Asia is a continent of contrasts, with huge disparities in natural resources, business conditions, and cultures across its many nations. However, economic growth and the correspondingly vast business opportunities are something that most of these countries share.
Asia is anticipated to account for around 60% of the world’s economic growth by 2030. The Asia-Pacific region will also account for the vast majority (90%) of the world’s 2.4 billion new middle-class citizens (1). Investing/doing business in Southeast Asia, makes up for a highly lucrative opportunity for foreigners with great prospects of returns.
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Digitalization & Tech Landscape in Southeast Asia
The population in Asia is heavily reliant on technology; it has pervaded every aspect of their life considerably more than in many other areas of the world. In almost every area of digitization, Asian players are ahead of the pack. Furthermore, even in the continent’s poorest economies, such as Cambodia, digitization is speeding up. Asian companies like Alibaba, Tencent, and Baidu, provide a wide range of services ranging from e-commerce to finance and cloud computing.
Asia is also at the forefront of the e-commerce and the fintech sector. Technological advancement also had a huge impact on production and growth, as well as the creation of new employment. Moreover, the proportion of GDP devoted to information and communications technology (ICT) in this continent has grown at a far higher rate than the rest of the world’s economy.
Low Costs of Doing Business in SEA (Southeast Asia)
Minimum wage rates are steadily growing throughout ASEAN nations to keep pace with rising living costs and promote domestic demand. However, several ASEAN countries did not raise their minimum salaries or did not raise them considerably, as a result of the pandemic.
Despite growing incomes, the majority of ASEAN nations’ minimum wages remain substantially lower than those in the world’s wealthy economies. Given the lower minimum wage and skilled labor force, the cost of doing business in Southeast Asia becomes much less as compared to any other continent.
For instance, the minimum capital requirement in Vietnam for setting up a business is lower than in other SEA nations. There are also numerous government incentives in place in countries such as Vietnam, and Indonesia which makes investing in Southeast Asia profitable.
Regional & Economic Stability in Southeast Asia
East Asia has been politically and economically stable for the past four decades. The absence of any major conflicts among SEA nations facilitates Asia’s integration into global supply chains and foreign investment flows, all of which contributes to the continent’s most prominent achievement: the alleviation of poverty for hundreds of millions of people and the emergence of a global middle class that has reshaped the global economy.
Due to rising tensions between the US and China over China’s expanding power projection in the area, US investors have shifted their focus to the next best alternatives like Vietnam. Moreover, the United States maintains a high degree of involvement in Southeast Asia.
Free Trade Agreements Supporting Investment in SEA (Southeast Asia
ASEAN Free Trade Agreement (AFTA)
The Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) is a commerce bloc agreement that supports local trade and industry in all ASEAN nations while also promoting economic integration with regional and international partners. It is one of the world’s largest and most important free trade areas (FTAs), driving some of the world’s major multilateral forums and blocs, such as the Asia-Pacific Economic Cooperation, East Asia Summit, and Regional Comprehensive Economic Partnership.
Vietnam – EU Free Trade Agreement (EVFTA)
The EU-Vietnam Free Trade Agreement (EVFTA) is a trade agreement between Vietnam and 27 European Union member countries. The accords, according to the European Commission, would expand trade while also supporting employment and growth on both sides through:
- Eliminating 99% of all tariffs
- Reducing regulatory barriers and overlapping red tape
- Ensuring protection of geographical indications
- Opening up services and public procurement markets
- Ensuring the agreed rules are enforceable
The culmination of all these points makes Southeast Asia an ideal destination for foreign investors to set their footprints and leverage the untapped opportunities in the market.
Relocation in SEA: Best Countries to do Business
Vietnam’s economic endurance has been demonstrated by a GDP increase of 6.61% in Q2 2021, despite the ongoing Covid-19 epidemic, thanks to an abundance of natural resources, a fast-rising middle class, a growing number of internet users, and several free trade agreements. Furthermore Vietnam is now expected to become silicon valley of South East Asia (source), with one of the highest rates of new tech startups, coupled with significant investments from a government who made it a priority to integrate IT and other tech-related curriculums into the educations system.
To entice foreign investors, Vietnam has permitted 100% foreign ownership of FDIs. (3)
Malaysia has a strong export-oriented industrial base and a high GDP per capita, making it one of the most sophisticated economies in Southeast Asia. The country, according to the World Bank, has one of the world’s most open economies, with a trade-to-GDP ratio of over 130% since 2010. Openness to trade and investment has aided in the creation of jobs and income growth. (4)
The Philippines’ economy has remained robust and resilient throughout the years, making it one of the region’s fastest-growing economies. Several businesses, including finance and insurance, public administration and defense, and agriculture, remained untouched by the COVID-19 pandemic in 2020 and continued to thrive until 2021 (5).
Private spending accounts for 60% of Indonesia’s GDP. A rapidly growing middle class that aspires to a contemporary, worldwide quality of living is fueling this trend. With half of Indonesia’s 264 million people under the age of 30, consumer products, specialized education and training, and innovative knowledge-based services and technology are in high demand (6).
The Singapore government aims to become a worldwide fintech powerhouse, and it has already established itself as an international financial center. The Singaporean government has launched the Smart Nation Initiative to achieve these goals, recognizing that technology is changing and will continue to disrupt the financial industry. It plans to take advantage of the shifting tides in the fintech industry to attract investors.
How Can Cekindo Help?
Investing in Southeast Asia is indeed a lucrative opportunity but it comes with its fair share of challenges. Having company registration professionals, like Cekindo, by your side can save you a great deal of time as well as provide you a hassle-free experience. Cekindo, with its offices in every key country in SEA, provides a wide spectrum of ancillary services related to company registration, like legal consultancy, license and other documents acquisition, tax and accounting, and HR services
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