China or India?
Why there are good reasons for choosing SOUTH EAST ASIA.
A significant number of companies lose money, time and energy through choosing the fashionable destinations of China and India. DR. KLIPPE Consult explains why you would be better concentrating on the huge market in SOUTH EAST ASIA. Find out why it is easier to get involved with one of the 10 manageable countries in SOUTH EAST ASIA.
1. Why are China and India so attractive?
With populations of 1.3 billion and 1.2 billion people respectively, China and India represent an enormous growth market, even if we forget that a large part of the rural population does not participate in the growth at all. Although there is no doubt that these are important markets for the future, they do have their adversities. In China there is the language barrier to overcome, in India the caste system. What both countries do have in common is that they have completely different cultures compared with Europe. Understanding the countries is difficult in itself and on top of that you have the sheer size. It can be easy to get lost very quickly. It takes more than a single agent, trading partner or point of support to handle these countries. An organizational structure is needed, and that costs money. Even more so with the substantial burdens placed on costs through the diversity and the distances involved.
2. Smart companies have been involved in South East Asia for a long time
Successful medium-sized companies and certainly major industrial enterprises have long been established in South East Asia. These companies often started their involvement years if not decades ago, and are now reaping the fruits of their labour as their long-term involvement and dependability are rewarded. These are the reasons you are now asked to take the first steps into these South East Asian countries.
3. "ASEAN" or "Asia"?
The English word Asia refers to the continent; "ASEAN" is the union of states established to increase mutual economic, social and political benefits. The European Union is its role model. It was founded in 1967 in Bangkok and its 10 members are the State of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
4. ASEAN 2015: The largest free trade area in the world is formed
The preparations have been made – it should be completed in 2015. That is when China, India, Japan, Korea and the 10 ASEAN states will form the largest free trade area in the world, with no customs barriers for goods and services. The question then arises of who will impose import restrictions and demand customs duties on and from whom. By that time the population in Asia will have increased again compared with Europe. Based on 3 billion people currently, an increase of only 1 % per year over the next 5 years means an additional 153 million people. That is equal to the populations of Germany and France combined. The momentum caused by this growth will have a significant influence on the food sector, social systems, energy and water needs, education and wealth; in short, the entire industrial sector and service area. Those companies that are not present on this Asian market by then and do not know the ropes will find it very difficult to continue seeing the returns that they do today.
Engineering services, IT processing, administrative work and also architectural services have already been outsourced by many countries such as the USA to South East Asia in the name of "Business Process Outsourcing" (BPO). The Philippines is a very high-profile country for these services. This process will intensify and anybody who is not active in this field will simply find it more expensive to continue to provide certain services. Manpower is still cheaper in Asia, with quality improving. Following the introduction of the world's largest free trade area, at the latest, nobody in Asia is likely to import more expensive goods from Europe or elsewhere if it is not absolutely necessary. Have another think: will your products be able to be sold then? Or would it not be better to start building a presence in SOUTH EAST ASIA?
5. Which countries are most suited to my company?
Small and medium-sized enterprises (SMEs) generally do not have the resources required to carry out well-informed market research. And yet these resources must be found, otherwise the financial risk is too great. Some are drawn to the advantage of not needing an interpreter since the official language is English, others to the cheap labour or location. Many companies look for an outlet for products manufactured in Europe, while others want to manufacture in South East Asia for the market there and then later for the free trade area. An answer to this admittedly important question can unfortunately only be given after extensive examination.
The short distances between the countries are an important aspect. It is what we are used to in Europe: from Jakarta to Kuala Lumpur, to Manila, from there to Singapore, continuing to Ho Chi Minh City, Hanoi, Bangkok and from there to Brunei, on to Borneo and back to Cebu. And each of these can be done in 1 to 3 hours. After landing in Singapore you are normally in your hotel or office within 45 minutes at the latest. Try doing that in Munich or London or Paris.
6. "South East Asia" - conclusion
With around 600 million inhabitants, South East Asia as a location offers closeness in distance between the 10 Member States, linguistic advantages and a clarity that is not a feature of larger countries. As an integral part of the world's largest free trade area which will become a reality in 2015, South East Asia offers outstanding opportunities for establishing and expanding your business. With a focus on one single country it is easier for you to carry out business transactions that remain manageable and profitable. The South East Asian region offers unique opportunities for European companies through the number of its inhabitants, continuous growth, as well as the eagerness of its people to share in the prosperity.
© DR. KLIPPE Consult 2010