Tuesday, February 18, 2020

Building up the backbone of Thailand 4.0

Jan 07. 2020
Tarin Thaniyavarn, Country Head of Grab Thailand
Tarin Thaniyavarn, Country Head of Grab Thailand
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By Tarin Thaniyavarn
Country Head of Grab Thailand

Leaders from the public and private sectors across Southeast Asia gathered in Bangkok in November for the Asean Business and Investment Summit (ABIS), part of the Asean Summit, to discuss how Asean businesses can best take advantage of and be ready for the digital era.

Under the theme of "Empowering MSMEs towards ASEAN 4.0", I spoke about a topic that is closest to Grab's business model and Grab For Good mission.

How do technology platforms like Grab empower micro-entrepreneurs, small and medium-sized enterprises (MSMEs) to embrace the 4th Industrial Revolution, and why is this important?

First of all, MSMEs form the backbone of the Asean economy. Likewise in Thailand, local micro-entrepreneurs and small business owners make up more than 99 per cent of enterprises, and in 2018, accounted for 85 per cent of overall employment [1].

This is a critical business segment to digitally transform in order to progress towards Thailand 4.0.

Yet, despite the large number of MSMEs, these Thai businesses are only recognising a fraction of their potential, accounting for only 43 per cent of Thailand's GDP [2]. There is a clear opportunity to increase their contribution.

Second, the Asean 6 countries across Southeast Asia, including Thailand, are developing national masterplans to shift away from a labour-based to a knowledge and service-based economy.

This is necessary to move out of the so-called "middle-income trap," a condition where rapidly growing economies stagnate at middle-income and fail to transform into high-income economies.

The digital transformation of MSMEs through the adoption of technologies will accelerate this transition and drive greater economic progress for the nation.

Third, our region's digital economy is projected to reach US$300 billion by 2025 [3], propelled by the phenomenal growth of e-commerce, mobile payments, ride-hailing, and on-demand food delivery and logistics services.

All Asean countries are aiming to get a much larger slice of this economic pie and are setting national agenda to bring more MSMEs into this sector.

But what's impeding MSMEs from leveraging the explosive growth of technology? It has become increasingly clear that equitable access is the key.

Such gaps exist across all of Southeast Asia countries and caused by common challenges that MSMEs face on their path to digitalisation.

Barriers include ease of accessing credit, readiness to embrace tech and innovation, and progressiveness of government regulations to facilitate their digitalisation process. And this is where technology platforms like Grab hope to play our part.

Let me share the story of Nonthakarn Saigalakum who owns a small north-eastern Thai cuisine restaurant, Somtam Amorn.

In the past, his business solely relied on walk-in customers whose numbers rarely crossed the 100 mark. Even on a good day, he felt he didn't earn enough as he was always constrained by the small space of the shop that could accommodate only 60 people at full capacity.

Things changed for the better when Nonthakarn set up an online extension of the shop on GrabFood platform.

As a merchant-partner, he was able to tap into Grab's vast online consumer base and use digital tools and insights to tailor his menu to diverse consumers' food choices.

After taking his business online, Nonthakarn stopped relying solely on walk-in customers. Grab's extensive driver-partner network enabled him to extend his business without investing into a physical expansion.

Today, more than 75 per cent of Somtam Amorn's revenue comes from GrabFood. Nonthakarn is a single example of millions of MSMEs on Grab platform that can leverage technologies to access to new revenue streams, and in doing so bring Thailand closer to seizing the USD 300 billion digital economy pie.

GrabKitchen, an innovative cloud kitchen which has recently launched in Thailand, is another example of how we support MSMEs through technology.

Through GrabKitchen, merchant-partners can expand the geographical areas they serve and reach more consumers.

GrabKitchen also help MSMEs manage their cost of operations by eliminating rental cost which is one of the highest barriers of entry for food MSMEs.

In Thailand, and across the region, tech companies like Grab are partnering with governments to empower MSMEs, including driver-partners, delivery-partners, merchant-partners and more, to elevate their quality of life.

For example, one in 70 MSMEs regionally have earned an income through the Grab platform, allowing them to work independently and flexibly.

For about 21 per cent of these individuals who did not work before joining Grab, this income was their first step on a path to financial independence [4].

In Thailand, Grab has been operating in 20 cities across 18 provinces, empowering hundreds of thousands of MSMEs to earn better livelihoods.

As Grab expands its business upcountry to more secondary provinces and cities in 2020, we will expand the benefits of the digital economy to millions more Thai citizens, particularly those living in rural areas, many of whom may not enjoy the same benefits as those in the urban cities.

Beyond economic access and inclusion, Grab has been bridging the gap in financial inclusion for the underserved population.

In Thailand, 18 per cent of people still don't have access to financial services. At a regional level, the number is as high as 46 per cent.[5]

Since 2012, Grab has worked, along with key financial partners, to help as many as 1.7 million MSMEs across the region open their first bank account.

In addition, we have also been providing digital lending solutions to many of these micro-entrepreneurs and small, medium-sized businesses who would have been traditionally turned down by banks for not meeting income threshold or lacking supporting documentation for their credit worthiness.

We have also doubled down on driving Asean e-wallet adoption to ensure that every person and business has equal access to cashless payments solutions.

In Thailand, we have opened up our GrabPay wallet to merchant-partners to accept in-store cashless payments from our extensive consumer base.

This has immediately extended the reach of these MSMEs to a new pool of digitally-savvy, mobile-first consumers that they may not have been able to attract before.

Finally, Grab has been working to close another critical gap on the path to digital transformation–investing in future-ready workforce and nurturing the next tech unicorns.

Through our GrabVentures programme, we have been helping innovative start-ups, another critical driver of the digital economy, develop and scale technologies that validate their business models with our regional-base of over 163 million mobile downloads and over nine million microentrepreneurs partner network to further their reach.

Our Grab For Good vision for the future of Southeast Asia and Thailand is to enable equitable access to the benefits that technology provides.

By empowering the backbone of Asean economy - the MSMEs, Grab will create economic opportunities at scale and enable Thailand to fully capitalize the USD 300 billion digital economy.

2020 is the best year yet to fulfill our ambitious mission for the longer-term benefit of Thai people and community.

[1], [2] The Office of SMEs Promotion, 2019

[3] e-Conomy SEA Report 2019 by Google, Temasek and Bain & Company

[4] Grab Internal Data

[5] World Bank Global Financial Inclusion Data, 2019

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