Southeast Asia and China have emerged as the two leading destinations for overseas expansion as 83% of businesses in Asia are keen to expand abroad, according to a recent report.
The latest Business Outlook report released by United Overseas Bank (UOB), which surveyed more than 4,000 small and medium-sized enterprises (SMEs) in the region as well as large enterprises within Asia, found more than four out of five businesses are planning to expand overseas within three years.
Companies in Indonesia, China, Thailand and Vietnam are looking to grow their revenue and profits internationally, but the report revealed there is hesitation to expand overseas among respondents in Hong Kong, Malaysia and Singapore.
About half of the respondents said Singapore was an important country in Southeast Asia for business expansion, followed by Thailand (45%) and Malaysia (45%). Almost 80% of respondents said the current business environment in the region is positive.
Meanwhile, only one in four companies want to expand beyond Asia, according to the report.
By sector, companies in industrial, oil and gas (88%) showed the most interest in expanding overseas, followed by enterprises in wholesale trade, tech, media and telecom.
Most businesses cited the need for more support to venture overseas, as some of the challenges include a lack of in-house talent, difficulty in finding the right partners to work with, and a lack of legal and regulatory compliance and tax support, the report noted.
"Businesses in China want connections with industry peers and access to business analytics and insights. Companies in Southeast Asia, on the other hand, said they demand more tax incentives and sustainable financing options," said Eric Lian, head of group commercial banking at UOB.
Roughly 60% of SMEs surveyed indicated their supply chains have been affected by ongoing geopolitical tensions.
"Companies are feeling the heat from the impact of global inflation on the cost of their supplies and challenges in procuring suppliers," the report noted.
Close to 30% of respondents are trying to diversify their supply chain, investing in building stronger relationships with their suppliers, and tapping into data analytics to help with their decision-making.
According to the study, around 90% of businesses believe sustainability is important, but only 45% have implemented sustainability practices. Over half of SMEs in Thailand and Vietnam have adopted sustainability practices, while only 38% of SMEs in Singapore have put such practices in place.
When implementing sustainability practices, respondents said their greatest concern is the increased cost to customers and the impact it would have on their profits and revenue.
"As a leading bank in Southeast Asia, it is our responsibility to engage our stakeholders across the region and step up our efforts to help firms in their transition to sustainability," said Mr Lian.
"We will continue to simplify access to sustainable financing for firms looking to strengthen their environmental, social and governance capabilities and grow their business."
