ASEAN in Focus: Economic Outlook, Insights & Opportunities

The center of the global economy continues to gravitate east, accelerated by unprecedented GDP growth and the rise of foreign direct investment (FDI) throughout the Asia Pacific (APAC) region. In particular, the growth of FDI has been a key driver of success for the emerging economies of the Association of Southeast Asian Nations (ASEAN), which are the focus of this special report.

Originally founded as a political bloc of five countries in Southeast Asia, ASEAN has evolved into a 10-member economic powerhouse. The ASEAN Economic Community (AEC) is now home to some of the world’s fastest growing markets, where hundreds of millions of people have joined the ranks of the middle class. ASEAN’s rapidly rising middle class is driving domestic consumption and fueling the demand for more discretionary and aspirational products and services – with a focus on quality, convenience and choice.

In the upcoming decades, ASEAN will write a new growth story. Bolstered by AEC’s economic integration agenda – as well as the recently passed landmark Regional Comprehensive Economic Partnership (RCEP) – the region’s rich resource reserves, established manufacturing base and rapid industrialization will continue to attract investors from around the globe.

With Tricor Group’s ASEAN in Focus: Economic Outlook, Insights & Opportunities, we hope to briefly introduce each market and provide inspiration for tapping into bourgeoning opportunities.

Why ASEAN?

ASEAN has been traveling on a remarkable journey over the past four decades. After weathering the 1997 Asian financial crisis, ASEAN's growth rate stood at 6% in 2000. Even through the 2008 global economic crisis, the regional economy continued to grow steadily from 2000 through 2019, before the COVID-19 pandemic, at an average annual growth rate of 5.7%. With a combined gross domestic product (GDP) of almost US$3.2 trillion in 2019, ASEAN collectively is ranked as the third largest regional economy in Asia and the fifth largest economy in the world.

Despite a global slowdown triggered by the COVID-19 pandemic, ASEAN continues to be an attractive region for foreign businesses and investors, particularly because of its strong economic growth and burgeoning middle class and consumer markets. The International Monetary Fund projects that ASEAN’s economy will grow 5.6% in 2022 and 6.0% in 2023, outpacing the projected growth of global GDP.

Overview of ASEAN Markets

The ASEAN markets each present their own unique challenges and opportunities. If your business expansion strategy includes one or more of these markets, it is critical to understand some background information on the economic climate, tax codes, labor landscape and culture.

Brunei

Small & Wealthy, Gradually Offering More Opportunities for Foreign Investors

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Cambodia

One of the Fastest Growing Economies in Asia

Indonesia

Low Costs, High Potential

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Laos

Motivated Workforce & Favorable Tax Environment

Labuan, Malaysia

Becoming a Market of Choice

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Malaysia

Making Inroads as a Hub For MNCs

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Myanmar

Poised to be the World's Next Low-Cost Manufacturing Hub

Philippines

Quality Manpower & Valuable Resources

Singapore

An Open, Pro-business & Diversified Financial Center

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Thailand

The Land of Smiles for Global Investors

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Vietnam

Emerging as Asia’s Newest ‘Tiger’ Economy

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RCEP: Opening New Horizons for ASEAN

Tricor-Group-Releases-2021-Asia-Pacific-Trade-Report-Focusing-on-Impact-of-RCEP-and-COVID-19-Recovery

On November 15, 2020, in the midst of the global COVID-19 pandemic that has widely disrupted global trade flows, leaders from 15 APAC countries gathered for a virtual ceremony to sign a commitment to the Regional Comprehensive Economic Partnership (RCEP), essentially connecting about 30% of the world’s population as part of the largest trading bloc globally.

For ASEAN, the RCEP could serve as a counterweight to the emerging trade protectionism that has accelerated amid COVID-19. At Tricor, our experts in global trade expect RCEP to steer both global and domestic businesses within ASEAN to re-shore or near-shore their supply chains.

