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Article

14 min read

Doing Business in Southeast Asia: A Comprehensive Guide

Global expansion

Author

Jemima Owen-Jones

Published

November 30, 2023

Last Update

July 17, 2024

Table of Contents

Key considerations for business growth in Southeast Asia

The benefits of expanding your operations to Southeast Asia

Employer costs and employee benefits across the region

Success stories: How Deel helped customers expand across Southeast Asia

Grow seamlessly in Southeast Asia

Key takeaways
  1. According to the British Chamber of Commerce, Association of Southeast Asian Nations (ASEAN) countries are projected to become the world’s 4th biggest market by 2030.
  2. In 2022, the APAC region ranked no.1 as the fastest-growing region hiring from global geos, with the Philippines being the second-hottest country to get hired from.
  3. Singapore ranked second among the top countries by the number of organizations hiring, while Thailand positioned itself as the fastest-growing country by the number of workers hired there.

Key considerations for business growth in Southeast Asia

Thanks to a sizeable population (over 650 million people), developed talent pools, and elaborate VC networks, Southeast Asia is one of the most favorable regions for business growth today—not just to hire from but also to reach new customer bases and enter local markets.

For example, Singapore has established itself as a hub for high-growth digital organizations looking to expand or get funded in the region.

Before you dive into this complex market, here are some key factors that may impact how you do business within Southeast Asia.

  • The high diversity of the region means that each country speaks its own language and operates within a unique legal framework
  • Localization is crucial in every sense, from legal documentation to adapting your business strategy to the specific country
  • Successful collaborations rely on building relationships first and meeting with people face-to-face, either virtually or in person
  • The digital economy is one of the largest in many countries of Southeast Asia, making the region ideal for companies of all sizes and industries, from fintech, e-commerce, and similar industries
  • Building local partnerships can be key to facilitating business operations and expanding to multiple markets within the region
  • In some countries, like Singapore, governments offer incentives for businesses to set up a local entity (grants and tax incentives)
  • In many ASEAN countries, the rise of digital nomads has caused governments to implement new tax-incentivized visa programs and infrastructure to attract remote talent

The opportunity is huge as there are already established talent pools in Singapore and Hong Kong, for example, or global operations support hubs in the Philippines and Malaysia.

Paul Endacott,

Founder & CEO

The benefits of expanding your operations to Southeast Asia

Many countries in Southeast Asia have been experiencing substantial economic growth and are slowly going back to pre-pandemic numbers, especially in terms of decreasing unemployment rates.

With this in mind, we can say the ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) hold incredible potential for international businesses looking to explore new markets.

Highly skilled, affordable, and active workforce

The APAC region has an abundance of highly skilled workers across industries who are readily available to hire locally. The costs of hiring these workers are also significantly lower for companies based in wealthier economies, such as the US, Australia, or New Zealand, which is why, for example, we’ve seen numerous developers from Malaysia working for foreign companies.

Southeast Asia also has a very young population that stays active for a long time—people don’t retire early and may remain in the workforce even at the age of 70. This means that the local talent pool is available for a longer period of time.

Growing middle class

As a top emerging market today, this region has also seen increased business opportunities thanks to the growing middle-income and higher-income classes. This indicates a growing purchasing power and consumer spending, opening the market to brands that wish to establish a local presence.

Thanks to this relatively new consumer base eager for quality products and innovative solutions, both Asian and Western organizations have already shown strong growth in the region, according to Deel’s expansion experts.

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Strategic location

As it’s located at the crossroads of major trade routes, Southeast Asia serves as a gateway to both the Asia-Pacific region and the global market. Its strategic positioning enables easy access to neighboring markets, facilitating trade and establishing a foothold for businesses aiming to expand their reach beyond the region.

Many companies set up in an ASEAN country (likely one with the most business-friendly regulations) to expand to the rest of the market from there. Reaching the world’s biggest economies, like China and India, is also easier when you’re already established within Asia.

