As the world’s largest and most diverse continent, Asia is home to world-class tech hubs, advanced infrastructure, and heavily populated emerging markets. Over the last three decades, Asia has experienced a rapid technological boom, with GDP growth across many of the continent’s economies outstripping the growth of Western markets. This has increasingly meant expanding into Asia is a key target for businesses seeking to expand their global presence.
Key Takeaways
1. Governments across Asia offer a number of incentives for foreign investors, including free trade zones, business grants, and competitive tax rates and tax rebates.
2. As of 2021, China is now the number one source of international direct investment in the world.
3. The World Bank’s Doing Business 2019 reportfound that Singapore is consistently recognized as the world’s best place to do business.
4. According to the Malaysia Economic Monitor report, workers from Malaysia are, on average, more highly educated than their peers from a number of other countries, including high-income countries.
5. Indonesia’s large population, as well its central location in Asia, makes it a rising star as a location for expanding into Asia.
6.Thailand, as a ‘middle economy’ continues to grow in prominence as a locus for foreign investment in Asia.
7. As a world financial hub, Hong Kong continues to be a key business destination for any business in the financial and fintech sectors.
8. Incentives for technology and Research & Development make Taiwan an attractive location for genuinely innovative international businesses.
9. South Korea is listed by the World Bank as thefifth most business-friendly country in the world, and among the best Asian markets to conduct business.
10. Whilst Asia is one of the world’s most favored markets for business expansion, it also has its own set of challenges. To be successful, businesses must perform their due diligence prior to selecting an Asian market.
The World Economic Forum notes that Asia’s GDP now overtakes the rest of the world combined. And by 2030, Asia is expected to add approximately 60% to global growth. With sustained economic growth and stability, many business leaders throughout the world see Asia as a logical expansion destination.
If you’ve been contemplating expanding your business into Asia, these are the best Asian markets for global expansion.
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1. China
In recent years, China has undoubtedly become one of the world’s most active economic markets. Gone are the days where the country’s economy was heavily dependent on agriculture and largely closed to foreign trade and investment. At present, China has opened its economy to international trade and is now renowned for its dynamic banking and tech-driven private sectors.
In findings released by the United Nations Conference on Trade and Development, China brought in $163 billion in inflows during 2020, compared to $134 billion attracted by the United States. This highlights the extent to which foreign companies and investors now view China as a pivotal trading partner.
International investors are permitted to form companies in China that are 100% owned by foreign capital. Local market sales are permitted, and foreign investment is encouraged in sectors other than industry and hi-tech, such as financial services, banking, and insurance.
It is expected that the new China Social Credit System will help foreign businesses expanding into Asia to better evaluate their local business partners in China.
China is an attractive destination for foreign investors due, in large part, to its low labor costs and an enormous buyer’s market (with a population of almost 1.5 billion people). Furthermore, there is an expectation of a steep increase in the buying power of Chinese residents; which is influenced by the annual GDP of over 8% per annum and extremely low rates of inflation.
Foreign investors receive tax benefits, including value added tax, as well as customs and income tax benefits that emphasize investment in Special Economic Zones (SEZ) or in special sectors and areas.
In China, there are five Special Economic Zones (SEZ) in the south of the country. These zones are located in Shantou, Shenzhen, Zhuhai in Guangdong Province, Xiamen in Fujian Province, and the entire island province of Hainan.
Within these Special Economic Zones, the major tax benefits are:
- Corporate tax rates of 15% – for qualified enterprises which are engaged in industries encouraged by the Chinese government; such as new and high tech enterprises, and certain integrated circuits production enterprises
- A benefit of between two and three years, which equates to a tax exemption for the first two years and a tax rate of 12.5% for the following three years
- For companies involved in ‘new high technologies’, as well as a 15% reduced tax rate, they may be eligible for an additional 50% deduction for R&D expenses.
To find out more about doing business in China check out our Extensive Guide on Doing Business in China.
2. Singapore
Situated in the heart of South East Asia, Singapore is widely regarded as a global business hub, offering strong trade and investment opportunities to international companies. In addition to having one of the world’s lowest corporate tax rates, Singapore’s many business-friendly policies have established the city-state as a reputable financial and regional trading center.
Singapore’s tax regime features a corporate tax rate on taxable income at 17%, as well as concessional rates on a foreign company’s first S$200,000 of income. The tax on capital gains and income is 0% and no withholding is levied on post-tax dividends paid from Singapore. Furthermore, all foreign-sourced income is tax exempt, provided that income has been subjected to tax in a country with a headline tax rate of at least 15%.
