Navigating regulatory challenges: A guide for businesses expanding across ASEAN

• ASEAN is a diverse region with a patchwork of legal and regulatory regimes for businesses to navigate
• Businesses can look to legal experts and experienced partners to manage the risks and rewards of overseas expansion
• Policy changes can also be a source of opportunity for growing businesses, particularly around sustainability and digital transformation

Rapid digitalisation and the realignment of global supply chains is increasing the importance of the Association of Southeast Asian Nations (ASEAN) to the global economy. HSBC Global Research expects the ASEAN economy to expand by 4.5% in 2024 as higher wages and a growing workforce increase consumers’ purchasing power.¹ Not surprisingly, international businesses are ambitious about capturing growth opportunities in the region. A 2023 HSBC survey of over 3,500 businesses with a commercial interest in at least one ASEAN market revealed that 91% planned to expand in the region.

Despite ASEAN’s increasing economic connectivity, it remains a diverse region with a patchwork of legal and regulatory regimes. In the same HSBC survey, 29% of respondents cited the pace of regulatory change as a hurdle to conducting business in ASEAN.

Businesses looking to access cross-border opportunities need to be aware of different requirements around tariffs, taxation, employment laws and product standards. They must also be ready to adapt to an evolving policy landscape, especially around environmental protection and advanced technology.

With thorough research and guidance from the right partners, businesses can be confident about navigating this complexity and accessing growth opportunities. Here are some practical considerations based on our experience as a leading international bank in ASEAN.

1.Get the basics right

Starting a new business in ASEAN economies can be complicated. It takes an average of 33 days and 13 different processes to start one in the Philippines, according to the World Bank’s Doing Business database. That compares with just 1.5 days and two processes in Singapore.²

As they expand from one ASEAN market to another, business leaders need to ensure they are able to comply with a new and potentially very different set of local regulations, including product licences, employment laws and environmental regulations.

The process of obtaining licenses can be intricate and time-consuming, often requiring multiple approvals from different government agencies. For example, a food and beverage company might need health and safety certifications, import licences, and halal accreditations, depending on the country.

Businesses may also need to take additional steps to safeguard their intellectual property as they enter new markets to ensure they can fully benefit from marketing and distribution efforts and ensure their expansion goes smoothly.

When it comes to finances, establishing a regional treasury centre may help businesses reduce the complexities of operating across multiple markets by centralising banking relationships, managing multiple currencies and streamlining cash management, subject to compliance with local market regulations. Choosing the right location for a treasury centre can be a challenge, and it is important to work with a financial institution with experience across multiple ASEAN markets.

Compliance with local regulations is of course essential. Businesses must be well-versed in the local laws and customs to prevent any legal missteps. The support of domestic legal and tax specialists, as well as industry consultants, can be a valuable investment.

2.Use partners wisely

While the cross-border opportunity may be compelling, the cost of getting international expansion wrong can be high – financially and in terms of a businesses reputation.

Local partners can help mitigate the risks by providing insights into the regulatory landscape and local business practices, including guidance on consumer trends and access to the right e-commerce platforms. Partners can also be invaluable in navigating local government departments and facilitating introductions to key stakeholders. And in specialised industries, partnerships may reduce the time to market by providing access to a skilled workforce without the need for extensive training or a lengthy and expensive recruitment process.

To protect their investment, however, businesses must treat all partnerships with caution. Proper and patient due diligence is essential, and all expansion plans involving joint ventures or acquisitions require qualified legal advice.

Businesses can lean on the networks of tried and trusted law firms, accountants and trade associations in their home bases, or turn to chambers of commerce and government trade promotion agencies, including consular staff, in target markets.

Experienced financial institutions can help businesses. While many local banks have a presence in one or two ASEAN members, HSBC has operations on the ground in the six biggest markets and a track record in Southeast Asia stretching back over more than 135 years. All this leaves the bank uniquely placed to support businesses as they expand across the region.

3.Be alert to policy opportunities

The regulatory environment is not just about compliance. Changes in policies can be a source of opportunity for businesses looking for a competitive advantage.

ASEAN economies continue to expand their network of free trade agreements, giving businesses access to new market opportunities. The Regional Comprehensive Economic Partnership (RCEP), for example, has boosted ASEAN exports of durian – a pungent fruit popular across Asia – since it took effect in 2022. RCEP has also reduced tariffs between the 15 signatories: the 10 ASEAN members, Australia, New Zealand, Japan, South Korea and China.³

As well as RCEP, businesses in ASEAN may be able to benefit from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and a latticework of bilateral treaties, such as the EU-Vietnam FTA. Negotiations are also continuing on the US-led Indo-Pacific Economic Framework and bilateral EU treaties with Indonesia and the Philippines. Staying on top of regional and bilateral free trade agreements can help businesses spot new opportunities to reduce costs in their supply chains or work with new international partners.

Vietnam, for example, has committed to phase out tariffs on European car parts by 2027 and most cars by 2030.⁴

Within ASEAN, policymakers continue to work towards closer economic and financial integration. In September 2023, at the ASEAN Summit in Jakarta, ministers launched negotiations for a digital economy framework that will govern how countries in the region cooperate on digital trade, cross-border e-commerce and digital payments.⁵

Policymakers have also pledged to promote the use of local currencies for cross-border transactions, leveraging the region’s advanced digital payments infrastructure to reduce vulnerability to external factors.

ASEAN’s digital connectivity is also shaping trade policies and helping businesses reduce frictions in import and export procedures. The 10 ASEAN members formally transitioned to an electronic certificate of origin on January 1, reducing processing times and documentation costs.⁶ With digital transformation high on the ASEAN agenda, businesses may be able to leverage new technologies to streamline international processes – such as by automating the documentation required for trade financing.

Sustainability policies can also present opportunities for businesses connected with ASEAN’s green transformation as regional governments push to meet their emission-reduction commitments.

For example, ASEAN governments adopted a Blue Economy Framework in September 2023, with the goal of positioning the sustainable use of ocean resources as an engine of economic development for the region.⁷ The battery storage and electric vehicle industries enjoy preferential policies in many markets. And several regulatory initiatives have also bolstered access to finance for the energy transition, including the publication of the revised ASEAN Taxonomy for Sustainable Finance in March 2023.⁸

One partner for many markets

ASEAN is made up of many markets, creating a complex terrain that must be navigated with care.

As well as depth and breadth of regional experience, HSBC customers can depend on the bank’s full range of business services and solutions for their needs and trade solutions.

The bank’s streamlined digital application process is fast, simple, and globally consistent, regardless of the market or markets where accounts are being opened.

Growing businesses can also leverage ASEAN’s world-class digital payments connectivity through HSBC Omni Collect, which allows businesses to receive customer payments through multiple channels and across countries via a single touch point.⁹

With thorough planning, the right partners and a growth mindset, businesses can mitigate the risks of international expansion in the ASEAN region. By leveraging HSBC’s presence and network in the six largest ASEAN economies, the bank’s customers have one less thing to worry about – and can focus on growth.