SINGAPORE — Southeast Asia's digital economy surpassed $300 billion in gross merchandise value in 2025, exceeding the inaugural forecast from a decade ago by 1.5 times and cementing the region's position as a global digital powerhouse, according to the 10th annual e-Conomy SEA report released by Google, Temasek, and Bain & Company. The milestone reflects sustained 15 percent year-over-year growth and marks the transition from a phase of explosive expansion to one characterized by disciplined monetization and sustainable profitability across the Association of Southeast Asian Nations' 680 million people.

Singapore has emerged as the undisputed leader in regional AI governance and innovation, securing $1.31 billion in private AI funding during the first half of 2025—the highest among ASEAN's six largest economies and representing 55 percent funding growth compared to the second half of 2024. The city-state chairs the ASEAN Working Group on AI Governance and spearheaded development of the ASEAN Guide on AI Governance and Ethics, positioning itself as the standard-bearer for responsible AI deployment while balancing innovation with worker protections and regulatory oversight.

The convergence of ASEAN's digital economic achievement and Singapore's AI leadership signals a pivotal moment for the region. With the Digital Economy Framework Agreement expected to be signed in 2026 and projections showing potential growth to $1 trillion by 2030—possibly doubling to $2 trillion with successful implementation—Southeast Asia stands poised to leverage its digital foundation into sustained economic transformation powered by artificial intelligence and regional integration.

Digital Economy Transformation Exceeds Expectations

The e-Conomy SEA 2025 report, which for the first time expanded coverage from six markets to all ten ASEAN nations by adding Brunei, Cambodia, Laos, and Myanmar, reveals a digital economy that has grown 7.4 times in gross merchandise value and 11.2 times in revenue since 2016. Revenues reached $135 billion in 2025 as businesses across sectors achieved or approached profitability through optimized operations and diversified revenue streams.

E-commerce leads the digital economy with $185 billion in GMV and $41 billion in revenue projected for 2025. The sector's acceleration stems from significant economies of scale achieved by leading platforms and the explosive growth of video commerce, which now accounts for approximately 25 percent of total e-commerce GMV. This trend, fueled by trusted local creators and seamless social-to-e-commerce integrations, has surged fivefold in just three years.

Food delivery platforms have largely achieved profitability or approach that milestone by reducing cost-to-serve through optimized logistics and streamlined operations in metropolitan areas. The transport sector continues scaling through tiered services and in-app advertising, while online travel benefits from rising rates and government-backed visa schemes that facilitate regional tourism.

Online media reached $34 billion in GMV driven by 16 percent year-over-year advertising growth. Retail media networks, maturing video commerce, and AI-powered ad formats fuel this expansion, while gaming continues expanding its user base particularly in Indonesia. Video and music segments maintain growth trajectories of 15 percent and 14 percent respectively, though slowing from 2024 peaks.

Digital financial services have evolved substantially beyond basic payments. Ten Southeast Asian countries now use national unified QR systems, with eight nations enabling cross-border QR interoperability. Growth comes from digital lending, where ecosystem players leverage in-app data for underwriting, and surging digital wealth segments where several platforms now exceed $1 billion in assets under management across six markets.

Singapore Establishes Regional AI Leadership

Singapore's digital economy demonstrates maturity and leadership while setting regional standards for technology governance. The nation's GMV reached $29 billion in 2025, up 7 percent from 2024, with transport and food growing 12 percent to $6 billion and online media surging 13 percent to $3.4 billion. Local commerce adoption of video commerce accelerated dramatically, with sellers and stores rising 125 percent year-over-year to 80,000 and transaction volume jumping 30 percent to 45 million.

As a mature financial hub, Singapore's digital financial services sector steadily gains ground. Digital lending grew 12 percent to $30 billion in loan book balance, while digital wealth rose 22 percent to $44 billion in 2025, driven by licensed digital banks capitalizing on strategic ecosystem partnerships. The sector's expansion reflects Singapore's broader positioning as a technology and finance nexus for the region.

Singapore's AI leadership extends beyond funding metrics. The city-state chairs the ASEAN Working Group on AI Governance, established in March 2024 and significantly expanded in January 2025 to lead and coordinate all vital AI initiatives across the region. Through this body, Singapore guided development of the ASEAN Guide on AI Governance and Ethics released in February 2024, providing the region's first comprehensive framework for responsible AI deployment.

The Expanded ASEAN Guide on AI Governance and Ethics for Generative AI, launched in January 2025, supplements the foundational framework with specific policy recommendations for generative AI technologies. The guide addresses risks including factually inaccurate responses and disinformation, deepfakes and fraudulent activities, intellectual property infringement, privacy concerns, and embedded biases. Nine policy recommendations align closely with Singapore's own AI Verify Foundation Model AI Governance Framework, demonstrating the city-state's influence in shaping regional standards.

