Through our work at Australia’s National Centre for Asia Capability at the University of Melbourne, it is becoming increasingly clear that some of our Southeast Asian neighbours are more than just a holiday destination and should be on the radar of small and medium-sized businesses looking to export and capitalise on fast-growing economies.
In addition to positive signs of thawing relations with Beijing, which mean many exporters will put China back on their agenda, large Asian consumer markets closer to home are catching the attention of Australian small businesses and start-ups looking for the next wave of opportunities.
From a thriving fintech sector in Vietnam to Indonesia’s emergence as a global powerhouse with a thirst for services and innovation, Australian SMEs need to double down and gain a deeper understanding of these markets or risk missing out on opportunities with our nearest neighbours.
In fact, several economies in Southeast Asia are forecast to grow faster than China, as their growing consumer classes draw business into the regions.
“Thailand is the second-largest economy in Southeast Asia.”
With a population approaching 700 million people and an economy more than twice the size of our own, Southeast Asia offers many new avenues of growth. It’s a good time to explore these opportunities with a fresh pair of eyes.
Here are the top five countries in Southeast Asia worth looking into for business opportunities in 2023.
Vietnam: A flourishing fintech sector and 100 million consumers
Vietnam is a star on the rise. Since opening up its economy, the nation has experienced one of the highest GDP growth rates globally. It has also been one of the big beneficiaries of regional diversification and the ‘China Plus’ strategy many international businesses have adopted. As a result, investment in the country has surged, making conditions ripe for innovation and fueling a booming tech ecosystem.
As Vietnam’s government continues to make the country an easier place to do business, Prime Minister Minh Chinh is prioritising “acceleration of the updating, connecting and sharing of digital platforms and databases, including connecting national and specialised databases with the government’s information and governance centre”.
With a young, upwardly mobile population approaching 100 million people, rapid economic growth and a pool of increasingly tech-savvy consumers who embrace new tech products, Vietnam is emerging as one of Southeast Asia’s most exciting digital and tech markets.
Vietnam’s fintech sector is flourishing. The low uptake of traditional banking means many consumers are ‘leapfrogging’ technologies and heading directly to e-wallet and payment apps. We’re also seeing vibrant, new sectors strengthening across the tech ecosystem, including AgTech, HealthTech, and EdTech. These will continue to attract an increasing amount of interest and investment for new entrants, including start-ups.
Malaysia: An established, trusted testing ground for expansion
Malaysia is often the ideal springboard for Australian companies considering regional expansion in Southeast Asia.
With its strategic location, multilingual workforce and cost-competitive business environment, Malaysia is an attractive destination for many Australian business travelers. Due to its Commonwealth heritage, Malaysia’s legal and regulatory systems will feel familiar to new entrants from Australia, despite the country’s rich and diverse culture. It’s also an easy place to do business in terms of establishing a presence and accessing resources, including human capital.
This may explain why a greater number of Australian companies export to Malaysia than to India, Japan or Indonesia. More than 3800 Australian businesses trade with Malaysia, the majority of which are SMEs.
Many Malaysian consumers know Australia well and have a strong appreciation of our high-quality goods and services, including food, education, healthcare and professional services.
Indonesia: An emerging global powerhouse
With the largest economy in Southeast Asia and the fourth-largest population on earth, Indonesia is an emerging powerhouse. In recent years, Indonesia’s GDP has been growing at more than five per cent annually, on the back of a rapidly expanding middle class, stable democratic government, open trade and investment policies, increasing domestic consumption, abundant natural resources and a growing skilled workforce.
While the trade relationship between Australia and Indonesia is trending upward, two-way trade still sits at less than $20 billion a year, which is low, given that both countries have trillion-dollar economies.
Historically that had a lot to do with a lack of complementarity, as both were resource-based economies competing for industrialised markets. But that paradigm is out of date. A fast-changing Indonesian economy with a thirst for services and innovation is an entirely different proposition from what’s gone before. While the business culture and governance issues often present challenges that need to be navigated, the breadth and scale of Indonesia’s growth trajectory are compelling.
Our combined GDP and populations indicate the potential for a significant uplift in our trading relationship, and Australian businesses will be able to play a big role in this future growth.
Singapore: A $4 trillion hub
Singapore is well-known as one of the most dynamic and business-oriented nations in the world. A small island with limited natural resources, this city-state offers excellent connectivity, world-class infrastructure, high-quality human capital, and a trusted regulatory environment. While Australian businesses will be welcomed in the country, they should appreciate the important role of government, the cost of doing business, and the highly competitive commercial environment they will be entering.
Singapore is Australia’s largest trading partner in Southeast Asia and one of our strongest economic partners. Exporters in service-related industries, advanced engineering and manufacturing, healthcare and MedTech, energy and technology will benefit from our two nations’ strong relationship.
Singapore’s standing as a global financial hub cannot be understated. It draws banks, insurance, wealth-management and investment companies from around the world. Both institutional and individual investors bring their capital to Singapore. The asset management industry currently oversees approximately $4 trillion in investments.
Thailand: More than just a holiday destination
It’s often overlooked that Thailand is the second-largest economy in Southeast Asia. It’s also heavily industrialised, with the industrial sector comprising one-third of the economy. Thailand is a hub for international car brands and manufacturers of electrical appliances, computers, furniture and plastic products. It’s also witnessing an infrastructure boom as the government invests in megaprojects across rail, roads and ports, to boost connectivity.
This is further enhanced by ‘Thailand 4.0’, a government initiative to achieve industrial, economic and digital transformation across the nation. This is drawing in expertise from across the region, providing Australian service providers with an opportunity to participate in this modernisation push.
Thailand’s economy was hit hard by the pandemic, due to the significant role that contact-intensive sectors play in the Thai economy, namely tourism, travel and hospitality. COVID-related travel restrictions resulted in significant job losses. Tourism traditionally accounts for 20 per cent of both GDP and employment. The revival of the tourism sector is set to improve in 2023 and beyond, increasing Thailand’s demand for high-quality Australian food and beverage exports. This is further strengthened by a domestic population paying more attention to what they consume and a large food manufacturing sector that sources ingredients globally, including from Australia.
This article first appeared in issue 40 of the Inside Small Business quarterly magazine