Through the World Bank’s annual survey of 189 worldwide economies, its findings published in the Doing Business 2019 report found that Singapore is consistently recognized as the world’s best place to do business. Not only is it easier and quicker to incorporate a business in Singapore, owning a company can be established by anyone, including foreign nationals.
Within Singapore, foreign companies have access to a highly skilled, multilingual pool of talent. Due to the country’s excellent education system and attractive immigration guidelines, the local workforce is regarded as both talented and extremely motivated. Additionally, English is widely spoken, which enables foreign companies to seamlessly integrate into the local market.
3. Malaysia
Malaysia is regarded as one of South East Asia’s most advanced economies; home to a prosperous export-oriented manufacturing hub and the region’s second highest GDP per capita (behind only Singapore). As of 2020, Singapore’s GDP per capita is $1.215.00 USD.
In data published by the World Bank, Singapore is one of the most open economies in the world, with a trade to GDP ratio that has averaged over 130% since 2010. Malaysia’s openness to trade and investment has seen the country become an attractive location for entrepreneurs and foreign investors to conduct business.
The standard corporate tax rate in Malaysia is 24%. For SMEs with a gross income of no more than MYR 50 Million, the first MYR 600,000 has a tax rate of 17%, with the remaining balance taxed at 24%.
Health services, manufacturing, high-technology, and biotechnology are notable business sectors that are favored by Malaysia’s government. In addition, companies in the manufacturing, agricultural, hotel, and tourism sectors, or any other commercial or industrial sector participating in a promoted activity or producing a promoted product, may be eligible for Pioneer Status or Investment Tax Allowance.
Foreign companies can access a highly qualified and driven local workforce, many of whom are multilingual and speak English, Malay, and Chinese. In its biannual Malaysia Economic Monitor report, the World Bank highlighted that workers from Malaysia were, on average, more highly educated than their peers from a number of other countries, including high-income countries.
4. Indonesia
As the largest archipelago in the world, and home to more than 270 million people, Indonesia is well known as a tourist haven; a country blessed with diverse and abundant natural resources. However, there is more to Indonesia than its natural beauty and a booming tourism industry.
Indonesia has become an attractive destination for expanding companies due, in large part, to its close proximity to major economies like India and China, as well as emerging markets such as Malaysia and Singapore. In addition, Indonesia’s GDP recently reached 1119.19 billion USD, thus making it the largest economy in South East Asia and one of the top 20 economies in the world.
Indonesia is now a recognized member of the G20 major economies in the world and forecast to become the fourth largest economy in the world by 2050.
Indonesia’s government has reduced the corporate income tax (CIT) to 22%, and this applies to the 2020-2021 fiscal year. Moving forward, the CIT rate will be reduced even more to 20% in 2022.
Further to the CIT reduction, numerous tax incentives have been granted to encourage additional foreign investments. Export services that are produced in Indonesian territories, such as legal consultation, HR consulting, research and development services services, toll and manufacturing, information and technology services, and repair and maintenance, all benefit from zero-rated value added tax (VAT).
The Indonesian government has issued a raft of new regulations to open up more business sectors and property ownership for foreigners to support Indonesia’s economic growth and attract more foreign investors. Additionally, there are fiscal and non-fiscal incentives for businesses that operate in any of the 13 special economic zones available in Indonesia.
5. Thailand
Thailand’s strategic location has enabled it to become a gateway to the heart of Asia, which is home to the fastest growing economy in the world. For expanding companies, much of Thailand’s appeal stems from its open, market-oriented economy. This encourages more foreign direct investments and promotes technology transfer, economic development, and employment.
Thailand has also recently been ranked as number one in the world among countries with the highest Covid-19 recovery rate, according to a report by the Global COVID-19 Index (GCI).
Situated in close proximity to both China and India, Thailand is renowned for its steady economic growth, incentives for foreign businesses, and cost-effective local workforce.
Thailand offers extensive trade opportunities with China, India, and the countries of the newly formed Association of Southeast Asian Nations. For those seeking to establish a company in Thailand, they can enjoy access to the Greater Mekong sub-region, where newly emerging markets offer excellent potential for doing business in Thailand.
In findings published in the World Bank’s 2020 Ease of Doing Business report, Thailand ranks 21st out of 190 countries. And according to the US News & World Report’s chart on the Best Countries to Start a Business in 2020, Thailand is now ranked number one.