Sapna Chadha, Vice President for Southeast Asia and South Asia Frontier at Google, emphasized Singapore's dual focus: "Singapore's strength lies in its dual focus: driving relentless digital innovation while building a robust framework for AI governance. As a global hub, its pioneering approach to responsible AI and its stable, mature ecosystem are setting an important benchmark for the rest of Southeast Asia."

AI Investment Surge Reshapes Technology Landscape

Over the past twelve months, more than $2.3 billion flowed into over 680 AI startups across ASEAN, accounting for more than 30 percent of private funding value in the first half of 2025. This momentum builds on major global players choosing the region as a hotspot for cloud and data center investments, recognizing Southeast Asia's potential as an AI development hub.

Singapore captured 58 percent of ASEAN deal volume and 68 percent of deal value in the first nine months of 2024, demonstrating its dominance in attracting technology investment. The nation accounts for 75 percent of total AI venture capital investment among ASEAN's six largest economies—$8.4 billion compared to Indonesia's $1.9 billion and Malaysia's $371 million.

The startup ecosystem benefits from world-class research foundations. The National University of Singapore ranks ninth globally in AI academic reputation, while Nanyang Technological University holds third position worldwide in AI research, trailing only MIT and Carnegie Mellon. NTU's Master of Science in Artificial Intelligence program received approximately 2,000 applications for its latest cohort, with the government providing subsidies of 10,000 Singapore dollars for Singaporean students.

Singapore's banks lead globally in AI deployment, generating substantial economic value. DBS Bank operates over 800 AI models across 350-plus use cases, delivering 750 million Singapore dollars in economic value in 2024 and expecting to exceed $1 billion by 2025. These implementations demonstrate practical AI applications delivering measurable returns.

Healthcare applications showcase AI's transformative potential. Singapore's SELENA+ system achieves 90 percent accuracy in diabetic retinopathy detection at the Singapore National Eye Centre. Predictive models now enable early identification of stroke, cardiac arrest, and kidney failure risks through the Healthier SG program. The National FH Genetic Testing Program, launching mid-2025, incorporates AI-supported risk assessment for familial hypercholesterolemia.

Digital Economy Framework Agreement Advances Regional Integration

ASEAN member states reached substantial conclusion in negotiations for the Digital Economy Framework Agreement during a gathering in Kuala Lumpur, Malaysia, marking a critical milestone toward the world's first comprehensive regional digital economy agreement. Due for conclusion and signature in 2026, DEFA aims to bolster a digital economy projected to reach $2 trillion by 2030 with successful implementation.

Currently valued at approximately $300 billion, ASEAN's digital economy could grow to $1 trillion by 2030 through natural adoption of digital technologies. Progressive rules in DEFA could double this value contribution, unlocking an additional $1 trillion through enhanced regional integration and interoperability. Indonesia, which leads the region's digital economy with a $90 billion valuation in 2024, could reportedly see its digital economy triple to $360 billion by 2030, with e-commerce contributing $150 billion.

DEFA seeks to bridge ASEAN's diverse digital landscape, uniting economies at different stages of development to advance digital finance and infrastructure collectively. Through streamlined digital regulations and improved e-commerce access, the agreement aims to enable micro, small, and medium enterprises to expand across borders, integrate into regional value chains, and compete globally. The framework creates pathways for women entrepreneurs, rural innovators, and youth-led startups, with provisions supporting skills development, talent mobility, and digital literacy.

Dr. Kao Kim Hourn, Secretary-General of ASEAN, emphasized the agreement's significance: "The provisions represent collective commitments of ASEAN to deepening cooperation and enhance our competitiveness while ensuring that the benefits of digitalization are accessible to all. Through DEFA, ASEAN will be able to unlock the benefits of cross-border digital integration and interoperability across the region."

The World Economic Forum's ASEAN Digital Economy Agreement Leadership project has supported the DEFA negotiation process since inception, recognizing the agreement's potential to set a blueprint for digital economic governance that other regions might emulate. The framework addresses critical areas including digital trade, cross-border e-commerce, cybersecurity, digital identity, digital payments, and emerging technologies like artificial intelligence.

Workforce Development and Regional Collaboration

The region's workforce actively seizes AI opportunities and develops relevant skills. In 2023, 71 percent of all venture capital deals across ASEAN were digital economy-related, 11 percent higher than the global average. Annual announced investments in communication, data processing, and hosting services increased nearly sixfold over the past decade, from $777 million in 2015 to $4.4 billion in 2024.

Private funding in the region rebounded 15 percent year-over-year to approximately $8 billion, with late-stage and digital financial services-led deals dominating. This recovery signals renewed investor confidence in the region's digital economy prospects and sustainable business models that prioritize profitability alongside growth.

Singapore's government announced in February 2025 additional support for organizations adopting AI solutions, setting aside 150 million Singapore dollars for a new Enterprise Compute Initiative. This program enables eligible organizations to partner with major cloud services to access AI tools and computing power along with expert consultancy services. The initiative builds on previous commitments to invest more than $1 billion over five years to boost AI computing resources, talent pools, and industry development.

Educational initiatives complement infrastructure investments. Singapore allocated more than 20 million Singapore dollars over three years to fund additional SG Digital Scholarships for Singaporeans pursuing AI-related courses in universities and overseas internships. These programs aim to develop the specialized workforce required to sustain AI innovation and deployment.

AI Singapore, the country's national-level AI research and development program, developed a family of open-source large language models called SEA-LION (South East Asian Languages in One Network) that better understand Southeast Asia's diverse contexts, languages, and cultures. Similar initiatives across the region include Thailand's ThaiLLM, Vietnam's PhoGPT, and multilingual models designed to ensure AI technologies serve regional populations effectively.

Challenges

Despite impressive growth, ASEAN's digital economy faces challenges requiring sustained attention. The AI safety governance landscape among Southeast Asian countries remains diverse. Singapore ranks 11th globally and second in Asia and Oceania on the Global Index on Responsible AI for 2024, while countries like Laos and Myanmar rank in the bottom 15 percent. This disparity highlights the need for continued capacity building and knowledge sharing.

Persistent shared challenges confront national-level AI risk management, including lack of quality datasets, poor cybersecurity infrastructure in some jurisdictions, and capacity constraints. The ASEAN Digital Masterplan 2025, published in 2021, makes no mention of AI across its 140 pages, suggesting the technology's potential was not fully anticipated during drafting. The region has since adopted an innovation-friendly governance approach to catch up with rapid AI developments.

Data center infrastructure requirements present both opportunities and challenges. Singapore lifted its data center moratorium while implementing stringent sustainability requirements including power usage effectiveness targets of 1.3 or lower, ensuring infrastructure growth aligns with environmental goals. AWS committed an additional $12 billion from 2024 to 2028 for cloud and AI infrastructure investments in Singapore, joining similar expansions by Google, Microsoft, and regional players.

Economic impact estimates suggest transformative potential. AI could boost Singapore's annual economic growth from 3.2 percent to 5.4 percent while delivering 41 percent labor productivity gains by 2025, according to Accenture. AWS projects a $23.7 billion contribution to Singapore's GDP by 2028 from its cloud and AI infrastructure investments. The broader ASEAN AI market will contribute 10 to 18 percent to regional GDP by 2030, with Singapore capturing substantial value creation.

Strategic Positioning for Global AI Leadership

Singapore's approach to AI governance emphasizes principles including transparency and explainability, fairness and equity, security and safety, reliability, privacy and data governance, accountability, and human centricity. The Model AI Governance Framework, first released in 2020 and regularly updated, provides practical guidance for organizations designing, developing, and deploying AI systems responsibly.

The city-state's initiatives extend to military AI governance. Singapore endorsed the Responsible AI in the Military Domain Call to Action in 2023 and co-hosted the REAIM Summit in Seoul in 2024, demonstrating commitment to responsible AI deployment across all domains. In February 2025, Singapore and other ASEAN member states adopted a Joint Statement on Cooperation in responsible military AI use, extending governance principles to defense applications.

Singapore released results of the "Singapore AI Safety Red Teaming Challenge" in February 2025, where partner institutes across nine countries tested effectiveness of safety guardrails in commonly used large language models. The goal was improving AI safety for unique cultural and linguistic contexts in the Asia-Pacific region, recognizing much AI red-teaming and bias research today remains Western-centric.

Looking ahead, the convergence of ASEAN's proven digital economy strength and Singapore's AI governance leadership creates a foundation for sustained regional transformation. Sapna Chadha emphasized this momentum: "Surpassing the $300 billion GMV milestone by 2025—1.5 times our ambitious forecast from a decade ago—firmly validates that Southeast Asia's potential is even greater than we imagined. Backed by strong fundamentals, robust macroeconomic conditions, and new consumer behaviors, the transformative impact of AI and the shift toward sustainable profitability are clear."

The next wave of growth will be more focused, efficient, and innovation-led as markets consolidate and investor confidence returns. For ASEAN, the challenge lies in ensuring this growth remains inclusive, with benefits accessible across diverse member states at varying stages of development. Singapore's leadership in establishing governance frameworks provides a model for balancing innovation with responsibility—an approach that could define Southeast Asia's trajectory as a global AI hub while ensuring technology serves the region's 680 million people equitably and sustainably.

The digital decade has built a strong foundation. The AI reality now dawns, presenting opportunities for ASEAN to lead the global shift into intelligent commerce and infrastructure while demonstrating that technological advancement and responsible governance can advance together rather than in opposition.