From whichever economic angle you look at it, Asia-Pacific has a huge potential for companies in the coming decades. Let’s decipher some of these numbers.
In 2020 alone, the GDP of Asia-Pacific was US$31 trillion, which was about 37% of the global GDP. By 2030, the Asian Development Bank predicts that the GDP of Asia-Pacific is expected to hit 60%.
According to Global Partners, post-COVID-19 pandemic saw many administrations in Asia-Pacific act swiftly, earning them the trust of about 65% of CFOs as the best point for global expansion. However, we must say that expanding into APAC is full of challenges, such as culture and currency. To help you out when targeting to expand into APAC, here is a checklist of key factors to consider.
A Checklist for Expanding into APAC
#1: Target Major Markets for Business Expansion
Asia-Pacific is large, covering various languages, time zones, and varying foreign direct investment laws. To seamlessly enter into APAC, it is paramount to take advantage of agreements, especially bilateral trade agreements between the targeted jurisdiction and the home country.
Recently, Regional Comprehensive Economic Partnership (RCEP) has been ratified by countries such as Thailand, South Korea, Singapore, China, Australia, Indonesia and Australia. If you take a closer look at RCEP alone, the involved APAC countries have about 2.2 billion people, which is about 30% of the global population. This makes it the largest bloc in history and the first one that pools together South Korea, China and Japan.
According to RCEP, all products from member countries are treated equally. Therefore, such a free trade pact can make it easy for your enterprise to trade in the entire region without requiring multiple offices.
Furthermore, there is strong government support, which is aimed at helping to accelerate growth in different sectors, such as medical devices and electronics. For example, Thailand is channeling US$43 billion to boost the building of roads, rails, and roads for connecting the eastern Thailand province to the Eastern Economic Corridor. Other industries being supported by the Thai administration include food processing, agriculture, and auto industry.
At Hawksford, our experts are familiar with all the investment treaties and favorable taxes that you should take advantage of. We can also help you to narrow down to the appropriate trade agreements that you can factor in to make informed business expansion decisions.
#2: Ensure to Comprehend the Main Markets for Company Expansion
In APAC, just like other regions, the regulations for investments are different. This can make it challenging to comply with them. For example, a sector like healthcare technology might be a priority niche in one country but a low priority in another.
Another thing that can stand on the way is the cost of compliance. According to Ponemon Institute, a privacy management research organization, non-compliance is very expensive, running about 2.71 times of compliance.
The regulatory requirements for areas such as cybersecurity, data privacy, and emerging demands like COVID-19 measures also differ depending on the jurisdiction.
When you outsource compliance needs to a professional firm, such as Hawksford, it becomes easy to understand the regulatory landscape and define your company’s liability and compliance needs when moving to new markets.
#3: Take Advantage of Local Talent
Skills shortage is one of the merging risks faced by many organizations moving to APAC or global markets. In fact, it outweighs both cloud computing and privacy regulation risks. Industries like manufacturing, financial services, and hospitality are at greater risk (Gartner) of talent shortage.
According to Korn Ferry, a HR consulting firm, talent shortage could easily result in US48.4 trillion in unrealized global revenue. This is why governments and savvy firms are in the race to develop local talent pools.
Take the example of Australia. The country has singled out the space industry as an area lacking in local talents and needs to revamp the availability of qualified talents through STEM (science, technology, engineering, and math) programs. To achieve this, the Hong Kong Polytechnic University and Huawei are organizing regular boot camps to drive interest.
It is crucial to appreciate the extent of the skills that are available in the targeted country to ensure you have the right staff to drive the targeted expansion in APAC.
#4: Make Sure to Understand and Follow Latest Consumer Trends
Although we are finally wrestling down the COVID-19 pandemic, some of the measures that were introduced, such as the use of online services have defined the emerging operating trends that you need to follow. Indeed, the online shift is defining the new way of doing things in many countries. For example, the Southeast Asia market is estimated to hit potential of about US$53 billion by 2023 and grow rapidly to US$ 130 billion by 2025.
According to Akama, a data network provider, there was about a 43% year-on-year growth in internet traffic for one year (start of 2019 to start of 2020). For a company expanding to APAC, this means it is prudent to be digitally ready for the emerging trend.
Even in new markets, such as Indonesia, consumers are very eager to adopt technology for their operations, such as shopping. JP Morgan, one of the leading financial brands on the globe, estimates that e-commerce in Indonesia will grow by about 14%.
#5: Focus on Future Growth
Global business expansion Into APAC can help to power future growth, but you need to be extra careful when getting started. The fast-growing digital economies are opening new opportunities that you can tap. For example, the middle-class in ASEAN is expected to grow and hit 432 million by 2030.
With the advantages of the larger middle-class, companies that can provide individualized customer experience have a better chance of winning a bigger market post-COVID-19 pandemic era.
Hawksford is a fully established business facilitator, helping businesses to enter into new markets and expand into Asia-Pacific. Our professionals also assist you to establish the right business structure and easily take advantage of the neighboring markets through vetted firms.
Whether you only want to test the new market or rapidly expand using a joint venture (JV), M&A or investment project, you can count on us to identify and manage the associated risks and complexities.