While the overall business sentiment may be muted amidst the global economic downturn caused by the COVID-19 pandemic, the ASEAN economy continues to see potential growth. The continuously tense US-China trade relations have led some US firms to shift their attention from China to other parts of Asia, largely benefiting the Southeast Asian market. 

But where in this region should such companies be focusing their next major plans and why?


ASEAN attraction 

According to a 2019 survey by the Singapore Business Federation (“SBF”), 82 per cent of Singaporean businesses already have a presence in other ASEAN countries, often in industries like infrastructure, finance, logistics, healthcare and education.

The survey also revealed that Singaporean business owners consider Indonesia, Malaysia, Myanmar and Vietnam good for regional expansion.

One advantage for Singaporean companies investing in Malaysia, for instance, is the updated Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income between the two countries, which entails withholding tax rates on interest and royalties being reduced to 10 and 8 per cent respectively (down from the previous 10 per cent  to 15 per cent), among others. Local firms can also enjoy such similar benefit in Myanmar, Thailand, and Indonesia.


Business Opportunities in Thailand, Malaysia, Indonesia, Vietnam and Myanmar 

  • Thailand

As Southeast Asia’s second-largest economy, Thailand has seen inflation rates of below 5 per cent for nearly 10 years, with a growing consumer economy and well-developed infrastructure continuing to attract Singapore investments.

At the same time, the Eastern Economic Corridor (“EEC”) development plan involves several large-scale infrastructure projects associated with airports, seaports and high-speed rails, making the market favourable for Singapore-based logistics firms able to offer manufacturing support.

These developments also extend to special economic zones (“SEZ”), industrial estates, and provinces that have the country’s lowers per capita income.

Furthermore, the country’s Board of Investment (“BOI”) offers both tax and non-tax incentives for foreign direct investments that target Research & Development and innovation in order to increase the nation’s competitiveness. Depending on the type of activities a foreign company in Thailand engages in, it can enjoy three, five or eight years of corporate income tax exemption.

  • Malaysia

Currently in 12th place on the World Bank Group index for ease of doing business, Malaysia’s progress in replacing its sales tax with GST (“Goods and Services Tax”) and developing an online tax payment system has helped to keep the company attractive to Singapore-based companies.

The country’s GDP rose by over 4 per cent annually for seven consecutive years from 2011, hitting S$445 billion in 2017. As Singapore’s second-largest trading partner, total trade between the two countries reached S$108.2 billion that same year, accounting for 11 per cent of Singapore’s total trade and 13 per cent of Malaysia’s trade.

Malaysia’s diversified economy means Singaporean businesses can capitalise on abundant opportunities in healthcare, tourism, manufacturing, retail, education and transport industries. Furthermore, the government’s Economic Transformation programme has seen the development of initiatives surrounding human capital development and service sectors, offering promising prospects for Singapore-based companies.

Such companies can also take advantage of Malaysia’s nine free trade zones, which include the Bayan Lepas Free Industrial Zone in Penang, Kulim Hi-Tech Park in Kedah, Pasir Gudang Free Trade Zone and Port of Tanjung Pelepas Free Zone in Johor, and the Port Klang Free Zone in Selangor.

  • Indonesia

According to a 2019 survey by the Singapore Chinese Chamber of Commerce & Industry (SCCCI), Indonesia is among the top locations for Singapore-based businesses planning regional expansion. In the 73rd spot on the World Bank Group’s index, the Country’s government reforms in recent years have abolished the minimum capital requirement for SMEs to establish a presence there.

In addition, applications for company registrations and trading licences have been consolidated to simplify the process of setting up shops in Indonesia. An online system for taxes has also been created to make filing and payments easier.

Indonesia’s steady demand for infrastructure across major industries such as transport and utilities and telecommunications has opened up opportunities for Singaporean companies to collaborate with local industries.

In January 2020, Grab partnered with Hyundai to launch GrabElektrik, its first electric car service, in Indonesia to support the government’s goal of boosting electric vehicle (“EV”) adoption in the country, aiming to have two million EVs on the road within the next five years.

Since then, Hyundai IONIQ Electric cars have been made operational at Terminal 3 of the Soekarno-Hatta International Airport, under the GrabCar Elektrik option.

The Indonesian government has also outlined a clear national development plan to continue attracting foreign investments, with infrastructure and manufacturing key focus areas of its transformation strategy towards Industry 4.0.

To this end, the government is seeking to improve maritime connectivity by building and upgrading infrastructure in 477 locations in Indonesia, and investing in automation and data exchange within the manufacturing sector.

  • Vietnam

At 70th place on the index, Vietnam has seen steady yearly growth of over 6 per cent over the last 10 years, following higher domestic demand, rising export profits, and consistent economic improvements by the country’s government.