Not only does RCEP assert trade openness with ASEAN’s border, it can also deepen the region’s connectivity with mainland China, South Korea and Japan. In particular, these three countries are global heavyweights for the electronics, cars, textiles and garments industries – upon which ASEAN is reliant. Placing each of these markets within a trade pact means ASEAN can assert its supply chain relevance across these sectors in ways it never has before.

RCEP is also projected to drive critical domestic regulatory reforms in key areas such as labor laws, investment liberalization, cybersecurity, cross-border data rules and intellectual property protection. Such reforms effectively foster material commercial incentives for trade and investment from member partners, a trend which will only accelerate as global supply chain dynamics continue to shift.

Business Incorporation

Tricor Group Commits to Responsible Business Framework with the Release of Its Inaugural 20202021 Environmental

One of the first steps when expanding into any new market is registering a business or entity. This process varies greatly across the markets of ASEAN and, in some cases, may entail complex requirements and degrees of foreign language interaction. ASEAN offers foreign entities and investors various options for incorporation, each with their own set of parameters, stipulations and requirements.

Because of the potential complexities across these markets, it is advised that you consult with a partner like Tricor Group which has local expertise and connections to ensure a seamless business incorporation process. A consulting partner can offer advisory on the selection of business structures available with reference to your specific business needs and local requirements of governments. They can also assist on registration with government authorities and subsequent bank account opening.

Tax Considerations

While there are cultural, language, economic and geographic overlaps between the markets of ASEAN, each has its own unique tax code with different reporting requirements. Even within these markets, there may be local taxation requirements from the city or territory. There have been efforts by ASEAN governments to simplify the tax codes, but there are still complexities for reporting and keeping accounting records, with requirements and policies subject to change.

Investors looking to expand across this region may find it challenging to streamline accounting procedures on their own and instead may benefit from consulting with a partner who has local tax expertise. An effective partner can help develop tax strategies and furnish reporting packages that comply with requirements and maximize deductions and incentives for the business.

It is critical to be aware of the tax requirements in ASEAN. Furthermore, it is certainly worth hiring a trusted partner to do the heavy lifting while you focus on your core business operations.

Labor Environment

Your company is only as good as the people who work for you. Arguably, the single most significant determinant of a company’s success in global expansion endeavors will be the quality of the staff, partners, advisors and consultants it hires. Building the right team to help grow your business is challenging in any market and in ASEAN there are varied levels of education, relevant industry experience and language skills to consider. Plus, the complex regulatory environment that exists in some cases makes hiring knowledgeable, local consultants a necessity.

Some local markets and sectors also have strict restrictions and regulations on employing foreigners and this will inevitably impact your hiring strategy. Whether you’re planning to relocate staff, hire expats, hire foreign talent or hire locally, you’ll need to know the necessary procedures to onboard staff.

Working with local partners with ample expertise and experience is critical when entering a new market. Partners that are experts at operating in your target market can provide everything from translation and localization services to efficient distribution of your products – even networking and referral opportunities. Having access to experts who know the ins and outs of doing business in your target market will help streamline your company’s expansion into the diverse and evolving ASEAN markets.

ASEAN: The Lever for Mainland China's Regional Plans

Beijing, China cityscape at the CBD.-357948-edited

Mainland China’s greatest challenges are in rebalancing its reliance on foreign investment, maintaining a labor-surplus workforce and responding to a shifting geopolitical landscape. Now that mainland China has reached the ranks of a middle-income country with the world’s largest consumer class, it will need to depend less on foreign investment and more on innovation and productivity growth.

At the same time, to avoid a detrimental shift from a labor-surplus to a labor-scarce society, mainland China will need to focus attention on its aging population and invest in programs that nurture a younger workforce. More than ever, a strong social safety net, education and training programs will be important in helping the Chinese workforce keep up with the demands of the global economy. This may shift some attention from domestic manufacturing to other investments.

With this shift, manufacturers in mainland China may look to pivot from sourcing or producing goods domestically and turn to other markets. Thanks to rising costs in mainland China, trade tensions and pandemic disruptions, international manufacturers from the US have been diversifying some production away from mainland China for several years to ASEAN neighbors. Like these other manufacturers, ASEAN countries will likely be a target destination for Chinese businesses looking for production and sourcing outside of mainland China.

Notably, mainland China’s ambitious economic development projects, such as Belt and Road Initiative and the Greater Bay Area, also require enhanced global interconnectivity and cooperation. ASEAN has already benefited from strong investment from mainland China in the last decade through both equity and non-equity modes such as international infrastructure contracts. In some ASEAN member states (e.g. Cambodia and the Lao People’s Democratic Republic), FDI from mainland China has accounted for the largest source of investment for consecutive years.

In the volatile times MNCs are facing in today’s business landscape, ASEAN remains a relative bright spot on the map and a guiding light for mainland Chinese investors searching for growth opportunities. Given its geographical proximity, a growing consumer class, advancing infrastructure and strengthened trade ties, ASEAN is expected to experience a surge in investments from mainland Chinese MNCs in upcoming decades and beyond.

Singapore: The Gateway to ASEAN for MNCs

Tricor Axcelasia Expands into Singapore with New Governance, Risk & Compliance (GRC) Solutions

As MNCs flock to tap into ASEAN’s success, they will need a launchpad for expansion, operation and investment. Singapore, one of the founding members of ASEAN, has long earned high marks from global investors for its economic stability and business-friendly environment. These favorable conditions make Singapore a strategic gateway for mainland MNCS from around the globe wishing to set up shop or strengthen their market position in the ASEAN region.

Seizing Opportunities & Overcoming Challenges in ASEAN

While the ASEAN markets offer tremendous opportunity, any business entering these unique, complex economies should be aware of the potential difficulties, missteps and obstacles along the way.

Developing a strategy for entering an individual ASEAN market or multiple markets
Overcoming language and cultural barriers
Understanding the government’s role in business as this varies across the markets
Registering your business and furnishing the required upfront capital, documentation, resources and personnel for the selected business structure
Complying with labor, payroll and hiring policies
and more...

HOW TRICOR GROUP CAN HELP IN ASEAN

Making that first step into any of the markets in ASEAN is intimidating for most companies and investors, with an almost endless series of potential pitfalls to be negotiated along the way. Despite regulatory obstacles and cultural barriers, the rewards of successfully navigating this vibrant region are immense.

Whether you are looking to set up shop in ASEAN or streamline and expand your current operations, Tricor can help you.

Download our guide and arrange a meeting with one of our specialists to learn how Tricor’s global knowledge and local expertise helps organizations looking to expand their footprint into or across ASEAN, and beyond.

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Lennard Yong
Group CEO
Tricor Group

The passage of the RCEP trade bloc is a defining moment for global trade and a pivotal development that will inevitably redirect FDI flows in the months and years ahead. Notably, the maturing economies of ASEAN serve as a linchpin for activating the deal. At Tricor, we are keeping a strong pulse on how this landmark agreement is triggering new global trade trends, bolstering pan-Asian supply chains and expanding opportunities for foreign investors. Tricor’s specialized local expertise and dynamic connections reinforce our status as the ‘go-to’ partner for enterprises seeking to expand throughout ASEAN, APAC and beyond.

Wendy Wang
Group CFO & COO
Tricor Group

While COVID-19 has ushered in a wave of trade protectionism around the globe, the RCEP envisions a pan-Asian trade network and embraces the belief that enhanced market openness promotes greater economic prosperity. One of the most promising features of the deal is that, for the first time ever, emerging economies in ASEAN are now linked to the developed powerhouse economies of China, Japan and South Korea through one inclusive trade agreement. The RCEP nearly ensures intra-Asian trade, which is already cumulatively larger than APAC’s trade with North America and Europe combined, will continue to serve as a growth engine for the global economy.

Gary Tok
Group Chief Commercial Officer
Tricor Group

With the recent passage of the historic Regional Comprehensive Economic Partnership (RCEP) – along with the region’s rich resource reserves, established manufacturing base and rapid-fire industrialization – ASEAN will continue to attract investors from around the world and serve as a growth engine for the global economy. Our objective for this guide is to share critical business intelligence, drawing from our team’s firsthand expertise and insights. We look forward to supporting businesses in establishing and expanding their businesses across ASEAN.

