UK companies are right to be excited by the depth and breadth of the opportunities on offer from setting up in Asia, says Dario Acconci of Dunedin-backed Hawksford, but don’t make the mistakes that could see you lose out before you’ve even started.
Tipped by the International Monetary Fund to post economic growth rates of 5 to 7 per cent a year, the markets of Asia are an enticing opportunity. Businesses setting up in Asia are investing in emerging economies that now account for two-thirds of global economic growth. Burgeoning middle-class populations are driving consumer spending higher and the region’s fastest-growing countries are embracing important structural reform.
No wonder British companies are targeting the region. Research suggests businesses in the UK with international activities are more excited about trade with Asia than with any other region – and that they want the UK to prioritise a trade agreement with China following Brexit.
How, though, to establish your business in Asia to give it the greatest chance of success? With close to 50 countries to choose from, where and how do you begin to build a footprint in the region?
These aren’t straightforward questions to answer from 5,000 miles away, particularly given the remarkable disparity in Asia, from the advanced economies such as Singapore and Hong Kong, through the region’s giants, China and India, to its less developed, emerging nations, like Vietnam.
The answer lies within
Ironically, given that you’re thinking about how to develop relationships with new partners in uncharted territories, your first step towards a move into Asia should be to look at yourself more closely. What is it that your business can do that will ensure its Asian business thrives? Without a clear idea of what unique selling points you’ll be taking to market, it’s very difficult to decide which market suits your business best.
For example, does your business’s competitive edge lie in manufacturing? China remains a critical manufacturing base despite its economy becoming more consumer driven. But there are also other markets that offer low cost, competent and accessible manufacturing supply chains.
What if you’re a hi-tech business? Well, again, the most obvious locations may not necessarily be the right ones for you. By contrast, both Singapore and Hong Kong are now working hard to establish themselves as centres of innovation and technology, offering a range of initiatives and support to attract new businesses from overseas.
Finding your customers
With a clear idea of what you’re taking to Asia, you can begin to narrow down the search for a precise location, based on where you expect to find your customers and how you’ll transact with them.
Again, the issues may be more nuanced than you’d realise without doing some detailed research. For example, while China may be an excellent fit for consumer-facing businesses, will you target one particular city or area, or the entire country – which is almost the size of Europe? If the latter, Shanghai might be a good option to ensure the most rapid routes to market.
What if your customers are spread across Asia, or you need to rely on supply chains throughout the region? That might mean there is a case for setting up in Singapore, which is widely regarded as a hub for connectivity, particularly for South East Asia.
Understanding the red tape
Then there are more administrative issues to consider. This isn’t just box-ticking: the diverse legal and regulatory systems in force across Asia could have a huge impact on your business’s prospects, depending on its activities – more supportive regimes could make your business while bureaucracy and legal difficulty could break it.
At the extremes, some countries may simply be off-limits if your business is in a particular industry. Indonesia, for example, has strict rules that limit foreign ownership of businesses in sectors including agriculture, oil and gas, and retail. Other nations aren’t so prescriptive but red tape still represents a significant barrier to doing business.
Looking to the future
Would-be expanders into Asia also need to think about whether prospective locations are stable and sustainable both now and in the future. The civil unrest seen in recent months in Hong Kong, for example, may give newcomers to the region pause for thought while others are taking advantage of opportunities in anticipation that the Hong Kong economy will rebound quickly.
By contrast, Singapore’s determination to attract international businesses has manifested itself in a series of double taxation and free trade agreements with other countries in Asia and around the world. These considerations should be weighed as you think about the ease of doing business both now and in the future.
Pre prepared and get the help you need.
With so many variables at play, taking specialist advice on your move into Asia, rather than trying to second-guess the region, will prove invaluable. Look for support from a partner who can help you with both the practicalities of doing business in Asia and with building for growth.
For example, Dunedin and Hawksford worked together to help Dunedin’s investee company Global Processing Services (GPS), a leading financial services and technology business, expand into Asia for the first time. We helped them settle on Singapore as their destination of choice and were able to help with the process of incorporating the business there, offering support with an employment pass application and company secretarial services. But we were also able to introduce GPS to key local institutions and agencies, to help it make new connections in a market it did not know.
Such support is vital. Asia really does offer UK businesses enormously exciting opportunities. But if your business is new to the region, there’s a danger of being caught out by the unknown, from cultural sensitivities to legal barriers.
Moreover, many people underestimate the competitive and demanding nature of the Asian business environment. Investing in Asia requires resilience, excellent talent and patience - as it can take some time for results to materialise. Look too for a great degree of control, especially when engaging in Joint Ventures; it wasn’t too long ago that it was common to hear horror stories of industrial investments made in China that weren’t profitable as the local partners diverted businesses for their own advantage.
Don’t miss out on the Asian opportunity by moving into the region in the wrong way, unprepared or with the wrong mindset.
Dario Acconci is the managing director of Hawksford for South East Asia
If you’re looking to grow and expand your business into South East Asia, Hawksford is here to help.
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