GRIT Search’s CEO confirms that this is a common case:

We see numerous examples, whether it’s an e-commerce, supply chain, or financial services businesses, for example, of companies that have established themselves in Singapore. But their main growth engines aren’t necessarily from that Singapore market. They’re actually from the larger population countries like Indonesia, Vietnam, Thailand, or the Philippines. But strategically, they will set up a headquarters in Singapore, and then they will go into those other markets.

Paul Endacott,

Founder & CEO

Developed remote work infrastructure

says Paul Endacott. In recent years, the Southeast Asia region has become increasingly popular among digital nomads, with many cities in Indonesia, Malaysia, and Vietnam becoming remote work hubs. This propelled countries to invest in infrastructure to support digital nomads and launch remote work visas to facilitate compliance and streamline taxation for foreign workers generating income from Southeast Asian countries.

Expanding into Southeast Asia and hiring from this region enables businesses to leverage infrastructure that supports remote work and flexibility, which helps them build a more productive and efficient workforce.

The digital nomad style is getting quite predominant and we’re finding a fundamental shift in the way that governments are operating now and supporting the digital nomad people more. Many countries are starting to recognize that the digital pathway is the way forward, so this is a massive advantage in any upscaling business.

Andrew Knell,

Senior Account Executive

Legal and compliance challenges of doing business in Southeast Asia

Navigating legal and compliance challenges in Southeast Asia demands a deep understanding of local laws and a tailored approach to adapt to the evolving regulatory landscape that varies by country.

Visas and global mobility

Moving around Asian countries almost always requires visas. Only a handful of countries offer a visa-free regimen during a certain period, like Singapore and Malaysia, where ASEAN residents can stay for up to 30 days without a visa.

That said, companies that want to ensure competitive advantage through global mobility need to be able to provide visa sponsorship for their employees and provide adequate relocation support for their talent in this region.

Everyone needing a visa is a big issue. It’s often the reason why people come to Deel for remote workers or to overcome a talent shortage. They need to hire someone from a foreign country, and it could be from next door or from halfway around the world, but either way, they need a visa.

Elizabeth Thai,

Partnerships Manager

Strategy localization

Some companies try to enter the Southeast Asia market by building an overarching strategy, thinking it’ll apply to all countries in the region. And according to our partners at GRIT Search, they fail because this strategy needs to be localized for each individual market.

Entering Singapore, for example, may be straightforward, but growth and investment in the region require understanding the new business environment and adapting your strategy. You’ll most likely need a local partner or a local team to act as a bridge between your organization and this new market.

Additionally, restrictions on foreign direct investment (FDI) in countries like Cambodia or Vietnam require certain types of multinationals (e.g., real estate companies) to have partners and shareholders on the ground to be able to operate.

Language barriers

In most ASEAN countries, English is not the first or second language. In some locations, education levels are not as high as in the West (especially in European countries), so consequently, many people may not have the required language proficiency to work in a global environment.

Additionally, some countries require all employment documentation to be in the local language. That means eight different languages for the entire region, for which you’ll need to hire a legal team to ensure employment contracts and other documents are properly localized and enforceable.

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Intellectual property ownership

Due to varying levels of IP protection and enforcement across Southeast Asia, navigating this aspect of business in the region may be difficult. In many locations, companies may experience delays in registrations and weak regime enforcement, which may cause financial losses for businesses operating within the region.

Local governments, for example, in Singapore, are working toward establishing more robust legal measures to allow companies to better protect their intellectual property.

💡 Read the interview with Karen Ng, Deel's Country Leader for Asia and get more insights about scaling your operations in the APAC region.