6. Hong Kong
Widely regarded as one of the world’s leading financial centers, Hong Kong provides foreign entrepreneurs and investors with a gateway to the growing mainland Chinese market. The city’s free trade and investment policy, simplified tax system, and strategic location has seen Hong Kong become a truly global city, as well as a financial hub for business entities.
Hong Kong’s standard corporate tax rate is 16.5%. For foreign businesses, the first HKD 2 million of assessable profits is taxed at 8.25% – half the corporate tax rate. Businesses can also take advantage of there being no capital gains taxes or GST in Hong Kong. Furthermore, gains from investments and capital transactions are exempt from any tax.
As one of the world’s premier business locations, Hong Kong enjoys proximity and ease of access to the Asia-Pacific’s leading markets. The city’s strategic location ensures that foreign companies establishing regional headquarters in Hong Kong can harness the potential offered by other Asian economies. In addition, Hong Kong acts as the infrastructural and commercial entry point to mainland China.
Not only can foreigners own 100% of the company they set up in Hong Kong, they can also be the sole owner or shareholder of a Hong Kong company. In fact, there are no requirements to be a local resident or specific nationality.
English is one of the two main languages in Hong Kong, alongside Cantonese. Hong Kong also enjoys a skilled and highly educated local workforce, while continuously attracting talent from all over the world.
7. Taiwan
Home to advanced cities and a multiparty democratic system, Taiwan has developed its industry and international trade towards extensive economic growth. Due to its world-class financial services industry, as well as a favorable fiscal climate, Taiwan has become increasingly attractive to foreign investors.
Taiwan’s standard corporate tax rate is 20%. For companies with a taxable income of less than NTD 120,000, they enjoy the advantage of being exempt from corporate tax.
Taiwan’s government strongly advocates tax incentives for companies that plan to establish themselves in certain locations. These locations include free trade zones, agricultural technology parks, export processing zones, and science parks.
Foreign companies with a focus on technology are heavily encouraged to expand their operations into Taiwan. This is supported by low interest loans designed to cater specifically for innovation and R&D projects. Companies can apply for loans of up to 80% of the total expenses of an approved plan, with the maximum loan amount being NTD 65 million.
Despite the fact that Taiwan’s official language is Mandarin, the majority of people within the country’s business community are fluent in English. And with more than 300,00 new graduates each year, Taiwan enjoys a highly skilled labor force across a host of different industries.
8. South Korea
Listed by the World Bank as the fifth most business-friendly country in the world, South Korea is among the best Asian markets to conduct business. As the world’s 15th largest economy and home to more than 50 million residents, South Korea has experienced tremendous growth in recent years. This is thanks, in large part, to sustained investment from foreign companies.
South Korea’s government offers industrial sites, tax incentives, and grants to foreign companies that contribute to the local economy. In addition, government-assisted free trade zones, tax rebates, and low rents on land offer extra motivation for expansion. Furthermore, South Korea currently has the highest government backing per capita for start-ups, totaling $3.7 billion USD. This support can help with some of the challenges of doing business in South Korea.
South Korea’s population is highly educated. In fact, 7% of the nation’s entire GDP is spent on education and 74% of South Korean nationals undertake postgraduate-level study.
In comparison to other Asian markets, South Korea ranks third in regard to knowledge availability. Consequently, this makes South Korea one of Asia’s most in-demand markets for sourcing high-tech talent.
Summary
Asia presents myriad opportunities for entrepreneurs, start-ups, and established foreign companies. Whilst Asia is widely regarded as a booming technological hub, the possibilities are not limited to the region’s existing and well-developed financial and tech centers. Foreign investors have access to a rapidly growing market, with the chance to grow their business across a host of industries.
If you’re considering expanding your business into Asia, the best Asian markets for global expansion include China, Singapore, Malaysia, Indonesia, Thailand, Hong Kong, Taiwan, and South Korea. These markets have not only experienced sustained economic growth and stability, they also offer competitive tax rates, financial incentives, and access to qualified and highly motivated talent.
How Horizons can help
Despite the fact that Asia is one of the world’s most favored markets for business expansion, it also has its own set of challenges. To be successful, businesses must perform their due diligence prior to selecting an Asian market.
Horizons is a recognized leader in global expansion and end-to-end employment solutions. We enable our clients to manage the risks of their expansion with a comprehensive market-entry strategy and guidance through local law, employment legislation, and tax compliance.
If you’re planning on expanding your business to Asia, you need the right planning and a partner you can trust. Horizons’ global PEO, recruitment, payroll, and global mobility solutions allow you to quickly and compliantly establish your operations across Asia – and the rest of the world.
