A HSBC-commission report by the Singapore Business Federation shows that over three quarters of companies here have plans to expand. The survey sought to gain deeper insights on Singapore-based companies’ interest in ASEAN. 1036 companies responded to the survey conducted from November 2017 to March 2018.
According to the World Bank, ASEAN’s economy is expected to grow by 6.2% this year as compared to global GDP growth of 3.7%. ASEAN is also poised to maintain this growth momentum, averaging 5.2% annual growth over the next five years.
The desire to be part of this regional growth is reflected in the survey results. Of the companies polled, 77% indicated that they have plans to expand their businesses beyond Singapore. Among these companies, 77% indicated that they were very keen to expand into ASEAN. The growth potential and opportunities for new market access are the biggest motivating factors for expanding into ASEAN.
Indonesia is a clear favorite destination for internationally oriented Singapore-based companies expecting to expand. Of the surveyed companies, 81% said they already had operations in Indonesia (the highest except for Malaysia at 87%) and 37% expect to further expand there in the next two years (compared to 36% for Malaysia).
Pull factors towards Indonesia for Singaporean companies include the potential customer demand, overall investment climate and the ease of building relationships. Favorable and transparent foreign investment regulations are also attractive to Singaporeans, as they are in Vietnam and Thailand.
Barriers to Entry
Notwithstanding the very strong interest in ASEAN expansion, companies expressed concerns over some of the obstacles they faced when venturing into the region, including uncertain economic and political conditions in ASEAN, the lack of knowledge on market opportunities and customer requirements, and difficulty in getting permits and licences as potential barriers to expanding into the region.
And despite the general positive sentiment towards the ASEAN Economic Community (AEC)/ ASEAN regional economic integration and the perceived benefits of the ASEAN Free Trade Agreements (FTAs), the lack of accessible, clear information about these initiatives is a major obstacle in terms of companies benefiting from these agreements.
Alan Turner, head of commercial banking, HSBC Singapore, notes that Singaporean businesses recognise ASEANs growing consumer base and “are looking to double down on the region’s consumer and demographic dividend.”
“The biggest risk we see is actually that of unfulfilled potential,” Mr Turner added.