Employer costs and employee benefits across the region

Many countries in the Southeast Asia region are considered to be low-cost when it comes to compensation and employee benefits. The exact percentages (of employee's salary) vary, but you can see some of the estimated employer costs in the table below:

Country Estimated employer costs
Cambodia ~2.1%
Indonesia ~4.24%
Malaysia ~13-14%
Philippines ~10.57%
Singapore ~17.25%
Vietnam ~23.5%
Thailand ~5%

Mandatory and voluntary employee benefits also depend on the country.

For instance, your employer costs in Indonesia involve death security and work-related accident benefits. Also, just like in the Philippines, Indonesia’s 13th-month salary is considered statutory.

In Vietnam, employers are required to pay the Control Union fee of 2%, while in Thailand, only social security is mandatory.

Employees in Singapore who have worked for three consecutive months can take a 16-week-long maternity leave. In Vietnam, maternity leave can last up to six months, during which the employee receives 100% of their average salary. In Indonesia, pregnant employees can take 1.5 months before childbirth and 1.5 months after childbirth of maternity leave.

In most countries of the region, there are no at-will terminations, and they have to be done at just cause. You can usually terminate an employee based on the following:

  • Probation period
  • Objective grounds
  • Disciplinary dismissal
  • Performance due to unsuitability for the job
  • Expiration of the contract

Severance pay is obligatory in countries such as Vietnam and Thailand but not in Singapore.

Read more in detail about mandatory employee benefits in our global hiring guide.

Competitive pay is a significant factor in talent retention in Southeast Asian countries. You may be more likely to win over a candidate by offering a monetary incentive or higher salary than a competitor—company culture and additional benefits typically come second.

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Take a look at what onboarding looks like for different Southeast Asian countries: Vietnam, Indonesia, Singapore, and the Philippines

Success stories: How Deel helped customers expand across Southeast Asia

Deel owns entities across the Southeast Asia region, which enables our clients to seamlessly hire full-time employees within Singapore, the Philippines, Malaysia, and other countries.

Deel’s in-house teams of payroll experts, legal professionals, HR specialists, and customer success managers know the region like the back of their hand—that’s one of the many reasons why our customers have so much success when expanding to Asia.

BCG, a global management consulting company based in Asia, used Deel to streamline payroll across different Southeast Asian countries, where they faced issues due to technology limitations and language barriers. Now, they’ve achieved unprecedented growth of 30% within a year while saving time and resources through our user-friendly platform.

Employees tell us the portal is very user-friendly, and they trust the system. We don’t have any issues.

Rajes Rajamorganan,

SEA-Payroll Manager

Lyre’s is another company that wanted to hire from ASEAN countries fast to meet the growing sales demand. Setting up an entity wasn’t an option, but Deel was there to enable Lyre’s to hire a contractor quickly with minimal cost and 100% compliantly.

One of the biggest challenges I had in my career is when you finally have a great candidate and [they are] in a country you don’t have an entity, and then you have to go through the absolute pain: it takes a lot of time, can take more than 6 months and the candidate is already gone by then. Solving that challenge is what attracted us to Deel.

Carl Hartmann,

Co-founder

Similarly, Singapore-based Responsible Cyber faced challenges in recruiting top talent, especially for niche roles. The team couldn’t find suitable candidates in Singapore, but they did find them in Vietnam and several other countries, where they hired from with Deel.

When it comes to dealing with local laws and tax regulations in multiple countries, relying on Deel is a game-changer. It would have been impossible for us to manage these topics in-house, with extremely costly legal services. Now, I can focus on growing our business while Deel takes care of the hiring logistics.

Dr. Magda Chelly,

Co-Founder and Managing Director

Grow seamlessly in Southeast Asia

Whether your goal is to hire Asia-based talent to overcome skills shortages or unlock a new market and customer base, expanding to Southeast Asia can be a winning move for your business.

Deel’s comprehensive services include hiring full-time employees and independent contractors, along with facilitating visa applications and immigration, global compliance, global workforce management, entity setup, and more.

Ready to hire in Southeast Asia? Book a demo with our expert team to learn more about how Deel can help.

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