According to the Economist Intelligence Unit (“EIU”) Country Report in 2018, Vietnam’s GDP will likely remain strong until 2022, at an annual average growth of 6.2 per cent. Singapore companies have plenty of private sector investment opportunities in Vietnam, thanks mainly to the booming tourism and updated investment and real estate laws.

For instance, Vietnam’s Investment Law was recently changed to reduce business and investment conditions under the Ministry of Industry and Trade (“MOIT”) from 1,216 to 675, making it easier for private companies in industries such as e-commerce, electricity, and food retail to invest in Vietnam.

Furthermore, the country’s relatively relaxed real estate laws have made it easier for overseas business owners to purchase land and property in Vietnam. At the same time, more state-owned companies are in the process of being converted to publicly listed organisations in Vietnam, which is also seeing a higher number of public-private partnerships and significant growth in key major manufacturing sectors.

  • Myanmar

While Myanmar ranks the lowest among ASEAN countries at 165th place on the index, recent improvements in its regulatory environment for businesses have made it more attractive to Singapore-based companies.

According to Enterprise Singapore, the country’s GDP growth is projected at 6 to 9 per cent on the average, and the number of middle-income consumers with higher purchasing power is expected to increase to 10 million this year.

The Government has rolled out initiatives to liberalise the banking sector and open up the telecommunications sector, as well as introduced new legislation to set up a cohesive legal framework for both local and overseas investors.

It also encourages the privatisation of state-owned enterprises and downstream manufacturing to boost the industrial sector, and has established 30 industrial zones throughout the country over the past 25 years. To further develop this sector, there are currently plans in place to set up more industrial zones in 11 of Yangon’s 12 townships.

Myanmar’s Investment Law now places foreign investors on the same level as domestic investors, offering corporate tax exemptions of three to seven years, as well as introducing an online registry for businesses to register themselves and file documents.

Singapore is Myanmar’s second-largest investor after China, with a cumulative investment of S$26 billion. Myanmar’s Information and Communication Technology (“ICT”), hospitality, property development, and utilities sectors have provided vast business opportunities for Singapore.


Digital development 

In addition to the aforementioned ASEAN countries, there remain lucrative opportunities throughout the entire region, due in part to technological advances.

The widespread use of the Internet and mobile devices has led to the exponential growth of the region’s digital economy — the latest e-Conomy SEA report pegged its value at US$100 billion, with expected growth of up to US$300 billion by 2025. This would make ASEAN the world’s largest digital economy, after the US and China.

The Report also stated that e-commerce was a major contributor to this growth, spelling continued opportunities for not just e-commerce operators but also those providing payment, logistics, insurance, and warehousing services for e-commerce businesses in the region.


Infrastructural advantage 

With its reputation as a smart city and the ever-increasing infrastructural demands of its neighbouring countries, Singapore can easily tap into the many infrastructural opportunities across the ASEAN region.

Rapid economic development, along with urbanisation, has brought with it increased demand for infrastructure. According to the Asian Development Bank (“ADB”), ASEAN’s infrastructure investment requirement will hit US$3.78 trillion in the next decade.

These demands will also give rise to the need for finance, logistics and manufacturing sectors, maximising opportunities for Singapore-based firms to be involved in regional infrastructure projects. For instance, the need for infrastructure in sectors such as transport, telecommunications, utilities and energy in countries like Indonesia and the Philippines means Singapore-based firms can collaborate with local industries and organisations to meet these needs.

The ASEAN Free Trade Agreement (“AFTA”) also presents numerous benefits for Singapore companies investing in ASEAN, including the elimination of tariffs for all product lines, back-to-back shipment of goods, third-party invoicing of goods, market safeguards that provide a more secure operating environment for service suppliers, and protection for investors and investments in the region.


Forward to 4.0 

Industry 4.0 has become a common goal for Indonesia, Thailand and Vietnam, with each country’s government having a strategy to give local manufacturing industry a competitive advantage.

At the same time, the manufacturing sector in Vietnam and Thailand has been growing swiftly — the former’s electronics, clothing, furniture and textiles manufacturing sectors have been thriving, while the latter’s automotive and precision engineering precision manufacturing sectors are quickly developing.

Singapore-based firms should take advantage of these favourable conditions by collaborating with local manufacturers to provide services that are in high demand, such as robotics, automation and IoT (“Internet of Things”).

Wherever your company’s opportunities may be and whatever its priorities, having the right guidance can make overseas expansion a relatively pain-free process. CorpServe, for instance, can help to facilitate incorporation of businesses in ASEAN and beyond.

To accelerate and strengthen your ASEAN business ventures, find out what RSM Singapore has to offer, as well as extensive details on specifics of the region.  

To find out more about RSM's ASEAN Desk, please contact our specialists: