How To Expand to the Southeast Asian Market, Including Singapore? Southeast Asian Emerging Markets Business Opportunity Guide - An Analysis of the Economy, Development & Consumption Level of Southeast Asia
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Southeast Asia is a beloved travel destination for many Hong Kong tourists. Apart from its spectacular landscape and affordable food and shopping, visitors are greeted with some form of novelty every couple of years due to the rapidly growing economies in the region. For businesses that have never set foot in Southeast Asia, each emerging market in the region may seem relatively similar, yet they are profoundly different. To fully capitalise on the abundant business opportunities burgeoning in Southeast Asia, foreign companies can first understand the consumer habits and distinct market characteristics of each Southeast Asian country.
Overview of Business Opportunities and Economic Growth in Southeast Asia
With a combined population of over 600 million and a GDP of US$3.3 trillion in 2021, the 10 countries of the Association of Southeast Asian Nations (“ASEAN”) – comprised of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – are the third-largest economy in Asia and fifth-largest globally, following the United States, China, Japan and Germany1.
The development of the 10 ASEAN countries holds global significance. However, given that each ASEAN country's economic development varies greatly, businesses need to consider the location of their business expansion thoughtfully. The International Monetary Fund estimates that in 2023, Indonesia, Malaysia, the Philippines, Singapore and Thailand will expect to grow by 4.3% compared to the 1.2% growth anticipated for developed economies during the same period. In 2021, there was a surge of 42% in foreign investment in Southeast Asia, among which 57% landed in Singapore, followed by Indonesia (12%) and Vietnam (9%). These two latter locations have been seen as hotspots for foreign investors, and they are competitive markets for various imports, ranging from electrical machinery and plastic goods to pearls and precious metals, etc. The gross variety1 demonstrates the ubiquitous business opportunities in Southeast Asia.
Characteristics of Consumer Groups in Emerging Markets in Southeast Asia
In 2022, the total sum of exports from Hong Kong to ASEAN reached US$46.1 billion, with Vietnam, Singapore, Thailand and Malaysia as the biggest export markets in that order1. Looking at the aforementioned economic development indicators, Indonesia has also emerged as a rising market, garnering foreign investment worldwide in recent years. These findings can be attributed to the apparent traits of emerging markets in these countries regarding their demographics and spending habits, including:
1. Young consumer-driven market
Compared to the dwindling fertility rates in developed cities worldwide, Southeast Asia boasts a huge young population. Data from 2022 showed that the majority of the labour force was between the ages of 20 and 55 years old, exceeding 300 million people2. Young populations are more receptive to new ideas and online shopping and are the main driving force of the region's overall consumption. Contrary to the developed world, e-commerce in Southeast Asia is still in the nascent stage - the market is less saturated, where SME enterprises can leverage their strengths to secure a foothold.
2. High penetration rate of online shopping and social media
Led by young consumers, the growth of online shopping and digital industries surpasses other sectors in Southeast Asia. Between 2023 and 2025, the estimated national GPD for Southeast Asian countries is about 5% to 12%. However, the anticipated GPD growth for the digital economy industry reaches 13% to 20%3. The estimated transactions related to online shopping and digital media amount to US$643 billion and US$105 billion respectively3. The leading industries within the sector related to online retail and digital media include e-commerce, transportation and dining, online travel product booking, digital media and financial services3.
By 2030, up to 80% of the population in Southeast Asia will be internet users4. Consumers in Southeast Asia do not only rely on traditional search engines but are also more inclined to search for information on various social media platforms5, making it easier for overseas foreign businesses to reach customers in Southeast Asia.
3. Southeast Asia is one of the regions with the high concentration of overseas Chinese and Chinese diaspora
Southeast Asia is a melting pot of cultures and ethnicities. Generations of Chinese nationals overseas and foreign nationals of Chinese descent make up one of the most predominant ethnic groups in Southeast Asia66. The commonalities rooted in a shared Chinese culture enable companies under Chinese ownership to venture into emerging markets in Southeast Asia and secure a solid presence in the region. Among all the Southeast Asian countries, Indonesia has the largest population of Chinese nationals overseas and people of Chinese descent, totalling over 10 million7.
Consumer Habits of Emerging Markets in Southeast Asia, Including Singapore
Each Southeast Asian country has its own distinct consumer habits, largely influenced by its economic and cultural background. Here are some examples:
● The emerging market of Indonesia - with the largest population in Southeast Asia, Indonesia is also the fourth biggest consumer market globally. Yet, with a relatively low GPD per capita, consumers tend to shop for reasonably priced products8. What is worth highlighting is the growth of the middle-class population in recent years, comprising about 35% of the Indonesian population9.
● The emerging market of Vietnam - embraces new tastes and flavours, and loves products that blend trendiness with practicality. Additionally, with an increasing number of working women, consumers also show a strong preference for fashion and convenience, for instance, packaged food and trendy lifestyle products, etc10.
● The emerging market of Malaysia - possesses a discernible spending power. E-commerce and online shopping are well-established practices: consumers frequently shop online, and purchasing non-essential goods online has already become a habit11.
● The emerging market of Singapore - possesses strong purchasing power, appreciates quality and is generally willing to pay a premium for extra services or pay a higher product price, such as better product quality and sustainable production8.
What Are The Challenges Businesses Face in Emerging Markets in Southeast Asia?
While Southeast Asia teems with business opportunities, starting a business and gaining a solid foothold in an unfamiliar emerging market is anything but easy. Foreign companies have to face a number of challenges, and here are some examples:
● Religious, cultural differences, and language barriers
Each nation in Southeast Asia boasts its distinct religion and culture, which forms different consumer preferences, peak sales seasons and holidays and festivals, etc. These cultural and religious variances pose challenges for foreign businesses. If you are planning to hire local employees in Southeast Asia, it is crucial to respect the culture and traditions of different ethnic groups, as well as local regulations. For example, cater to your employees’ dietary requirements, the need for a prayer room, adjust working hours during Ramadan, etc.
● Infrastructure and logistic challenges
Many Southeast Asian countries are island nations and lack well-developed infrastructure and transport networks. Traffic congestion poses a severe issue12, and many remote areas and villages also require substantial human resources and time to complete the logistic operations. Take Indonesia as an example; often known as “the Land of Thousands Islands”, the nation comprises 17,000 islands. The cost of transporting goods from the city to each island can increase by 10 to 20 times, making logistic efficiency and costs a complex challenge for foreign businesses8.
● Building trust and brand reputation
For foreign enterprises at the beginning of the business, it takes time and effort to win the hearts of local consumers. For example, as the Philippines was once a US colony, western and international branded products are particularly popular among locals8. How can foreign-owned brands then stand out in such a landscape? This is the lesson that no foreign investor can avoid.
Are you planning to explore business opportunities in Southeast Asia and expand your business into top emerging markets in the Southeast Asian region? DBS SME Banking is your best business partner for your business expansion to Southeast Asia, including the Singapore market. Open a business bank account now, and enjoy powerful support for your overseas business at any time.
The above information is for reference only. For further information, please refer to the source and seek appropriate professional advice as necessary.
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