Is your business ready to expand into ASEAN?
“South-East Asia is definitely emerging as a region. But it would be simplistic to say that in the next five to ten years it will be a unified region. You would probably make some business errors if you don’t account for some of the individual country differences,” says Roberts. While the Association of South-East Asian Nations (ASEAN) has taken significant steps towards harmonising regulations and especially tariffs to make cross-border trade easier, most business expansions must take account of different countries’ regulations.
Despite this, the 2018 HSBC Navigator Report found that business confidence in the region is higher than in many other parts of the world—reflecting positives such as ASEAN’s strategic location, rapid urbanisation and a fast-growing middle class.
One of South-East Asia’s most underappreciated attractions is the fast take up of digital
technology, which can make it a globally competitive place to launch digital business ideas. “Businesses from other parts of the world can learn about how things are going from ASEAN and even import those ideas back to their home market,” he says.
Roberts says ASEAN-based SMEs appear to be expanding from their home countries into neighbouring countries much earlier in their lifecycle than in the past, usually due to the opportunities offered by digital technology and a greater sense of regionalisation. In contrast, SMEs from other parts of the world tend not to think about the ASEAN region as one market. Instead, most simply pursue opportunities offered by a particular niche in their sector within an individual ASEAN country.
Global multinationals are likely to have an ASEAN strategy in place and the capabilities to enter the region without needing to rely on locally based partners. However, Roberts argues it is much more challenging for an SME from outside South-East Asia to go it alone without the planning resources of an MNC. “I have seen businesses expand into the region both with partners and without,” says Roberts. “But, if you are in the ASEAN region for the first time, there is a good chance you will really need a partner to make a success of it.”
Singapore: An ASEAN case study
With a highly competitive and slow-growing local market, it is not surprising that a Singapore Business Federation survey shows 77% of the country’s SMEs want to expand offshore.
HSBC Singapore Head of Business Banking, Li Lian Ng, says Malaysia, Indonesia and Vietnam are the most favoured countries for Singapore-based SMEs to expand into because they have large domestic markets and provide a base for export-oriented manufacturing. In her experience, the main reasons for the failure of offshore expansion are lack of proper due diligence about the market, poor partner choice, and difficulty with capital control rules. To alleviate these risks, Ng says Singapore SMEs seeking to move offshore should find local partners to reduce the risks of expansion.