This checklist identifies key factors for companies to consider when planning their international business expansion into Asia-Pacific
International business expansion into Asia-Pacific
By most economic indicators, Asia Pacific offers the greatest economic potential in the coming decades.
In 2020, Asia Pacific's total gross domestic product (GDP) was $31 trillion, accounting for 37% of the world's GDP (source: International Monetary Fund). The region is also expected to contribute 60% of global growth by 2030, according to the Asian Development Bank.
Post-pandemic, the swift action of governments in the region and economic resilience has earned the trust of 65% of CFOs as their choice of destination for international expansion plans, according to a survey by HR technology platform Globalization Partners.
However, expanding a business into a new region can uncover a broad swathe of challenges – from language to culture to currency.
This checklist identifies key factors for companies to consider when considering international business expansion into Asia Pacific.
Checklist: Expanding into Asia-Pacific
- Focus on key markets for business expansion
- Understand foreign investment regulations
- Harness local talent
- Follow local consumer trends
- Fuel for future growth
#1: Focus on key markets for business expansion
Asia Pacific covers many different languages, time zones and foreign direct investment policies.
One way to facilitate your entry into this region is to take advantage of bilateral or multilateral trade agreements between your home country and the target market.
Covering 15 countries and 2.2 billion people or 30% of the world's population, RCEP is the biggest trade bloc in history and the first to include China, Japan, and South Korea – three of the four largest economies in Asia.
Another major implication from this deal is the "rules of origin" where parts from any RCEP member nation are treated equally.
Such free trade agreements can open new markets for expanding businesses without needing to open many offices across the region.
Strong governmental support in growth industries is also directed at accelerating growth in sectors as electronics, automotive and medical devices.
For example, the Thai government is investing $43 billion in the Eastern Economic Corridor – boosting air, rail, and road connectivity in the eastern provinces of Thailand to decentralise growth. The Thai government has also highlighted industries such as next-generation automotive, advanced agriculture, and food processing as the kingdom's future growth engine.
At Hawksford, our team of experts are familiar with favourable tax and investment treaties in the Asia Pacific region. We can help identify relevant trade agreements that can help you make informed decisions for your international business expansion.
#2: Understand foreign investment regulations
Regulations on foreign direct investment differ vastly across the region, making it difficult to stay on top of compliance across countries.
A single industry, such as healthcare technology, may be a top industry sector for one country but a low priority for another with many layers of bureaucracy that may drag international business growth.
In addition, the cost of non-compliance can hinder your business expansion plans. According to a report by privacy management research centre, Ponemon Institute, the cost of non-compliance can run 2.71 times highest than the cost of compliance.
Regulatory hotspots such as data privacy, cybersecurity and even COVID-19 measures tend to be unique for each jurisdiction and may be fluid depending on the local situation.
By outsourcing your compliance requirements to a firm like Hawksford, your company can better understand the local regulatory landscape and map out your liabilities and compliance posture as the business expands into new territories.
#3: Harness local talent
When expanding into new markets, skills shortage is the top emerging risk that global organisations face – outweighing privacy regulations and cloud computing.
According to research firm, Gartner, industries such as financial services, manufacturing, consumer services and hospitality sectors indicate high levels of concern in this area.
This talent shortage may lead to about $8.5 trillion in unrealised annual revenues as estimated by HR consultancy Korn Ferry.
Savvy organisations and governments are looking at developing the local talent pool.
Australia, for example, has identified the space industry as one area which needs local talent with appropriate STEM (science, technology, engineering, and math) programmes. Huawei and Hong Kong Polytechnic University is organising artificial intelligence boot camps to nurture young talent in this fast-growing field.
Singapore has been able to punch above its weight by attracting entrepreneurial talent. The small city state ranking the highest in Asia Pacific in 2019, for enabling and attracting entrepreneurs.
It is important to understand the depth and breadth of skills available on the ground to ensure that you can have the right mix of home country and local talent to fuel your international business expansion.
#4: Follow local consumer market trends
As the COVID-19 pandemic continues to linger, stay-at-home measures and movement restrictions has accelerated the growth of e-commerce. And this marked transition online to live, work and play can be seen even more in digitally ready Asia Pacific.
Data from content delivery network provider, Akamai, found that there was a 43% year-on-year growth in internet traffic from the first quarter of 2019 to the first quarter of 2020 in Australia.
What does that mean for organisations expanding into the region? Being digitally ready is imperative to meet this "new normal".
Even in nascent markets like Indonesia, the younger consumers are eager to use their smartphones to make purchases online. Financial institution J.P. Morgan estimates a 14.8% annual growth in e-commerce in Indonesia
as digital natives start earning and spending for the first time.
Fuel for future growth
International business expansion into Asia Pacific can fuel future growth but requires careful consideration when setting up your operations.
The growth of the digital economies across Asia Pacific presents ambitious companies with unprecedented opportunities. The emerging middle-class, set be 472 million in 2030 in ASEAN, is one of the key drivers shaping Asia's fastest internet economy.
Given the benefits of having a large middle class, businesses that are able to provide a unique and individualised customer experience will stand a better chance of tapping into the most dynamic nation beyond COVID-19 pandemic.
Hawksford is an established facilitator of market entry and business expansion into Asia-Pacific.
Our experts enable you to enter, establish and structure your business in new and diverse markets, through our alliance of vetted partner firms.
Whether you are testing a market, or expanding at a rapid pace through joint ventures, investment projects or M&A, we help you manage the risks & complexities of business expansion.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.