![](https://www.cmgassets.com/s3fs-public/styles/article_node_main_image/public/2023-09/pexels-pixabay-269724.jpg?h=a0def058&itok=JHmsdvV4)
Int’l businesses target ASEAN for supply-chain connectivity versus consumer market
Growth in sales for the region is expected to climb 23.2% in the next 12 months.
International businesses from nine major economies are increasingly optimistic about their growth prospects in Southeast Asia (SEA), but are more likely to dive into the market due to its supply-chain connectivity.
Global businesses anticipate that sales in the region will grow by 23.2% over the next 12 months, up from 20.1% in the previous year, research commissioned by HSBC Commercial Banking showed.
This growth rate is significantly higher than the anticipated gross domestic product growth in Southeast Asia, reflecting growing confidence in the region among international companies.
The HSBC Global Connections survey also reveals that businesses from countries geographically closer to SEA, such as those in the rest of Asia Pacific (APAC) and the Middle East, have a more advanced presence in SEA and greater ambitions for regional expansion compared to their European and American counterparts.
Respondents from APAC, especially China, are more likely to significantly increase inorganic growth in SEA by 2024 compared to respondents from Europe, such as Germany (45%).
While there are regional differences, overall, respondents from all markets expect increased M&A activity in SEA over the next four years.
Companies already present in SEA plan to prioritise growth in the markets they are familiar with.
Singapore (36%) is the top choice for growth among current markets, followed by Malaysia (27%) and Thailand (24%). Singapore's enduring appeal as a regional business hub and the financial centre continues to attract businesses.
ALSO READ: Hong Kong’s business scholars target top finance employers for work-life balance
Indonesia and Malaysia are the most popular choices for companies planning to expand into a new ASEAN market over the next two years. A significant number of firms without a presence in Indonesia or Malaysia plan to enter these markets during this period.
Businesses primarily see ASEAN as a supply chain connectivity hub. Key attractions include a skilled workforce, a growing digital economy, and competitive wages.
However, talent is both an attraction and a challenge, with the cost of training and the lack of skilled personnel identified as top challenges for businesses seeking to digitise their operations.
“The cost of training (36%) and lack of skilled personnel to drive implementation (also 36%) are identified as top challenges for businesses seeking to digitise their operations in ASEAN. Also, the ability to hire talent with the right level of expertise is the top challenge to becoming more sustainable in the region,” said the report.
Further, respondents identify e-commerce (31%) and digital payments (28%) as technologies in which ASEAN is leading the way, reflecting the widespread adoption of digital platforms and mobile wallets in the region.
Companies from APAC and the Gulf Cooperation Council countries are ahead of their European and American counterparts in terms of organic growth, supply chain development, and pursuing M&A activity in ASEAN.
They also make greater use of Free Trade Agreements (FTAs) to increase trade with ASEAN.
The survey was conducted online between 25 July to 2 August with 3,509 businesses from nine different markets namely China, India, UK, France, Germany, US, Australia, Hong Kong, and GCC countries.