Top 10 startup cities in Asean

Singapore, Jakarta, Bangkok, Kuala Lumpur, and Manila make up the top five startup cities in the Association of Southeast Asian Nations (Asean) grouping, according to a study by startup ecosystem mapper StartupBlink.

Startups catering for their regional market have some interesting advantages compared to those with a global focus, StartupBlink said in its Global Startup Ecosystem Index 2023 report.

Riding on the tailwinds of this trend, successful regional hubs are increasing in strength, the report said, while highlighting Singapore, which became the place where many of the most successful Asian-focused startups are headquartered.

Singapore has also greatly benefited from the demise of the Hong Kong startup ecosystem, which used to be the gate to Asia and is now replaced by Singapore, the report said.

The top 10 startup cities in Asean at a glance:

1. Singapore City (Singapore)

The city-state has entered the top 20 startup cities rankings by jumping six spots, while becoming the sixth top startup nation. StartupBlink ranked Singapore as a city as well as a country in its rankings. The Lion City is ranked as the top startup city in Southeast Asia. Singapore is a model for innovation and another great example of a relatively small country that massively over-performs, StartupBlink said, while adding that the country has become a location of choice for the incorporation of startups operating in Asia due to its financial stability, pro-business approach, and tax policies.

2. Jakarta (Indonesia)

Jakarta has steadily ascended the ranks, securing the 29th position globally and becoming the 2nd best startup ecosystem in Southeast Asia. The city’s impressive growth trajectory over three consecutive years highlights its emergence as a formidable player, even surpassing Hangzhou, China, to claim the 10th spot in Asia’s rankings. Indonesia is the biggest market in Southeast Asia and has a young, talented, internet savvy workforce. As one of the most populous countries, Indonesia enjoys the rare advantage of creating massive startups and unicorns that can focus on the low hanging fruit of serving its own domestic economy. In recent years, improving the country’s connectivity has been a focal point for the public sector. For the startup landscape, this translated into additional government support for tech and IT startups. One example is the government-run accelerator Startup Studio Indonesia that aims to empower the startup ecosystem and digital industry in the country.

3. Bangkok (Thailand)

This year, Bangkok gained 25 spots to rank 74^th globally on the startup ecosystem map, reversing the negative trajectory of last year. Bangkok bypassed Kuala Lumpur (87th) to become the third best ecosystem in Southeast Asia. Over the last 40 years, Thailand has taken a leap forward into a more economically developed country through multiple reforms and social innovations. Mainly seen as a tourist destination, the emergence of covid-19 caused the public sector to prioritize startup ecosystem development as an important step in securing Thailand’s future economic growth. Those efforts are not yet focused or determined enough compared to Thailand’s counterparts in locations such as Singapore or Malaysia, but are a good start toward ensuring the Thai ecosystem can fulfill its potential. Thailand attracts not only tourists, but also flocks of digital nomads residing largely in Chiang Mai and Bangkok. With creative policies, the Thai public sector could tap into this immense knowledge and talent base, StartupBlink said.

4. Kuala Lumpur (Malaysia)

Malaysia’s capital city and the main startup hub improved by one position to 87th in the world, although it slipped two slots to 20th in Asia-Pacific. Kuala Lumpur climbing globally but declining regionally shows that competition among Asian ecosystems is becoming fiercer, StartupBlink said. Despite its strategic geographic location, offering potential access to huge regional markets, Malaysia has yet to fully realize its potential. The talent and positive mindset are there, government policies and public sector startup related institutions are overperforming compared to most of their Asian counterparts, but the easing of regulation and bureaucracy is crucial for Malaysia’s sustained startup ecosystem growth, the StartupBlink report said. Used-car ecommerce platform and Malaysia’s first unicorn, Carsome crossed the $ 1 billion valuation threshold in 2021. According to Malaysia’s Digital Economy Blueprint, the country aims to foster five more unicorns in its key digital industry clusters by 2030.

5. Manila (The Philippines)

Manila jumped five spots to rank 95th, strengthening its position in the global 100, while maintaining its position as the fifth top startup city in Southeast Asia for a third time.  Manila, by far the dominant city in the country, ranks among the top 50 cities globally in fintech, with its total score far greater than  Cebu city. The Philippines, meanwhile, is making progress toward becoming a formidable startup ecosystem in the Asia-Pacific region. The country enjoys a talented English speaking population, with many already working remotely for international startups. Its attractiveness to foreign entrepreneurs and digital nomads, and the massive knowledge that local remote workers have gained while working in international startups, should allow for successful ecosystem growth, provided more of the local population embraces entrepreneurship, StartupBlink said.

