FDI

Why Should You Expand Your Business to Southeast Asia?

Nora Setiawan

April 28, 2021

Southeast Asia is home to over 673 million people and makes it the most populous subregion in Asia, and third-largest labor market behind India and China. Not only that, it has experienced a tremendous technological boom and the economies there are relatively stable in the last decades. 

In fact, the Asia business development has accelerated economic growth and stability are one of the many reasons why you should consider expanding your business to Southeast Asia. Therefore, the article will focus on Asia business development and expanding your business to Southeast Asia. Let’s keep reading until its end!


Overview of Business in Southeast Asia

Southeast Asia’s economic performances continue to outstrip the global average. The region’s investment prospects also look strong and consistently post impressive growth. 

The Southeast Asia trade has received its boost from the prospect of an integrated Asean economy in the market and production platform through the free flow of goods and services, capital, investments and skilled labor.

Furthermore, Foreign Direct Investment (FDI) inflows into Southeast Asia have surged in the last five years. In the future, the region will be able to enhance its attractiveness to FDI to make the region more competitive against the global economy.

Apart from economic growth, a vast population in Southeast Asia also delivers a huge consumer market to companies. Many international businesses seek to expand in Southeast Asia because it is more profitable to offer a product or services to 673 million customers in the countries there. Hence, Asia business development nowadays is growing fast.

Southeast Asia has also a very business-friendly environment, especially for foreign investors. For instance, Singapore offers low taxes for companies and it has an easy setup for new businesses. In addition, Singapore has been recognized among the world’s best places to do business and remains the top choices for business investors.

If it is compared to other countries as business hubs, Singapore offers one of the easiest and quickest processes of business registration, which attracts investors to start a business in Singapore.


The Reasons of Expanding Business to Southeast Asia

As we have known, Southeast Asia is a strategic position to have market entry expansion, and it is relatively easy to do some Asia business development there. Additionally, its location at the center of a dynamic APAC region would benefit Southeast Asia-based companies. There are key advantages of Southeast Asia:

  • An economic powerhouse with combined GDP valued at USD $3 trillion dollars, making it the 5th largest economy in the world.
  • Youthful workforce and customer base with a population approaching 700 million and median age below 30.
  • Not a homogenous market, since there are 1000 different languages spoken.
  • ASEAN Economic Community (AEC) economic cooperation is a key pillar that constructs ASEAN’s success. 

The business expansion or Asia business development means that there are a lot of different things for disparate companies. In other words, the company incorporation needs some work in the first hire, new partnership, new office, new marketing message, or a new pipeline in a new market. Regardless, the main aim for the expansion is helping the business grow.

There are some methods to escalate the market in Southeast Asia, it also includes understanding the options, and considering both the opportunities and obstacles of each method. These are methods that will help ease the incorporation process:

  1. Fly-in, Fly-out (medium risk – medium cost)

It is a method of employment used in remote areas, particularly where industry is in a remote region, such as oil fields or mining. The employers will fly staff to the work site for a specific period of time, then fly them back to their home for a period of time.

The opportunities for this method:

  • Better for the early stages of geo expansion
  • Can be used for scoping the market and building pipeline
  • May involve regular trips

The  obstacles for this method:

  • Can be taxing physically due to long haul flights
  • Limited flexibility on meeting times and in-person presence
  • May have time zone-based communication lag
  1. Relocation and Incorporation (low risk – medium cost)

When a particular country has an increasing economic strength and well-improved environment for the conducting of business, then there is such a chance to relocate or incorporate business there.

These are the opportunities:

  • Easier done in some countries which better task rate, less red tape, and low corruption
  • Better for legal and compliance consideration
  • Allows easier business transactions with incorporated status

However, this method has its obstacles:

  • Incorporation cost varies by country
  • Requires legal support
  • Has variable costs for marketing, administration, and employee relocation
  1. Incorporate and Hire Locally (low risk – medium cost)

When you succeed incorporating your company in a foreign country, you should hire local employees to help you enter the new market. Understanding a local market is needed when you set up a business in a country that is not your hometown.

The opportunities for this method:

  • Profitable if managed correctly
  • Better in understanding language, culture, and way of doing business
  • Networking or relationship advantage which is important in Southeast Asia
  • Better business commitment pointed by local employees

The obstacles for this method:

  • Lengthy legal and banking processes
  • Requires familiarization with tax and regulations
  • Needs careful hiring for the first employees

After knowing these methods, you also need to look out for the tips for expanding a business in Southeast Asia. Moreover, these are the tips that you can consider for your Asia business development later:

  • Approach the Southeast Asia market as a multiple markets which significantly based on language, culture, technology maturity, and spending power.
  • As an entrepreneur, you should show commitment and physical presence because buyers in Southeast Asia expect a local presence or at least a locally established partnership.
  • Have a plan for at least two years to create footprints as businesses. You can also actively educate prospecting clients with your business value propositions and the pain points that your business can solve.
  • Different countries might have distinct levels of price sensitivity. There is sometimes a need to tweak global pricing models as Southeast Asia countries have strong bargaining cultures.

The above information is the reasons and opportunities why you should expand your business to Southeast Asia. There are many additional nuances worth exploring and also depending on the administration you may be looking at. In conclusion, it is a great thing to do if you want to do Asia business development in order to try a new market for your business because in the end you will have to do everything for your successful business.

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