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What Should You Consider Before Doing Business in SE Asia

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What Should You Consider Before Doing Business in SE Asia

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Doing business in South-east Asia is an eye-opening and interesting experience. You would find that the business culture in South-east Asia is relatively different from the West, as there are specific customs and expectations which business professionals are expected to follow, in order for keeping their clients and customers happy.

Rich and dynamic in opportunities, South-east Asia is one of the fantastic places to do business. However, before boarding your Singapore Airlines or Thai Airline flight and kicking off the round of meetings, ensure that you do your homework well: if you wish to succeed, itís crucial you have a proper understanding of the target market.

For any company looking to start a business in the Asia Pacific region, it is difficult to ignore South-east Asia. Considered as one of the worldís key emerging economies, it stays to be the focus for multinationals and investors looking to gain from its huge population of over 620 million and the amplified spending power of its emerging middle class.

An organization wishing to take advantage of this increasing urbanization, the rise of the middle class and enhancements in telecommunications is required to be equipped for the challenges which might lie ahead. While the business opportunities are huge, there are possible hurdles which could frustrate expansion into Southeast Asia and could act as a barrier to achieving business goals. Some of the considerations which every business should keep in mind before doing business in Southeast Asia are listed below:

Distinct Markets

When looking at South-east Asia for business opportunities, you should look at the region as 10 distinct markets, with:

  • 10 currencies,
  • 10 different legal systems and
  • 9 official languages,
  • Different levels of infrastructure.

Each of the market in ASEAN is unique and offers varied opportunities for the foreign companies wishing to expand their business. Unlike markets in Western Europe and Latin America where the multinationals are able to group the countries into broad markets Ė itís not that easily achieved in South-east Asia given the differences in culture, language, and spending habits.

It is advisable for companies to adopt a highly localized, single country go-to-market strategy with the management running out of a global headquarters or centralized regional, like Singapore or Bangkok.

Regulations and restrictions

For corporates used to a fairly straightforward legal and business environment such as those in the UK, the USA, and Australia, becoming acquainted with the various regional and local regulations, forms of brand protection, immigration policies, and intellectual property registration could be a painstaking and time-consuming process. Corruption and bribery is also a material risk which the businesses expanding overseas are required to mitigate, ensuring that their corporate governance covers the business practices in that part of the world.

Most of the ASEAN markets, such as the Philippines, Cambodia, and Vietnam have restrictions with respect to FDI (foreign direct investment), often necessitating the foreign companies to have the local partners as well as the shareholders or for the companies to be screened and approved before commencing their operations. Apart from Singapore, the members of ASEAN are usually more restrictive as compared to the OECD (Organization for Economic Cooperation and Development) member countries, however, this would also depend on the sector youíre wishing to operate into as some of the sectors such as telecoms, fisheries, banking, and transport are more regulated.

Recruitment pitfalls

While the free flow and availability of skilled labor are anticipated as the core objective of ASEAN Economic Community, itís not very likely that the businesses could benefit a great extent from this proposed free flow of skilled labor. Additionally, the Southeast Asian markets have their own, often vague and strict, regulations with respect to the employment of foreign resources.

If youíre planning to hire foreign talent or relocate staff, check whether they would be able to work in-country and the kind infrastructure you require for employing an employee Ė do you require setting up a fully operational office, could you have one or two managers working across multiple countries, and in case so, what would be the individualís tax status and tax liability across such countries.

Finding the right team to help grow your business is challenging in any market. However, there may be additional challenges in South East Asia given the varied levels of education, relevant industry experience, and language requirements.

Frequent return trips

Just as Rome was not built in a day, business relationships usually take a longer time to build in APAC as compared to the West. Most of the Asians prefer building trust and personal friendship through a series of face-to-face meetings prior to confirming any commitments. Hence, if you wish to strike the all-important deal, itís important that you are prepared to travel frequently.

Understanding the significance of cultural sensitivity

One of the important rules of doing business in Southeast Asia is to understand the importance of displaying consideration. It means avoiding actions or situations which could cause embarrassment or discomfort to the other person. For instance, donít refuse the hospitality offered during the meals, or reject any appropriate gift, and be always be careful not to involve in the blame game for faults in public. Failure in understanding their culture could jeopardize prospective business dealings.

Visit your target markets

For truly understanding Southeast Asia you need to board a plane and get out to your targeted markets, meet the potential customers, suppliers, partners and the respective chambers of commerce.

Talk to people living and working there as they could offer you lot of insights on how to take things forward.

Understanding the challenges

The opportunities in Southeast Asia are exciting, however, you must also consider some of the potential challenges and frustrations. Such as:

  • Economic disparity
  • Varying levels of complexity of doing business across markets: You might be dealing with established centers for international business like Singapore or Bangkok and markets which have recently opened their doors to foreign investment, such as Myanmar and Cambodia.

Government assistance for foreign businesses

It is recommended to do the homework for understanding how you could access the market. If a localstartup consultantis required, know and understand their services and their past history before building a business relationship with them.

If you are thinking ofdoing business in Thailandor Singapore, the government could provide you with the relative information you require. For instance, rules and regulations, practical matters and cultural differences. Whatever be your plan ofdoing business in Southeast Asia, you would require the right international contacts for carrying them through. You could use the governmentís mission network for finding new contacts, customers, and partners. The network could advise and help you, offer contacts and open doors for new engagements.

The governments keenly promote the interests of organizations and companies in Southeast Asia Ė by positioning companies and by reducing the trade barriers. The government also assist with local procedures and business issues. Ministries provide a range of financing schemes for helping businesses at every stage of development.

Invest in right market analysis

Assess the market opportunities very carefully. The available target market for most of the foreign businesses entering Southeast Asia is quite smaller than the overall market, and itís crucial to define such market segment, understanding your potential clienteles and competitors, and targeting it thoughtfully.

You need to be selective about markets which you want to enter. Donít follow the herd, use the market intelligence for specifically identifying the best opportunities for your business.

Each market is different from the other and it will not be an intelligent move to assign the same key assumptions for all the markets as a whole, so treat market analysis of every Southeast Asian market separately.

Get help from a local

Planning and preparing by reading is crucial. however, the street knowledge could be as decisive as the book knowledge. Acquainting with a team or person who knows exactly the ins and outs of specific cultures is the bare essential for any project in Southeast Asia. Preferably a person who is both raised in such culture and has also worked alongside the people from the culture you come from, allowing them to understand the differences between the cultures like no other. You can also consider teaming up withstartup consulting firms, however, make sure that you do proper due diligence prior signing any contracts with them. One of the leading startup and business consulting firms in Thailand for over 15 years is startupinthailand, a part of Aditya Group  for a FREE advice and total execution of your project.

Ensure that you receive local insights from ground zero on a continuing basis. It might be easier to do in the mature markets like Singapore, Thailand or Malaysia, but gets tougher when it comes to emerging markets in ASEAN, where most of the activities happen outside the realm of easily available information.

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