HM Trade Commissioner for Asia Pacific Natalie Black discussed the region’s opportunities at a recent event. Here are some key takeaways.
- Southeast Asia will soon become the fourth-largest economy in the world.
- The UK government is ready and willing to help startups expand internationally.
- ASEAN countries see UK startups as being particularly attractive.
- The appetite for FinTech, EdTech and MedTech is growing.
A summary of some of the insight and advice shared by Natalie Black, Her Majesty’s Trade Commissioner for Asia Pacific, at a recent Eagle Labs virtual event.
Southeast Asia offers unique opportunities
With a population of 650 million, the Southeast Asia economy is expected to become the fourth largest in the world by 2030. The UK’s trade relationship with Southeast Asia has increased by 70% over the last decade and is now worth £42 billion. The digital economy was valued at $100 billion last year and is expected to triple by 2025 with tech startups driving much of that growth. All this means that there are significant opportunities for UK startups.
FinTech and EdTech sectors are booming
Almost three-quarters of the population in Southeast Asia is underbanked — and there is a huge opportunity to move banking online. Singapore and Malaysia are striving for a cashless society.“Asian unicorns dominate the market and are looking to team up with UK startups to help them focus on the customer as well as on specific capabilities they have not been able to develop,” says Black.
EdTech has also seen huge gains as a consequence of Covid-19. Governments across the region want to know who is the very best at AI-enabled EdTech and how they can bring those players into the market. It’s not just about primary and secondary education — boosting technical skills to drive economic recovery is also key.
The Department for International Trade is ready to help
Many startups across the UK are wondering how they can break into new markets during lockdown. Black says this is where the Department for International Trade (DIT) really comes into play. The department employs around 200 people across Asia Pacific (13 countries) and can help put startup founders in touch with the right people and institutions, from local embassies to specific investor groups.
New initiatives to support trade
The UK recently launched the Digital Trade Network in Asia Pacific to increase digital trade and investment opportunities in the region. The UK Budget allocated £8 million to launch this joint initiative by the Department for International Trade and the Department for Digital, Culture, Media & Sport. Last month it launched the UK ASEAN Digital Business Challenge. The initiative will identify specific business challenges that UK startups will be able to pitch for.
The UK is very attractive to Association of Southeast Asian Nations (ASEAN) companies
“Corporates are very excited about working with UK tech companies because they are seen as coming from a very strong educational background—the UK has four of the world’s top 10 universities,” says Black.
UK R&D efforts are particularly strong, there are many great employers in the country and branding often plays an important role in the region. The UK is also seen as being particularly good at cybersecurity—with a strong pipeline of cybersecurity startup to come out of the UK in recent years. These types of calling cards play an important role in Asia Pacific.
The appetite for MedTech is growing
MedTech is seeing exponential growth in the region because it has two roles to play. First, it has a very important role to play in the immediate response to Covid-19. The Trade Commissioner has seen a huge amount of inquiries from within the region asking to be put in touch with the best UK MedTech firms to see how they can be persuaded to come to Southeast Asia.
Governments across the region also see MedTech playing an important role in long-term economic recovery and are issuing incentives and backing innovation hubs. “The main challenge facing startups is not the number of opportunities but rather working out what’s going to be your sequential strategy,” says Black.
The UK government is already seeking free trade agreements
A key measure of why the UK Government is so excited about Asia Pacific is the opportunity to develop new free trade arrangements and agreements. In September 2020 the UK agreed in principle a new free trade agreement with Japan—with a specific chapter on digital that may bring lots of opportunities to UK tech.
It is also discussing new free trade agreements with Australia and New Zealand, where it is believed climate change and climate issues will take centre stage. The UK government is also looking at multilateral agreements in this part of the world and is currently applying to be a dialogue partner, meaning the UK would have a formal way to engage with all 10 ASEAN countries and develop its trading relationships.
Homegrown unicorns have increased interest in UK
Investors in the region had paid limited attention to the UK market as their focus was on the US and China. However, over the past two years there has been a “light bulb” moment, particularly because of the number of strong unicorns coming out of the UK, says Black. Asian investors tend to be focussed on the long-term, so they’re looking for solid partnership opportunities.
Investors are also looking for ways to avoid the disruption seen throughout the pandemic—so AgriTech and CleanTech are finding increased interest. Black says there was $9 billion in unspent private equity and venture capital investment last year and that may partly explain why we’re seeing increased movement into the UK.
Corporates can help you springboard around the region
One strategy to consider is to launch in Singapore and use it as a regional hub to break into the rest of Southeast Asia, Black says. Singapore is very welcoming to UK tech with most big VC firms based there. Working with corporates can help startups move into other territories such as Indonesia or the Philippines. Because corporates are very influential in Southeast Asia, they can help you with navigating market access challenges.