With a population of more than 600 million and a nominal GDP of $2.31 trillion, ASEAN (the Association of Southeast Asian Nations), made up of Brunei Darussalam, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam, is fast becoming a major economic force in Asia and a driver of global growth.
Economically, Indonesia represents almost 40 per cent of the region’s output, while Myanmar is still an emerging market.
In Singapore, GDP per capita is more than 30 times higher than in Laos and more than 50 times higher than in Cambodia and Myanmar.
ASEAN MNEs AND BUSINESS GROUPS
Large firms in ASEAN play an important role in the rise of intra-ASEAN investments and in connecting the region through their extensive regional investments, business expansion, subsidiary networks, production linkages, sourcing activities, infrastructure development and participation in regional value chains.
Of the 100 largest non-financial ASEAN companies, 77 have operations in other ASEAN countries. The other 23 are purely domestically focused due to the nature of their business (e.g. public utilities or large domestic market services firms), corporate policy to serve the home market and the significant influence of their large home-country domestic markets, which have contributed to their reluctance to internationalize.
Looking specifically at the 100 largest MNEs based in and with subsidiaries in ASEAN, they have expanded significantly in the region during this decade. The number of subsidiaries of these MNEs in the region rose from 198 in 2010 (about two each, on average) to 308 in 2017 (about three each). In addition, in 2010, 30 of the 100 largest ASEAN MNEs did not have a presence in other ASEAN countries but by 2017, all of them had established at least one subsidiary in the region outside their home country. Some 40 per cent had established operations in four or more ASEAN countries in 2017, compared with only 18 per cent in 2010.
Malaysia, Singapore, Thailand and the Philippines are home to more than 90 per cent of the 100 largest ASEAN MNEs. All ASEAN countries witnessed an increase in the expansion of regional operations by these MNEs but Singapore, Myanmar, Indonesia and Viet Nam saw a bigger increase in the number of operations during 2010–2017. Cost advantages, local market factors, natural resources, investment opportunities and business ecosystems (Singapore) played a role in the geographical distribution of the subsidiaries of these ASEAN MNEs.
Malaysia is one of the ASEAN region’s largest economies. Multilingual workforce speaking two or three languages, including English and strategic location due to proximity to ASEAN, ample land and good infrastructure are among the strengths that Malaysia could tap to convince multinational corporations to set up their regional centres here.
Singapore is consistently ranked as the world’s easiest place in which to establish a business; economic and regulatory affairs are highly transparent and reliable and are backed by an efficient and pro-business government.
Indonesia is an emerging Asian giant. It is the largest economy in Southeast Asia and in recent years, Indonesia’s gross domestic product (GDP) has been growing at more than five per cent annually on the back of stable democratic government, open trade and investment policies, increasing domestic consumption, abundant natural resources and a growing skilled workforce.
- Indonesia is home to the world’s fourth largest population with about half of its residents under the age of 30
- Indonesia boasts one of the region’s most rapidly expanding middle-classes, with purchasing power forecast to grow strongly
According to the Forbes report, Vietnam’s vision of economic development focused on offering highly productive, cost-effective labour-intensive expert manufacturing is paying off, driving those record FDI inflows. We see potential trade diversion as US import demand shifts away from China to other ASEAN markets like Vietnam.
If you as foreign companies would like to approach doing business in ASEAN. You should carefully assess the risks and benefits associated with each market because of the region’s diversity. Working with reputable local partners, clients and customers and taking the time to develop deep, long-term relationships will substantially reduce the risks associated with operating in the region.
Bear in mind that business relationships in ASEAN are based on trust and familiarity Personal contacts and networks are therefore important in making business deals.
We at Beyond Borders provides a comprehensive mix of information and customised services to help you do business with ASEAN markets and to understand foreign regulations and business practices.