Sunshine Farzan
Group Head of Marketing & Communications
Tricor Group

Headlines of the past two years have been dominated by one omnipresent story: COVID-19. Few could have anticipated the distress and ubiquitous disruption the pandemic would present to economies and businesses around the world. But Tricor Group’s recent experiences on-the-ground suggest that, despite roadblocks and looming uncertainties ahead, emerging opportunities abound for global businesses. In particular, recently passed economic policies and the activation of the RCEP are opening new doors in ASEAN. By highlighting these emerging prospects and prescribing possible steps forward, Tricor’s ASEAN in Focus: Economic Outlook, Insights & Opportunities can help business leaders and investors stay ahead of the curve in today’s shifting landscape.

Cecelia Wong
COO & Director
Tricor Brunei

Brunei’s footprint in global trade has been increasing in recent years, especially following new trade policies and favorable taxation schemes. Furthermore, Brunei’s adoption of the RCEP signals the country’s strong commitment to nurturing ASEAN’s post-pandemic recovery efforts, strengthening trade linkages and expanding horizons for global businesses. With opportunities for FDI continuing to grow, Tricor Brunei is excited to help clients tap into flourishing market opportunities.

Francisca Gunawan
Co-Managing Director of Accounting & Corporate Secretary Services
Tricor Indonesia

Recent years have brought a significant boom to Indonesia’s economy, placing it among the top investment climates in ASEAN and APAC. A large domestic market of growing middle-class consumers, highly competitive labor costs and an established export-oriented manufacturing sector make Indonesia an attractive choice for global investors looking to expand their operations in ASEAN. At Tricor Indonesia, we offer customized solutions to help businesses succeed in Indonesia’s vibrant, everchanging business landscape.

Yeap Kok Leong
CEO & Managing Director
Tricor Malaysia / Labuan

Supply chain diversification has been in the spotlight in recent years, due to rising geopolitical tensions, pandemic disruptions and ongoing global shortages. Significantly, the RCEP helps to streamline the necessary global supply chain shifts that can help businesses problem-solve and thrive. Thanks to the deal’s focus on digitization and smart manufacturing, businesses in Malaysia and Labuan will be incentivized to develop more innovative and competitive products. As ASEAN’s footprint in global supply chains deepens, Tricor Malaysia / Labuan is committed to supporting our clients in their cross-border endeavors throughout the region.

David Ong
CEO
Tricor Singapore

The RCEP is greatly enhancing cross-border trade, which is at the very heart of Singapore's open and export-oriented economy. Notably, companies in Singapore are enjoying greater flexibility in their sourcing strategies and now have access to a larger pool of suppliers throughout ASEAN and APAC. At Tricor Singapore, we are committed to helping global and local enterprises pivot their business plans so they can capitalize on these emerging opportunities and collaborate with regional partners to explore new markets.

Dyland Mah
CEO
Tricor Thailand

Investors in Thailand can expect enhanced trade opportunities throughout the region as the RCEP eases tariffs, promotes regulatory transparency and reduces compliance costs associated with customs processes. But due to the scale and diversity of the RCEP’s coverage, its implementation is proving to be cumbersome for some businesses. As a leading business expansion specialist, we look forward to working with our clients to overcome impending challenges, fill gaps and thrive in Thailand.

Lim Chor Ghee
General Director
Tricor Vietnam

The RCEP is particularly significant for the future of trade and investment in Vietnam, as the deal is expected to drive critical domestic regulatory reforms in key areas such as labor laws, investment liberalization, cybersecurity, data security and protection of intellectual property. In response to mounting opportunities and evolving needs, Tricor Vietnam offers a full suite of expansion solutions to our clients as they navigate the local landscape and explore how the RCEP may impact business decisions.

ASEAN in Focus: Economic Outlook,Insights & Opportunities