4 in 5 Singapore SMEs eye expansion in the ASEAN

Four in five Singapore-based small and medium-sized enterprises (SMEs) are looking into expansion in the ASEAN region, an HSBC-commisioned report by the Singapore Business Federation (SBF) revealed.

2 in 5 firms target Indonesia for further expansion.

The study found that SMEs are particularly keen on expansion in Indonesia. Amongst respondents, 81% said they already had operations in Indonesia whilst 37% expect to further expand there in the next two years.

SMEs wanted to expand to the ASEAN country because of potential customer demand (82%), overall investment climate, and the ease of building relationships (60%). Meanwhile, neighbouring country Malaysia is the next priority of Singapore SMEs after Indonesia in terms of expansion.

“The growing consumer base is already well recognised by Singapore corporates, the report shows that many businesses are looking to double down on the region’s consumer and demographic dividend,” HSBC Singapore head of commercial banking Alan Turner said.

The study cited a World Bank Report which noted that ASEAN’s economy is expected to grow by 6.2% in 2018 as compared to global GDP growth of 3.7%. This trend is poised to continue over the next five years with average annual growth expected at 5.2%.

Also in the list of expansion targets for SMEs are Vietnam and Thailand. The two countries, alongside Indonesia, are ‘favourable’ for Singapore SMEs mainly due to their transparent foreign investment regulations.

“Singapore is good news for Vietnam given Singapore is already one of Vietnam’s largest source of investment,” the report noted.

Singapore injected about US$2.41b in Vietnam in 2016, making the Lion City as the third largest source of foreign direct investment (FDI) of the country. By 2017, the Vietnam Trade Promotion Agency revealed that Singapore’s FDI in Vietnam reached $41b.

Despite Singapore SMEs’ enthusiasm to expand into the ASEAN, they also expressed concerns they have faced as they ventured into the region. These include uncertain economic and political conditions, lack of knowledge on market opportunities and customer requirements, and the difficulty in getting permits and licences.

The study garnered responses from about 1036 firms from November 2017 to March 2018.