impact of Covid-19 in South East Asia, and acceleration of digitization

1. www.cathayinnovation.com
www.cathay.fr
COVID-19 in Southeast Asia is also a
digital acceleration for a sustainable leapfrog
By Romain Dufourcq

2. Across Southeast Asia, the COVID-19 situation varies widely
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Number of confirmed COVID-19 cases
Singapore Indonesia Malaysia Philippines Vietnam Thailand
Most of SEA now in full lockdown… …As cases are rising sharply
Indonesia
 Worrying situation in Indonesia, as the country lacks the ability to test for the virus and
has limited healthcare resources
 By April 15, the country had more than 5,000 official cases with 569 reported deaths
Philippines
 Another large country in Southeast Asia, it has almost 6,000 cases now.
 The country also faces a worrying situation, due to deficient healthcare system and
several pockets of poverty (slums) around Manila
Malaysia
 Malaysia has more than 5,000 cases, having suffered from an initial spread due to a large
cluster at a religious gathering that took place at the end of February.
 Facing a fast spread of the virus, Malaysia entered an aggressive lockdown on March 18.
Enforced by the army, the “movement control order”, is likely to be extended for several
weeks.
Vietnam
 Vietnam seems to be an outlier. On April 15, Vietnam had confirmed only 267 cases
of COVID-19.
 Vietnam seems to have stopped the spread of the virus, thanks to the aggressive
lockdowns and other measures (school closures, quarantines…) it implemented
early on

3. Singapore - tough and early policies slowed down the spread, until the second wave
 Singapore is one of the countries that took
swift, harsh action very early at the beginning
and kept the coronavirus under control, thanks
to aggressive contact tracing and preemptive
closure of the borders
 The country also developed smart tools to
improve contact tracing and social distancing
Singapore’s data-centric actions
Singapore was initially praised for their management of the COVID-19 at the initial stage
“Safe Distance @ Parks” – measuring
real time traffic in Singapore parks
“Space Out” – measuring real time
traffic in shopping malls
“TraceTogether” – mobile app that enables
community-driven contact tracing. 1M
installs so far in Singapore
Singapore’s contact tracing, using
Singapore Armed Forces’ staff
 With more than 4,000 cases, Singapore had to
implement a so-called “circuit breaker” in early
April
 All schools and non-essentials businesses are
closed in Singapore for one month, until May 4,
and the population is asked to stay home and
limit as much as possible social interactions.
 The authorities are trying to contain large
contamination cluster in foreign worker
dormitories

4. SEA’s governments have all announced massive stimulus packages, to counter the
massive economic fallout.
Economic fallout
Singapore’s economy
already contracted by -2.2
percent in the first
quarter of 2020 from a
year ago
Singapore MalaysiaIndonesia PhilippinesVietnamThailand
Total stimulus
$37 billion (11% GDP)
Targets of stimulus
hard-hit sectors (e.g.,
food services, aviation,
tourism), self-employed
individuals, cash payouts
to the population, tax
relief
Economic fallout
Indonesia’s real GDP is
expected to almost
stagnate (+0.5%) vs a
5.3% initial target
Total stimulus
$35 billion (3.5% GDP)
Targets of stimulus
$4.5 billion for healthcare
spending
$6.6 billion for social
protection
$4.2 billion for tax
incentives
Economic fallout
GDP per Capita is
expected to contract by
-6.9% according to IMF
World Economic Outlook.
Total stimulus
$62 billion (14% GDP)
Targets of stimulus
N.A
Economic fallout
Malaysia’s economy is
expected to contract by
as much as -2.9% in 2020,
with some 2.4 million job
losses
Total stimulus
$58 billion (18% GDP)
Targets of stimulus
$4.8 billion to support
tourism and other
industries
$23.1 billion in support of
businesses
$2.3 billion in direct cash
payments for 4 million
low-income households
Economic fallout
Being a fast-developing
economy, Vietnam’s
economy should still rise
by +2.7% in 2020 (IMF) vs
7% in 2019 nonetheless.
Total stimulus
$3.7 billion (1.7% GDP)
Targets of stimulus
Subsidies to households
and fiscal package
Economic fallout
Philippines’ economic
projection for 2002 have
been revised by the IMF
from 6.2% to 0.6%
Total stimulus
$3.9 billion (1.2% GDP)
Targets of stimulus
Wage subsidies, support
for the tourism industry,
social security.
Also provide monthly aid
to poor families and
healthcare workers who
contracted COVID-19

5. An opportunity to leapfrog many of the economic activities to digital : Healthcare
Technology and digital transformation can help SEA countries close the healthcare development gap with developed countries.
Most of SEA countries lack doctors and hospital beds
Optimizing consultation management in times of
doctor scarcity, telemedicine is a sector that has
attracted large amounts of investment, even before
the pandemics :
 Halodoc raised more than $100M in total, from
investors such as UOB VM, the Bill and Melinda Gates
Foundation, Allianz X and Prudential.
 Alodokter raised more than $45M including its series-
C round that took place in Oct 2019.
 Many different models will co-exist, however,
sometimes inspired by the large Chinese digital health
platforms like Alihealth, WeDoctor, Ping An Good
Doctor, DXY and others.
Such investments are poised to grow, as digital health and
telemedicine platforms are well positioned to compensate for the
deficiencies of the Indonesian healthcare system for example.
They will certainly grow further in notoriety and audience during
the COVID-19 pandemics.
$6.8Bn
investments in digital health in 2018.
Source: WHO

6. As center of healthcare excellence in SEA, Singapore will have a major role to play
One of the four pillars of
Singapore’s National R&D
Strategy
The industry represents a S$4B
budget in the Research,
Innovation and Enterprise (RIE)
2020 Plan of the National
Research Foundation.
Healthcare and biomedics
A recognized leader in biomedical research
which has been mass-producing
diagnostic test kits for COVID-19, which were developed
in three weeks by research institute A*STAR,
a digital therapeutics startup that
has developed a platform that detects symptoms of
deterioration in COVID-19 patients
who has developed an AI-
powered assistive CT-scan diagnosis platform, or
a CDMO company which is co-developing a
vaccine for the coronavirus with other firms in
Singapore and the US.
Some achievements
around COVID-19

7. COVID19 is likely to push SMEs to reinvent their operating model, by impacting mobility, logistics, retail
operations and supply chains…
More technology such as Machine Learning
will be required to optimize these platforms
that are reaching operating bottlenecks and
will benefit from more data-centric models
in areas like pricing, addressing, inventory
management, routing and supply chain
management to make logistics and e-
commerce operations faster and more
resilient.
SARS impact on Asia’s retail industry in 2003
 Like in 2003, the retail sector will obviously suffer the most
from the pandemics, as populations will be in lockdown for
weeks and months, and the recovery of the offline retail
will certainly imply a wave of digitalization of retail
operations to build more resilient companies.
 As a comparison, in China, where 60% FMCG sales come
from offline retail, the category has been hit hard,
especially during the first two weeks of lockdown (-23%
and -41% respectively)
Those companies (and others) have
had to increase their activity massively
to serve the demand for fulfillment of
online grocery, food delivery and e-
commerce in general all over the
region.
+11%
penetration
In China
SEA could also follow the tracks of China, where e-
commerce gained higher penetration among older
consumers and lower tier markets
Online retail and last-mile delivery clearly benefit from the pandemics.

8. … and force fintech adoption at the same time.
 Since more transactions happen online
and banks are closed, fintech companies
will also benefit from the pandemics, in
an area where 70% of consumers are
underbanked and 70% of SME merchants
accept only cash today.
 Same for online lenders, who are well
positioned to help people in precarious
financial situation after a loss of income or
unemployment.
 Because most of these companies acquire
users online, more e-commerce and
online transaction will bring more traffic to
fintech companies in the region.
SEA’s fintech could become a US$38Bn market in 2025

9. Finally, we believe the pandemics will create massive opportunities for the EdTech and “future
of work” space.
 The time spent on online education platforms (particularly kids
education, as parents wanted to compensate for the school
closures) increased massively during lockdowns.
The amount of investment in Chinese online
education therefore spiked at the end of the
lockdown.
Education & Office Efficiency apps DAU Scale
 The spike in usage of Zoom
videoconferencing service during the
pandemics, we can anticipate that
collaborative work and decentralized work
platforms across the region as well.
 Unemployment is rising during the crisis but
online hiring platform that will allow people
to find new jobs (such as Kalibrr in the
Philippines or older generation JobStreet /
JobsDB portals) are expected to benefit
massively during the post-pandemics
recovery period.
New ways to work will be very promising sectors to look at.

10. SEA’s Internet economy is now worth $100B and could exceed $300B by 2025
32
100
300
2015 2019 2025F
(billion US$)
source: Bain, Google, Temasek
1.3%
2.8%
8.0%
6.5%
6.0%
SEA (2015) SEA (2018) SEA (2025) USA (2016) China (2016)
(according to OECD narrow definition)
 Even before the COVID-19 crisis, the digital economy was expected to grow very fast in Southeast Asia
 The pandemics may accelerate even more the digitalization of some industries in Southeast Asia
 This will create the perfect ground for technology leapfrogs and fast technology adoption in the region
Southeast Asia’s Internet economy sizing Internet economy GMV as % of GDP

11. The pandemics will catalyze the digital revolution in Southeast Asia…
Southeast Asia is enjoying strong growth potential thanks to several positive factors, related to macro-economics, demographics, and tech adoption.
Strong market drivers
Large and fast-growing population in SE Asia...
…supported by robust economic growth
1%
CAGR
China
0.3%
US
0.6%
6.7%
CAGR
China
6.4%
US
3.1%
A thriving internet economy
Internet economy growth vs GDP penetration
 While the region has grown at an average rate of 33% a year since 2015,
Indonesia and Vietnam have pulled away from the pack

12. … but will also generate many challenges and issues
Adoption of the most recent technologies will
provide populations with a more efficient and
fairer access to welfare and economic
opportunities
 Mobile technologies and connectivity
provide access to 1) information 2) financial
services 3) education 4) healthcare.
 Emerging regions can enjoy technology
leapfrogs and are consequently able to
adopt the latest technologies and well-tested
business models that can be adapted to local
conditions to scale and spread faster.
The access to economic opportunities remains
unequal, and the wealth gap is increasing. The
COVID-19 crisis will make more visible the
deficiencies in infrastructure and inequalities
in the region:
 Increasing inequalities between the rural
and the urban worlds
 Deficiencies in infrastructure and inequal
access to basic services such as healthcare
and education
 Increasing urbanization will lead to a need
to respond to more demand in a more
efficient and sustainable way; for food,
clean energy, goods, mobility/logistics
services will require technologies that can
create efficiencies in the context of
undersized/overutilized infrastructure.

13. Cathay Innovation’s subjects of interest in Southeast Asia are consistent with the
UN’s Sustainable Development Goals
Cathay’s Impact
We are running the Cathay investment
platform in a way we can ensure our
investments have a positive social and
economic impact
 Cathay can bring the most suitable
technologies or know-how from the world’s
innovation centers to Emerging Asia (Silicon
Valley, China, Europe, Israel, etc) and consequently
enable technology leapfrogs
 Cathay can bring industrial resources and
know-how from global industry leaders in the
most impacting industries (healthcare, agriculture,
commerce, education, mobility, logistics…)

14. Our presence in South East Asia, so far… - FinAccel
Partnership with leading
e-commerce players and
payment processing
companies
Year to Year User growth
+$300m + 300%
 FinAccel offers a mobile-first consumer
credit solution in Indonesia (under the
brand name Kredivo) and mainly targets
white collars and affluent millennials
 FinAccel provides a line of credit like a
virtual credit card, with monthly roll-over
or installment payment, personal loans, a
credit scoring engine, and also a real-
time transaction engine that allows users
to transact online and offline directly with
the Kredivo app.
 The company is looking to expand
regionally and create the dominant
fintech for the region. The first product is
credit but over time they will deepen
their relationship across a range of
offerings and could become a neo-bank in
Indonesia in the future.
X 4
A leading fintech Exponential traction on loan disbursement
Total loans disbursed, just for
digital credit service

15. Partnerships with major
Asian and particularly south
east Asian marketplaces
Presence in
6 countries
 Axinan is an Insurtech startup with full-
stack capabilities to create and distribute
digital insurance products for the internet
economy across Southeast Asia.
 Axinan’s core technology includes Partner
API, for integration with partner
platforms, a full-stack digital
Infrastructure, a Realtime Risk Engine and
a Machine Learning/neural network data
processor that helps process transaction,
shipping, tracking, fraud detection, etc…
 The company also develops Igloo, a B2C
app, providing affordable insurance from
phone screen repairs to travel insurance.
 Axinan plans to expand in Thailand and
Vietnam.
Full-stack insurance solutions Multiple insurance products powered by AI
Our presence in South East Asia, so far… - Axinan (newly renamed )
Direct to consumer solution
(for phone protection)
B2B integration
Instant, seamless and
error free policy
Risk profilingCustomized
premium
Risk profilingCustomized
premium
Personal insurance Lifestyle insurance
Accident Disease Travel Transit Gadget

16. Some of the subjects we are currently looking at
Digital health
Online consultation
Doctor platforms
Access to healthcare
B2B health
Fintech
Consumer lending
SME lending
Insurance and Insurtech
Smart logistics & e-commerce enablers
Logistics marketplaces (truck, air, sea)
C2C social commerce enablers
Cross-border e-com enablers
Supply chain digitalization

17. Thank you