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PHNOM PENH — 'Digital leapfrogging' emerged as a key buzzword throughout the World Economic Forum's (WEF) three-day ASEAN meeting in the Cambodian capital.
The Association of Southeast Asian Nations (ASEAN), an economic bloc comprising of 10 member nations, celebrates its 50th birthday this year and its embrace of digitization was a key theme at the WEF's annual event.
In a nutshell, the concept of digital leapfrogging asserts Southeast Asian countries are better poised than their developed peers to embrace technological innovations thanks to a young population equipped with smartphones, explosive internet penetration and ongoing economic integration.
"In the context of the industrial revolutions, this is the first time Southeast Asian companies can compete with global players... It's the first time for Southeast Asian companies to be champions," Patrick Walujo, co-founder of private equity firm Northstar Advisors, said at the WEF on Thursday. Walujo's Singapore-based firm is a backer of Indonesian unicorn Go-Jek and manages more than $2 billion in equity capital.
ASEAN will take a long time to catch up to first-world nations in the realm of traditional industries, such as manufacturing, "but the eco-system for digitization is different, so that's an opportunity for us," he continued.
The region's digital economy already generates $150 billion in revenues per year, according to data from A.T Kearney, led by the information and communication technology (ICT) sector.
Venture capitalists have long remained bullish on ASEAN and now, a growing degree of regional cooperation between neighboring countries is fanning even further optimism. Speaking at the WEF, Paul Bragiel, founding partner of Silicon Valley-based venture firm Bragiel Brothers, outlined several improvements he's witnessed in the region's tech scene over recent years.
Not only have the quality of investors increased, entrepreneurs are also helping each other out, he explained. "That's how you move faster. When we invest, we're also gathering knowledge among start-ups so we can avoid repeating mistakes. That's part of the digital leapfrogging."
But plenty of roadblocks still remains for ASEAN to truly become a digital champion.
"We have great young talent but they haven't had opportunities to develop large companies," Tan Hooi Ling, co-founder of Southeast Asian ride-hailing app Grab, told CNBC on Thursday.
The businesswoman, who usually prefers to let CEO Anthony Tan handle media interviews, explained that five-year-old Grab was now at a mature enough stage to start giving back to the region, noting the firm's recent $700 million investment in Indonesia and newly-launched research and development centers across Asia and the U.S. Grab also holds regular talks with regional governments on promoting cashless societies, Tan said.
Amid expectations for further digital momentum in Southeast Asia, experts at the WEF offered local entrepreneurs a few fundamental tips.
Entrepreneurs can't ignore urbanization trends, remarked Bragiel.
"The density of people together is important," he said, using the example of Singapore. The city-state is a recognized leader in innovation and has attracted a wealth of smart minds across diverse industries, he continued.
If a company is in the middle of nowhere, it's not benefitting as much and isn't capitalizing on a city's human capital, he added. "The right people are even more crucial than plenty of investment."
"If you're a Southeast Asian company and want to create a search engine to rival Google, that's unrealistic. But if you're in a consumer- based business, you can come up with local solutions. As investors, we have a bias towards supporting local players in large markets, " Walujo said.
Excluding Singapore, ASEAN countries lack the basic infrastructure for a healthy innovation environment, according to Markus Lorenzini, president and CEO of Siemens' operations in Thailand, Myanmar, and Cambodia.
"It's a matter of education and English proficiency— governments must emphasize digitization in the educational curriculum."
Standards must also be aligned throughout ASEAN so companies can exchange best practices and sound information, he added.