And Southeast Asia, just a few years ago seen as a budding hotspot for the digital economy, is no exception. A new report from Bain and Company shows that private equity deals are down in the region, despite positive growth outlooks and the region possibly benefiting from reshoring trends from global business.

Deal values in Southeast Asia dropped 39% to hit $9 billion in 2023, compared to the running average between 2018 and 2022. The overall number of deals is down too, falling to 109, a 24% drop compared to the previous average. Deal value in the region is back to where it was in 2020.

Still, Southeast Asia’s performance is roughly comparable to other Asia-Pacific markets. Deal value in Greater China and India are down 58% and 41% respectively over the same period. 

One market that did well? Japan, which boasted an 183% increase in deal value when compared to the running average between 2018 and 2022. 

Singapore and Indonesia accounted for the bulk of Southeast Asian deals, both by value and number. “Singapore has typically been number one,” said Usman Akhtar, senior partner and head of Bain’s Southeast Asia private equity practice. “Singapore is a geography that attracts a lot of companies that have regional ambitions. It doesn’t necessarily mean that this is all going into economic activity in Singapore, but this is where companies are based.”

Indonesia is typically in second place when it comes to attracting private equity investments, according to Bain. The country is the region’s largest economy and boasts a fast-growing middle class. 

Southeast Asia on average reported private equity-backed investments worth between $10 billion to $11 billion between 2018 to 2020, only to shoot up to $27 billion in 2021, as the COVID pandemic fuelled an investment boom in the internet sector. 

The internet and tech sector continues to receive the most private equity investment, accounting for more than half of all deals since 2018. Yet healthcare is quickly growing as an attractive target for investors, according to Bain’s report. The firm also forecasts that rising incomes in the region will make the consumer products sector a hotspot for investments.

If 2023 was hard, 2024 is unlikely to be much easier. A Bain survey found that investors expect less favorable returns over the next three to five years, and are worried about challenging exit conditions for their investments. 

Dealmaking in Southeast Asia has been slow so far this year. Only $1.4 billion in private equity deals were agreed in Southeast Asia in the first quarter of 2024 so far—or $5.6 billion at an annualized rate, lower than the $9 billion in deals from last year.