Why expand your business into Asia Pacific
Why expand your business into Asia Pacific
5th December 2022, 12:35 pm
Asia is home to over 4.5 billion people, making it the most populous continent on Earth with approximately 2/3 of the world’s population living there.
In the last decade it has experienced a technological boom, and is shaping up to be the leading global financial hub. A strong combination of favourable government regulations, enticing tax rates and a growing talent pool have prompted foreign companies to expand their businesses into Asia Pacific. According to the ‘Doing Business’ report published by the World Bank; Singapore, Hong Kong, Malaysia, Taiwan and Thailand are the five Asian countries which are the easiest for foreign companies to do business.
The accelerated economic growth and stability are one of the many reasons why you should consider Asia as your next opportunity to expand abroad.
1. Spectacular economic growth
In the last 60 years, Asia has experienced spectacular economic growth and has become a breeding ground for fast-moving, innovative, and competitive businesses. Since 1960, Asia has become richer faster than any other region of the world.
Of course, this growth has not occurred at the same pace all over the continent. The eastern half of the continent and more specifically China, Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Taiwan, Thailand, and Vietnam have been champions in economic growth.
According to UNCTAD’s World Investment Report 2021 developing Asia is the only region recording FDI growth, accounting for more than half of global inward and outward FDI flows. FDI prospects for Asia are more favourable than the global average, because of recovery in trade, manufacturing activities and a strong GDP growth forecast.
Asia has a very business-friendly environment, especially for foreign investors. Singapore, for example, has an attractive tax regime with the corporate tax rate on taxable income at 17%, and concessional rates on a company’s first S$200,000 of income. The tax on capital gains and dividend income is 0%. All foreign-sourced income is tax-exempt as long as the income is subjected to tax in a country with a headline tax rate of at least 15%.
Foreign investors will have access to a multilingual talent pool and highly skilled personnel with local knowledge. Workers in Singapore are highly motivated and talented due to sound education policies and attractive immigration guidelines. English is widely spoken, enabling a seamless integration for UK businesses. Foreigners can own 100% of the company they set up in Singapore, and registering a business takes a day with just SGD$1 required as capital.
3. Large consumer market
A vast population in Asia also delivers a huge consumer market to companies. Many international businesses seek to expand in Asia simply because it is more profitable to offer a product or service to 263 million customers in Indonesia than the 70 million in the UK.
Although Asian countries tend to be very proud of their products and services, Asian customers love to spend and have a curious fascination with Western products and culture. Interestingly the New Tech Adoption Index (NTAI)1 found consumers in Asia are the most enthusiastic adopters of new and innovative technology products globally.
4. Tax incentives and special economic zones
Across the Asia Pacific region, governments have embraced incentives to attract new business to set up in their country.
High-technology, manufacturing, biotechnology and health services are among the business sectors favoured by the Malaysian government. They are encouraged by tax incentives for certain types of investments into the country.
Thailand supports foreign investors and businesses through its special investment policies that focus on free trade. The country gives special support to companies and activities that promote innovation and technology. Incentive packages include tax reductions and holidays.
Other countries such as Australia offer extremely favourable Research & Development incentives. The R&D Tax Incentive is a program designed to encourage companies to conduct eligible R&D activities in Australia by offering between 38.5% and 48.5% tax rebate on eligible R&D expenses.
5. Low Risk Market Entry Options
The right partners in your business journey will make a huge difference to the potential success of your business when expanding into Asia. Reliable partners in your business such as your distributors, marketing agents and corporate services providers are critical to success.
There may be bureaucratic hurdles to face, and finding a partner that has successfully navigated similar hurdles in the past can be an invaluable asset. Equally, your business model needs to be adaptable to changes in the landscape of the market as those changes occur. Once the right partners are found, communicating with them effectively is vital to ensure the business evolves in the way needed to be successful.
For businesses wanting to access Asia quickly with lower entry costs Employer of Record services are also available. This can be used to give businesses a genuine local presence without the cost and time of setting up a legal entity or access via M&A activity.
We at Acclime help UK business identify all of the advantages of investing in Asia Pacific. We have over 1000 employees across 12 countries and have supported over 10,000 clients to successfully expand into the region.
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