I will never forget a time as a young employee when the roaring waves of the Asian market were merely focused on Hong Kong and Singapore.
Indeed, expanding in Asia is not for the faint-hearted. Entrepreneurs and business leaders need to possess the courage to explore opportunities sometimes in far fetched areas.
Today, Asia has the world’s largest GDP. The Asia-Pacific region will soon account for 90% of the 2.4 billion new middle-class people entering the global economy.
Moreover, the growing markets of China, India, and Southeast Asia will account for the majority of global business expansion, prompting new revenue opportunities.
While these projections depict tremendous consumption growth, the reality is that consumption patterns will vary by market behavior and growth rates are influenced by local demographics and culture.
What are the factors to consider before expanding in Asia?
Adapt to Local Preferences
Local markets have an impact on multinational companies. The Asian market is open to new products and services if they consider the diverse culture, values, and sentiments of its population.
Most Asian countries can relate to Western standards and sensibilities. However, to boost your potential of capturing Asian consumers you must adapt to their local preferences aligned to their cultural heritage.
Check the Infra
Local infrastructure and funding are significant factors to consider in the country to expand your business. The availability of resources and other raw materials for your operations will greatly affect the bottom line of your endeavors.
Southeast Asian countries such as Malaysia, Vietnam, the Philippines, and Indonesia are aggressively expanding their infrastructure projects to attract foreign investments. They’ve opened up major industries like transportation, telecommunication, and construction to uplift their economies.
On the other hand, Singapore and Hong Kong have already better infrastructure than their Asian neighbors, so expanding in these developed countries comes with a higher price.
Cultural and Language Barriers
As you expand to new markets, you may find it challenging to overcome cultural and language barriers.
Many Asian countries are fluent in English like the Philippines, Vietnam, Malaysia, Hong Kong, India, and Singapore. Some others have more scattered propagation of the English command. Anyway, the western influence on these Asian nations gave them a natural orientation toward international trade, tourism, and business exchanges.
Furthermore, building long-term business connections requires excellent communication skills and a genuine interest in your Asian partners. There are also different business etiquettes in meetings and social gatherings that you need to know when expanding in Asia.
Skilled Local Workforce
Having a local workforce that knows the ins and outs of the business is the ideal scenario for global expansion.
Asia, as we all know, has a highly-talented and globally competent talent pool that can be an asset for your expanding enterprise. Singapore has Asia’s most highly skilled workforce and offers multinational enterprises seeking skilled workers some distinct benefits. Malaysia also has a strong entrepreneurial spirit that encourages residents to be creative.
Indonesia, Vietnam, and the Philippines, on the other hand, will be more in line with your goals if you are merely searching for a low-cost labor force. Moreover, Thailand is also a viable option for your Asian expansion. Developing countries like Laos and Cambodia continue to welcome foreign investors as well.
However, it may take longer to build your local entity in Asian countries, given that they vary in business regulations and labor laws.
The help of Employer of Record (EOR) service providers and Professional Employer Organization (PEO) can be critical for global businesses to jumpstart their plans without dealing with regulatory compliance.
These service providers will act as the legal employer of your workforce. They will assist your HR teams to comply with payroll and other statutory duties to abide by local laws.
Vietnam has been named one of the world’s fastest-growing economies, not only in Southeast Asia. Furthermore, Vietnam’s GDP increased by 2.6 percent year on year.
Vietnam was placed 70th out of 190 economies, with a score of 69.8. It has adopted two of the most significant efforts in the areas of business capital and taxation.
In contrast to many other nations, Vietnam does not need a minimum capital commitment in most economic sectors. This has resulted in fewer entry barriers and cost-effective, adaptable investments around the country. Moreover, when it comes to taxes, Vietnam’s General Department of Taxation has greatly enhanced its IT infrastructure, allowing firms to settle their tax obligations much more quickly and easily.
Indonesia has consistent economic development. It’s the largest economy in Southeast Asia and one of the world’s top 20 economies.
The government of Indonesia has decreased the corporate income tax (CIT) rate from 25 percent to 22 percent for the fiscal year 2020-2021, which is good news for all investors. The CIT rate will be cut even more in the future, to 20% in 2022.
Indonesia ranked 73 out of 190 economies in terms of ease of doing business in 2020, with an overall score of 69.2. A foreign investor may now anticipate the full business registration procedure to take between 1and 1.5 months. New enterprises that are created in Jakarta are no longer required to file Company Domicile (SKDP) (SKDP).
The Philippines is Asia’s fastest-growing economy. It has a unique blend of Western and Eastern traditions. It’s also a key entry point for international investors, making it an appealing destination for entrepreneurs looking to establish or develop their businesses.
Through the Ease of Doing Business Act, TRAIN Law, and Revised Corporation Code, the Philippine government is working towards fostering a more dynamic business climate for global entrepreneurs that can decide to go through BOI or PEZA for incorporation.
Furthermore, to encourage greater foreign investment in the Philippines’ developing regions, certain tax incentives have been implemented.
Foreign enterprises do not need to be concerned about high labor expenses because the Philippines’ typical compensation rates are substantially lower than in other regions.
Malaysia has long been a popular investment destination and is one of Southeast Asia’s most developed countries. The Asian Development Bank anticipates a robust 6.5 percent growth for this nation. Although Malaysia’s economic outlook and investment prospects have been bleak in 2020, the view for the future remains promising.
Malaysia’s infrastructure is well-positioned to service international businesses. Multinational firms can easily distribute their goods and services to locations all over the world. The telecommunications infrastructure is one of the most developed in the region, enabling a range of local and international communication services. Malaysia has highway access connecting the country to Thailand in the north and Singapore at the tip of the peninsula.
Moreover, English language proficiency is widespread among the populace. The Malaysian workforce provides all the necessary abilities to run a successful business and is also among the most productive.
Olivia Yu has decades of experience in the Human Resources industry. She’s the Regional Director for Asia Pacific of a famous international HR company. Olivia’s international experience inspires her to write articles about human resources and global staffing.