ASEAN: A growth driver for Indian businesses
As ties between India and ASEAN enter their fourth decade, the avenues for trade, investment and the exchange of expertise continue to expand.
In addition to merchandise exports, information technology (IT), pharmaceuticals, renewable energy, and automotives are the sectors fuelling opportunities for Indian companies looking at Southeast Asian markets, according to findings of a survey of Indian business executives engaged in cross-border activities across the India-ASEAN corridor.1
However, ASEAN’s appeal for Indian corporates goes beyond access to a new market, wider talent pool, and a more developed ecosystem with robust physical infrastructure and advanced online platforms – the region also serves as a gateway to the rest of the world.
“Indian investors are increasingly looking at ASEAN as an important and growing business destination that offers economic connectivity to a global market,” Dato’ Ramesh Kodammal, Co-Chair of the ASEAN-India Business Council said at the recent “Standard Chartered Borderless Business: India-ASEAN Trade Corridor” webinar.
For instance, Singapore has free trade agreements (FTAs) with the United States and the European Union,2 and Indian companies that set up production bases in the city-state can leverage these pacts to gain access to wider markets.
An attractive destination for India’s startups
ASEAN is the fastest growing internet market in the world3 and the region’s vast, young population, high mobile penetration, rapid adoption of digital payments and supportive government policies have created an extensive marketplace for digital services and products. In addition, India’s well-established IT companies and its raft of emerging new economy startups are perfectly positioned to tap into this demand.
“A lot of Indian startups, which have learned to thrive in a very tough and complicated domestic market, are ready to expand their horizons,” noted Abhijeet Dabas, Chief Executive Officer at pre-owned online car sales platform Cars24.
The company recently launched operations in Thailand to tap into the nation’s growing used-car market and internet-savvy population.4
Local partners are crucial
Still, penetrating and succeeding in ASEAN, which consists of 10 demographically diverse countries, requires a deep understanding of the nuances of the market in question. And the effective execution of such a move hinges on several factors, including finding the right local partner.
“All markets are different from an operating standpoint, and understanding how businesses need to be built in different ASEAN countries is important,” Vivek Subramanian, Co-Founder and Executive Director at Fourth Partner Energy said. “Leveraging a local partner’s strengths and combining them with your own to create a synergistic alliance is the only way to go.”
Additionally, a major concern for a startup or an established company exploring new markets is financing day-to-day operations, and access to financial experts that are familiar with local regulations and policies is vital.
Gaurav Bhatnagar, Head of Trade and Working Capital for India and South Asia at Standard Chartered noted that businesses entering ASEAN are seeking financing partners that serve as a one-stop-shop that provides corporate finance, fund capital requirements, as well as offering a secure digital platform.
“Ideally, clients want to work with financial institutions that are present in ASEAN countries as well as India for a more seamless experience,” Bhatnagar added.
Dabas agreed, highlighting, “most cars are bought with financing and working closely with banks and financial institutions in ASEAN made scaling up in Thailand possible.”
Overall, the webinar panelists concurred that venturing into ASEAN can be extremely rewarding, not just from a business perspective but also from the viewpoint of a symbiotic alliance for India and the region.
For instance, ASEAN’s efforts to improve investment in green infrastructure and move towards a lower-carbon future, supported by initiatives such as the ASEAN Catalytic Green Finance Facility (ACGF),5 have boosted demand for Indian metals, machinery, and electrical goods and created several entry points for Indian companies looking to do business in Southeast Asia.
Separately, the region’s dramatic shift towards e-commerce in the wake of the pandemic, which brought 40 million people in Southeast Asia online for the first time in 2021,6 is creating demand for digital talent and digital startups alike, giving another boost to India’s booming new economy sector. This exponential growth is likely to continue, with ASEAN’s internet economy expected to reach USD360 billion by 2025.7
From an entrepreneur’s perspective, the funding opportunities in ASEAN are also vast. Southeast Asian startups raised USD25.7 billion in funding in 2021,8 doubling from the year ago. Beyond the immense economic possibilities, the ASEAN experience is increasingly proving to be a rite of passage for companies seeking to expand their horizons.
“Enter ASEAN for the market potential, but rest assured that the exposure and learning from operating in these markets will improve your standing at home as well,” said Fourth Partner Energy’s Subramanian.
1 https://av.sc.com/corp-en/content/docs/India-ASEAN-Borderless-Business-Report.pdf
3 https://www.weforum.org/projects/digital-asean
4 https://www.bangkokpost.com/business/2197007/cars24-aims-to-strengthen-thai-foothold
5 https://www.adb.org/publications/asean-catalytic-green-finance-facility
6 https://development.asia/policy-brief/accelerating-e-commerce-asean
7 https://www.bain.com/about/media-center/press-releases/2021/sea-economy-report-2021/