switch to electric or hybrid vehicles by 2040.
Powering all these digital services is data, stored in centres that guzzle large amounts of energy. This is why companies such as Google have pledged to be carbon-free by 2030; SAP’s Climate 21 initiative which helps stakeholders lower their carbon footprints; and Huawei is building technology that lowers energy consumption.
Another impediment to digital growth is the shortage of talent. According to management consulting firm Korn Ferry, 47 million tech-related talent is required for Asia-Pacific’s digital transformation by 2030. The question is how to fill that gap.
SMEs and traditional industries undergoing a tech transformation are having to compete with technology giants for digitally skilled people. While the surge in demand for digital talent is apropos, meeting this need will take a radical change in the mindset of policymakers, corporations and educational institutions.
Employers no longer have the luxury of waiting for prospective employees to complete 3 to 4 years of university education. Instead, apprenticeship, self-learning and partnerships with the private sector will be the way forward for companies to increase their talent pool. Employers should also look for talent outside their sectors with the relevant skills in order to expand their talent pool. In this regard, the Skills Path initiative launched by LinkedIn in partnership with the Singapore government is a positive step to promote hiring based on skills.
A bellwether for Asean’s digital potential
As the pandemic continues to create hurdles for businesses and new Covid variants put reopening at risk, Grab’s IPO at this time is a bellwether of Asean’s digital economy going forward. As countries in Asean continue to develop policies to promote the digital space, openness, a sensible framework for cross-border data flows and interoperability will be necessary for other ‘Grabs’ to emerge.
The Asean Agreement on Electronic Commerce, which recently entered into force, is a good first step to harmonise regulations regarding e-commerce and pave the way for a digitally integrated Asean.
Furthermore, Singapore’s efforts to lead on the Asean Model Contractual Clauses and Data Management Framework will enhance the region’s digital potential. Private-public partnerships will also be essential to upskill talent in innovative ways and to address the looming issue of sustainability in the region’s digital economy.
- The writers are from the Singapore Institute of International Affairs (SIIA). Jessica Wau is the deputy director for Asean programmes. Rohini Nambiar is Asean senior policy research analyst. The SIIA is working on a ‘Charting Asean’s Digital Future’ programme and convening key digital economy stakeholders in a series of roundtables discussing recovery, integration, geopolitics and sustainability.