Countries in Southeast Asia were formerly best known for attracting holiday-makers and globe-trotting backpackers from around the world thanks to the huge number of gorgeous beaches, variety of exotic cuisine, and the low costs associated with exploring the region. In recent years, however, the area that includes Myanmar, Brunei, Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam has been dubbed a “high-priority strategic region” thanks to several factors that make doing business in this region look more and more attractive as the world economy continues to develop and shift.
While there are various pros to trading in this corner of the globe, there are also some cons that an up-and-coming business owner should consider before deciding to set up shop in the region. Let’s take a look at some of the advantages of trading in this region.
Robust and Growing Economies
Trade in this region is assisted by the Association of Southeast Asian Nations (ASEAN); a regional grouping whose aim is to promote political, economic, and security cooperation among 10 of the 11 countries in Southeast Asia. Since its formation, ASEAN has gained importance as a trade bloc and it is now recognized as the third-largest in the world.
ASEAN is responsible for the cancellation of all import and export duty taxes on items traded within the 10 member countries as well as several free trade agreements entered into with other Dialogue Partners, namely Japan, China, India, the Republic of Korea, India, New Zealand, and Australia. These agreements have played a role in allowing for economic growth and development that is expected to exceed the global average for the foreseeable future. In 2019, the estimated total gross domestic product (GDP) of the ASEAN region was approximately 9.34 trillion dollars, a significant increase from previous years, which is reflective of the thriving and expanding economies of the member countries.
Thanks to the efforts of the World Bank, who created the Ease of Doing Business index, and the Doing Business project, it is easier than ever before to make an educated decision on where to set up your new business.
According to the 2020 Doing Business index, in terms of starting a business, three out of the 10 ASEAN countries rank in the top 25 with Thailand ranking 21, Malaysia ranked at 12, and Singapore coming in behind New Zealand in second place. This score comprises several factors including the time required to set up the business, the number of procedures that need to be followed, and the cost and paid-in minimum capital requirements for small to medium-sized businesses to both start up and then formally operate. It is also indicative of what challenges business owners can expect in these areas.
Now for some of the disadvantages of setting up shop in this part of the world.
High Cost of Living in Developed Cities
The cost of living in one of the most famous cities in the ASEAN, Singapore, can prove one of the biggest cons to trading in this area. A sovereign island city-state, Singapore has gained infamy for being one of the most expensive cities to live in globally thanks to a tendency towards high rent prices, high monthly utility bill costs, and high cost of education for expats who often choose to enroll their children into international schools rather than the subsidized public schooling system. While it no longer tops the list of most expensive cities to live in, an honor given to Hong Kong, it does rank number five on the global list and leads the Southeast Asian region by a huge lead.
One of the biggest hurdles in setting up a business in the ASEAN region is the challenge of hiring skilled labor, as each region in the ASEAN has their own set of oftentimes strict regulations concerning employing foreign resources.
Finding the right team to grow your business is essential but, thanks to companies such as New Horizons, one of Asia’s leading corporate and HR administration specialists, business owners don’t necessarily have to live in the country they wish to trade in to run a successful business. New Horizons, which can be found at nhglobalpartners.com, allows businesses located around the world the ability to hire staff and embark on various business-related tasks in Singapore without having to set up a legal entity in the region, which costs money, time, and commitment. Taking charge of the legal responsibilities relating to employing staff in Singapore, the employer of record (EOR) becomes the primary employer of your new employees on paper, ensuring that your business is compliant with the day-to-day regulations regarding local labor laws as well as other general HR practices.
Setting up a business in any part of the world, including your hometown, comes with its own set of challenges. However, if you are looking to expand to a global audience, you could do a lot worse than the ASEAN region which not only boasts a booming economy, but also gives businesses access to an estimated 622 million consumers.
