Updated: Nov 1, 2022
The ASEAN economy, with a population exceeding 680 million people, is relatively large. A fast-growing company with global ambitions may find Southeast Asia a good place for expansion. Foreign businesses looking to capitalize on growth in Southeast Asia must be mindful of the complex environments they will face and plan accordingly.
In this article, we'll look at five challenges faced by foreign companies entering Southeast Asia and how to deal with them.
1. Laws and regulations can be complicated
There are many differences among Southeast Asian countries regarding business and employment laws. Establishing a business in one country may be quite simple, but it can require strict adherence to regulations. Language barriers may also pose a problem.
It is important to get legal and tax advice before entering a new market to avoid non-compliance and fines or penalties.
2. Language differences and cultural misunderstandings can pose challenges for international businesses
Southeast Asia has many different languages and dialects, not all of which are widely understood. English is generally a common language, but fluency varies widely from country to country. The politics and cultures of the region are also different, so what works in one place may not work elsewhere.
It's often wise to hire a local team of experts when entering new markets. For example, you might hire someone who speaks the local language and understands the local culture.
3. Competition among local businesses is increasing
As the economies of Southeast Asia continue to grow, local businesses are gaining more capital and have better access to advisory services, enabling them to compete more effectively with foreign businesses.
Because of this, foreign businesses should expect to encounter more complex local competition and analyze the local environment before entering markets in developing countries. Foreign companies can also face disadvantages when competing with local Asian competitors, as the latter often bring products to market much more quickly. When choosing a location, finding a knowledgeable local industry expert can help you refine your competitive strategy.
4. Local business licenses are required
In many Southeast Asian countries, even industries with low barriers to entry such as restaurants and bars are required to obtain locally issued business licenses.
Licensing requirements apply to certain sectors of the economy to protect consumers, such as travel, banking, finance, and insurance. Manufacturing and agriculture are also regulated in some countries.
To start a business in another country, you must obtain licenses. Hiring an in-country specialist will make it easier to get the necessary licenses and deal with government officials.
5. Labour laws
To operate a business in another country, you will have to become familiar with its laws regarding worker protection, registration of a company and its operations, social security and insurance obligations, minimum pay, etc. Violating labour laws can result in costly penalties.
Acc Po (Singapore) has the experience, knowledge, and expertise necessary to help you enter the Southeast Asian market. We can help you address many of the challenges you may face when expanding your business into Southeast Asia. Learn more today.