Customers work at a cafe and co-working space in Hanoi, Vietnam on Thursday, July 20, 2023.
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According to a UOB study, higher costs had the biggest impact on Asian businesses in 2023, even as they continued to struggle with a global economic slowdown and rising financing costs.
More than 4,000 companies in Southeast Asia and Greater China were surveyed in China, Hong Kong, Thailand, Vietnam, Malaysia, Singapore and Indonesia.
Of those surveyed, 32% said they were affected by high inflation, another 32% said they faced higher business costs, while 24% said rising labor costs were hurting their business., This is evident from UOB’s Business Outlook Survey 2024.
The online survey, conducted from December to mid-January, surveyed 4,050 small and medium-sized enterprises and large companies.
Beyond rising costs, 27% of respondents said they were being hit by an overall economic slowdown, while 23% said a higher interest rate environment was taking a toll on their businesses.
Still, about four in 10 companies said they felt “very positive” about the business environment in 2023, while 32% said they were “somewhat positive,” the survey found. Indonesia (56%) and Vietnam (47%) were the most positive markets.
About 35% of companies surveyed said the business environment would deteriorate in 2023 compared to the previous year.
To combat future headwinds, 30% of companies say reducing operating costs will be their top priority over the next one to three years. Attracting new customers (26%) and digitizing their business (26%) were also high on the agenda.
Overseas expansion
More than 80% of respondents said they were interested in expanding overseas because they wanted to increase sales and increase profitability.
Of those looking to expand outside their home country, more than half (56%) said they were keen to expand their operations in Southeast Asia, while 30% said they were trying to break into the Chinese market. Only 18% saw Europe as the top location for future expansion.
In Southeast Asia, Malaysia (45%), Singapore (41%) and Thailand (40%) were the top choices.
Companies in Indonesia and Vietnam were the most willing to expand, while companies in manufacturing and engineering or technology, media and telecom showed the greatest interest in growing abroad.
Finding the right local partners was the biggest concern of those looking to grow their business abroad; almost 40% said this was their biggest barrier. A lack of internal talent to drive expansion projects, as well as insufficient finances were other factors.