EXPANDING YOUR ENTERPRISE TO ASIA - THE UNVEILED POTENTIAL

By David Finlayson, Managing Director, Segovia Financial Services Pte Ltd

The Asia Economic Powerhouse

Rapid Economic Growth

Asia’s economies, led by giants like China, India, and Japan, have witnessed staggering growth rates in the last few decades. While developed nations have matured, many Asian countries are still in their growth phase, offering businesses vast untapped potential. These countries include Indonesia, Malaysia, Thailand and Vietnam.

Favorable Business Climate

Numerous countries in Asia, including Singapore, Hong Kong, Vietnam, Thailand and Malaysia have implemented pro-business policies, tax and investment incentives making it easier and more attractive for foreign enterprises to set up operations. Singapore and Hong Kong have long been established as the favoured platforms to invest in Asia due to their sophisticated infrastructure, banking capabilities, the regulatory landscape, amongst others.

Diverse Consumer Base

Whilst many businesses initially focus on the sheer size and scale of the Asian market, Asia’s diverse demographic offers a myriad of consumer preferences, behaviors, and needs. Companies can diversify their supply chain, catering to new audiences allowing them to innovate and satisfy niche markets, ensuring a broader customer base.

Further advantages for UK investors

The UK’s recent accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has brought about various implications for UK businesses, especially those looking to expand or invest in member countries like Singapore and other Asian nations. The CPTPP is a free trade agreement that also includes several Pacific Rim countries, including Japan, Canada, Australia and Mexico.

Singapore is currently the 15th largest UK export market accounting for approx. 1.7% of total exports worth GBP 14 billion in the four quarters to end of Q1 2023 [source: ONS UK Total Trade]. The CPTPP should accelerate exports not only to Singapore but to other Asean member countries.

Navigating the Asian business terrain and the challenges facing the aspiring entrant

Whilst opportunities and optimism are abound, it’s crucial that foreign entrants into the Asian market understand local culture, economic and regulatory nuances. The business landscape and consumer preferences can vary significantly from the West and between Asian countries. Mistakes at the outset, whether cultural, legal or otherwise can have lasting and significant consequences for the success of the operation.

The Asian market is dynamic and ever evolving. It’s essential to remain agile, adapt to market trends, and continuously innovate to stay ahead of the competition.

Regulatory restrictions

The laws on capital structure, foreign ownership and minimum capital requirements vary significantly from country to country. In some countries, a degree of local ownership is mandatory. This means finding a local partner that can be trusted and will align with your best interests. Some countries require local directors that need to be on the Board. Decisions have to be made as to whether to relocate existing personnel or find local suitors.

Human resources

Most countries have onerous procedures and policies to allow foreign employees to work and reside in the country. These will often involve restrictions on the number of work permits that a company can obtain as well as a lengthy application process. When trying to establish and grow a business in a new market, these uncertainties and delays can have a significant impact on the success of the operation.

Distribution channels

Establishing distribution channels and finding the right partners in the supply chain can be difficult, especially for SME’s or companies that have a lack of brand recognition in Asia. Establishing contacts and the right contacts is a time consuming and difficult process. Profit margins can be easily eroded with bad decisions or partnerships.

Cultural differences

A new market, on a different continent, presents a myriad of cultural challenges. Asia comprises diverse nations with their own histories, languages, tradi- tions and business practices. Consumer behaviour and patterns need to be researched and assessed; business etiquette and religious observances need to be understood and handled with sensitivity and decorum.

Breaking through challenges and optimizing success

Overcoming these challenges requires strategic planning, flexibility, a deep understanding of the local landscape and patience. It’s critical for businesses to be aware of and prepare for potential challenges. Investing in proper research, conducting due diligence and finding the right local partners can mitigate some of these issues and reduce the risks for market entry.

Building a solid network of service providers and partners

In many Asian cultures, business is built on relationships and trust. Investing time in understanding and building these relationships can pave the way for long-term success. Identifying reputable and long term partners who will align with your goals and objectives is often a game of trial and error. Businesses without the right network and financial resources can come unstuck.

Local partners will help advise with human resource solutions, banking relationships, an understanding of cultural differences and being able to filter the noise on the regulatory landscape and help channel time and expenses into the key drivers that will create the biggest impact.

Research and Local Market Understanding

Conducting thorough market research to understand local consumer preferences, competitors, and market dynamics. Collaborate with local businesses or partners who have established networks and understand the business environment. Joint ventures or strategic alliances can help navigate local business customs and regulatory environments.

Conclusion

Asia, with its economic dynamism, technological prowess, strategic location, and cultural wealth, offers unparalleled opportunities for businesses. By understanding the landscape and making informed decisions, businesses can unlock the vast potential that this continent has to offer.

Companies should invest in research, hire local talent, and collaborate with local partners who understand the nuances of the market.

Whether you’re a startup or a well-established enterprise, Asia beckons with promises of growth, innovation, and success. Are you ready to seize the opportunity?

About The Company

Segovia is a multi-jurisdictional corporate service provider helping clients enter foreign markets and setting up single and cross border structures to meet project goals and maximize shareholder returns. An independent and responsive management team with offices in Singapore, Hong Kong and the UK providing corporate, fiduciary, accounting and tax services. As a leading corporate service provider, we deliver transparent, efficient and trustworthy corporate services. Taking time to understand the business needs and objectives and deliver tailored solutions that combine innovation and flexibility. Our global experience, specialist expertise, and deeper understanding of the industry builds lasting relationships with corporate and private clients. Find out more at www.segovia.com.sg.