01 Apr Roaring into life
Global Opportunity 2015 | UK-ASEAN Business Council
An unrivalled economic diversity and impressive commercial dynamism are key to South East Asia’s economic growth. UK companies must remain ahead of the curve to take full advantage says Ross Hunter, Executive Director at the UK-ASEAN Business Council
With an annual economic growth rate averaging 5%, the dynamic region of South East Asia and the 10 nations that comprise it is celebrating its status as a thriving economic, trading and cultural hub.
With state-provided infrastructure buckling against today’s economic growth which has seen consumption soar, the region’s infrastructure challenges are accompanied by a growing consumer demand for the UK’s education and international commercial acumen.
The UK ASEAN Business Council (UKABC) strives to present real opportunities for UK business in a region that is entering a new era of economic integration.
The advent of the ASEAN Economic Community (AEC) will provide exciting commercial benefits to UK companies who are looking to export to, or invest in, the region as trade barriers within ASEAN are removed.
With the region representing the third largest trading partner to the EU, UK companies at all levels of the supply chain must ensure they remain ‘ahead of the pack’ if they are to take full advantage of the region’s growing economic prowess.
Which markets make up ASEAN?
The 10 states that comprise the region are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Which of these are the largest commercially?
The region boasts an impressive average growth rate of 5%. Given the economic stagnation that has encapsulated other global markets over the past 10 years, the opportunities in the world’s seventh largest economy remain impressive.
One could describe the region as a ‘box of chocolates’ with the 10 economies at vastly different stages of development but all sharing immense growth potential.
The ‘frontier’ markets of Cambodia, Myanmar and Laos are growing above 5%, playing catch-up with the more developed markets of ASEAN.
Indonesia is ASEAN’s powerhouse economy, with its 250m population fuelling consumer demand.
Brunei is in the process of diversifying its oil based economy. Singapore is arguably one of the most technologically advanced countries in the world with a heavy reliance on their external markets.
Malaysia is hot on the digital heels of Singapore with an advanced, developed economy. Thailand is ASEAN’s second largest economy and although growth has slowed, government spending is increasing.
Vietnam and the Philippines have been the darlings of ASEAN over the past couple of years with by far the strongest growth across the region.
At the end of 2015 ASEAN became a trading bloc. Leaders in the region have been quick to stress that the new ASEAN trading bloc, the AEC, will not be an ‘ASEAN Europe’.
Instead ASEAN will be unified through consensus with no political interference, militarisation or single monetary policy.
Its purpose is solely to improve trade relations between ASEAN’s markets which house a population of over 630m people, a sizeable market of potential customers by any standard.
Although the United States and Western Europe remain the UK’s largest export markets, it is predicted that by 2030 over half of the world’s trade will stem from Asia with ASEAN becoming the fourth largest economy in the world. We must therefore ensure UK companies begin to look east and consider ASEAN’s high growth markets.
Are UK companies lagging behind our competitorsin the region?
Other European countries have always had a significant presence in the region, but Japanese and Chinese investors remain present across the whole of ASEAN.
The UK enjoys shared histories with some of ASEAN’s markets, but this is no guarantee of future commercial success. Customers want innovative, quality products and this is where UK companies can excel.
‘Brand Britain’ has never been stronger in ASEAN, with the Union Flag seen on fashion accessories to cars.
The UK government is playing a key role with a number of high level ministerial visits to the ASEAN with David Cameron visiting the region July 2015.
The Prime Minister visited Indonesia, Malaysia, Singapore and Vietnam in four days – an impressive feat, but also politically very important.
It was also the first ever visit of a UK Prime Minster to Vietnam. These high profile visits significantly strengthen the UK – ASEAN relationship whilst installing a confidence in UK businesses that wish to engage with the region.
What is the level of infrastructure in the region?
There is a significant infrastructure spend in the region and an even bigger planned spend.
It’s difficult, however, to indicate particular industrial sectors as the opportunities are so diverse across the region in scale, sector and complexity.
Examples are plentiful, from the construction of numerous dams in Laos to a major rail network currently being implemented from Kuala Lumpur to Singapore.
With its severe congestion, Indonesia alone requires an underground transport system 10 times larger than that of London.
Given the high calibre of UK expertise in construction projects around existing infrastructure, there is significant opportunity for the UK to share its expertise and win business.
How can UKABC help companies engage with these opportunities?
The UKABC is reactive to ASEAN’s opportunities with a proactive outreach programme of events across the UK and supporting webinars.
With 10 high growth markets we are lucky to host a regular flow of delegations to the UK. These government and private sector delegations present their opportunities to UK businesses.
We recently hosted the Indonesian Maritime Minister and, in conjunction with UKTI we offered 10 British maritime companies an interactive session with the minster, something they found extremely valuable and are already in the process of following up.
It is hard to do business with ASEAN from behind your desk, so we partner with organisations such as the London Chamber of Commerce and Industry (LCCI), to take groups of UK businesses to the region to explore opportunities and hopefully return to the UK with new business.
How important are cultural sensitivities when doing business in ASEAN?
Although there are small cultural nuances that one should be aware of, business remains business. This includes shaking hands, sending emails and exchanging business cards.
However, times are changing and the email should not be the only form of communication with a potential client.
Texting (yes the humble text) a potential client is a good way to build rapport and also using apps such as WhatsApp to communicate can result in faster responses.
It’s hard for a UK company not to send the traditional email, but supplement it with other communications and build the relationship. Don’t forget the two ‘FFs’ – Food and Football.
Food across ASEAN is amazing and will form part of any successful business relationship. Football is big in ASEAN –the English Premier League is avidly watched across the region and is normally a good icebreaker.
Are UK companies frightened of engaging with these markets?
The UKABC aims to ‘demystify’ the region, bringing ASEAN to the UK. However, there is no substitute for actively visiting the market and experiencing the commercial culture first-hand.
The difference between operating in Ho Chi Minh City, Bangkok or Manila and European cities such as Paris or Rome is the level of raw energy and commercial drive contained within these emerging economic hubs.
Having visited the region recently, the hunger and drive of the emerging younger generation is incredibly impressive.
Which UK companies are the ‘trailblazers’?
There are smaller companies represented on the UKABC Board that have relished the opportunities the region affords.
‘Adelphi Digital’ is a digital company that has ventured into and subsequently based itself in Singapore, one of the world’s most digitally advanced countries in the world.
It has then used its position as a springboard into ASEAN and now boasts a physical presence in Thailand. Successfully growing, it is currently investigating its next ASEAN commercial adventure.
A number of UK companies have done this in the region– they identify a market to win their first contract and then expand into the wider ASEAN market and beyond.
How will the UK and UKABC role change in next 5-10 years?
The UKABC is based in the UK to raise awareness and present opportunities within ASEAN to British companies. This process will become ever more sophisticated in matching specific opportunities to UK capabilities.
We cannot work in isolation, though, and we have fantastic delivery partners based in ASEAN designed to help.
The UKABC’s partners in ASEAN include the British Chamber of Commerce across the region, which has an excellent business network across all the sectors.
We also work closely with UKTI and the other ASEAN trade and investment promotion organisations based in ASEA and the UK to help British companies gain a commercial foothold.