6. Ho Chi Minh (Vietnam)

Ho Chi Minh lost three spots to rank 114th globally, while Vietnamese peer Hanoi jumped 47 spots to rank 174^th. The Vietnamese ecosystem has massive potential, mostly due to the substantial market size of the Vietnamese economy, making the creation of successful local startups profitable even if they do not expand internationally. Of late, Vietnam has become a more appealing option for companies looking to relocate for two reasons. First, Western countries have imposed tariffs on goods manufactured in China, while on the other hand, over the past few years, free trade agreements were concluded between Vietnam and the EU, UK, and several countries in the Asia-Pacific. Second, manufacturing costs have been rising in China. With the right initiatives, the Vietnamese ecosystem can benefit from these trends to become a regional and global hub. However, to achieve this goal, Vietnam will have to generate technology innovations and integrate them into the traditional manufacturing process, developing itself into an exporter of services and an exporter of manufactured goods.

7. Hanoi (Vietnam)

Both Ho Chi Minh City and Hanoi have maintained their positions in Southeast Asia’s top 10 at 6th and 7^th ranks, respectively. With Hanoi’s jump of five spots to 31st in Asia, it is getting closer to joining Ho Chi Minh City on the Asian top 30 cities list, the report said. Having Hanoi and Ho Chi Minh City as innovation hubs is a bonus to the Vietnamese ecosystem, but with the nation’s population of almost 100 million, just two ecosystems is not enough, the report added. The main challenges the startup community in Vietnam faces are a shortage of qualified workers, a lack of critical mass of scaled startups, and slow regulatory reforms. In addition to existing funds and loans, the government needs to invest more in training and education to build a skilled workforce. Vietnam should also continue with regulatory reforms to build a friendly business environment for investors and developers and continue attracting digital businesses to the country. The more Vietnam becomes an open society without Internet restrictions, the easier it will be for its startup ecosystem to thrive, it added.

8. George Town (Malaysia)

George Town maintained its eighth place in Southeast Asia, above Bandung, Yangon, and Cebu City, while climbing 12 spots to 329th globally. ­In the Asia-Pacific, George Town improved four spots to 55th, ranked above Colombo (with a score gap of less than 0.01%), Yangzhou, and Taoyuan City. George Town has a thriving startup ecosystem, with one of the most important facilitators in the city being Digital Penang, a government-linked organization that contributes to the development of the startup ecosystem through initiatives such as the SME Go Digital program to support the growth of early-stage tech startups and strengthen the startup ecosystem.

“Over 90 active startups in a variety of technology verticals make up the Penang ecosystem, which is backed by numerous initiatives from Digital Penang, its federal partners, and private entities,” Cseng Lim, director of ecosystem development at Digital Penang, said in the report.

9. Bandung (Indonesia)

Bandung, Indonesia’s second best startup ecosystem, is ranked ninth in South East Asia and jumped 19 spots to 386th globally. Jakarta’s total score is almost 30 times larger than Bandung, indicating the centralized startup economy of Indonesia. Growth in digital infrastructure, partly accelerated by the covid pandemic, can be a huge gain for Indonesia’s startup ecosystems. With easing visa regulations and better internet connectivity, foreign talent may have the opportunity to establish their businesses and form startup hubs in Indonesia, the report said.

10. Yangon (Myanmar)

Yangon in Myanmar, ranked 453rd worldwide, is one of three cities in the top 500 whose countries are not in the top 100. The other two are Addis Ababa in Ethiopia at 417th and Tehran in Iran at 426th. Yangon is home to about 90% of startups in the Southeast Asian country. Myanmar’s economy has been subdued by multiple shocks in recent years —covid, high energy prices, and conflict — stalling a stretch of rapid growth. Estimates show that Myanmar’s GDP contracted by 18%in 2021, and in July 2022, its local currency kyat, depreciated by 30% relative to the dollar even as inflation rose to 19.5%, according to the World Bank. Despite these significant challenges, Yangon has secured the 10th spot in Asean, showcasing its resilience and the city’s ability to foster a thriving startup ecosystem against all odds.

This story is part of a series focusing on the Association of Southeast Asian Nations (Asean) grouping.