Vietnam is a priority market for Greater Bay Area businesses in ASEAN

January 10, 2024 | 14:15
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Vietnam is one of the priority markets for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) to expand sales and outsource production in ASEAN, according to a research report released by the Hong Kong Trade Development Council (HKTDC) and United Overseas Bank (UOB) on January 9.
Vietnam is a priority market for Greater Bay Area businesses in ASEAN

The report – Navigating Connectivity: Exploring ASEAN Opportunities for the Greater Bay Area – indicated that about 85 per cent of businesses in the GBA plan to maintain or grow their sales to the ASEAN bloc over the next three years. Malaysia, Singapore, Thailand, and Vietnam were the top sales markets for expansion-minded GBA businesses, while Vietnam remained the top choice for procurement and production outsourcing.

Overall, the report shed some light on why GBA businesses find ASEAN appealing. The sheer scale of the ASEAN market was singled out by 55.9 per cent of respondents as a key catalyst for their expansion plans. This was ahead of the 49.6 per cent who highlighted government incentives and investment policies and 32.8 per cent which cited enhanced e-commerce access.

The HKTDC-UOB survey conducted in the third quarter of last year took the form of a questionnaire completed by 671 GBA enterprises, supplemented by in-depth interviews with a representative number of member businesses.

The survey found more than 70 per cent of respondents planned to expand in ASEAN in the next three years, compared with 60 per cent in a similar survey conducted in 2021. The number is even higher for those already established in ASEAN, with 96 per cent of such businesses planning to maintain or expand operations over the next three years.

GBA companies across the four surveyed sectors – consumer goods; business, professional, and financial services; real estate, hospitality and construction; and technology, media, and telecommunications – all saw Malaysia, Singapore, and Thailand as having the greatest potential to thrive in.

In terms of industrial goods, GBA businesses considered Malaysia, Singapore, and Vietnam their priority markets. Malaysia’s popularity across companies in the four sectors was considerably higher than in the 2021 survey.

Besides opportunities, GBA businesses regarded navigating local government policies and regulations (48.6 per cent) as the key challenge to expanding their market share within ASEAN, followed by cultural or language barriers (38.7 per cent) and difficulties in obtaining talent (26.4 per cent). This differs notably from the 2021 survey, which identified inadequate infrastructure, difficulties in finding the right local partners, and the increasing cost of doing business as the top three obstacles.

Overall, 53.7 per cent of GBA companies noted that geographic economic integration initiatives, particularly the Regional Comprehensive Economic Partnership (RCEP), were likely to boost their chances of success within ASEAN, followed by digitalisation (51.9 per cent) and cost management, including moving production to lower-cost locations (40.8 per cent).

Most respondents credited the effectiveness of RCEP at streamlining and accelerating trade between the region’s most dynamic economies – including Mainland China, Vietnam, Indonesia, Malaysia, Singapore, and Thailand – as the main reason for its success.

The surveyed enterprises also believed digitalisation had been crucial for the maintenance of economic and supply chain resilience amidst the unprecedented impact of the pandemic. They also viewed it as a key productivity driver, reducing operational costs and facilitating business and investment expansion in the region. In all, 23.2 per cent of companies saw this as a priority for their business, as it is likely to boost their chances of successfully entering the ASEAN market.

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