You’ve probably dreamed about visiting Thailand or Indonesia, but have you thought about finding a supplier in Southeast Asia?
Prior to the pandemic, the economy in Southeast Asia was growing rapidly. After sustaining a significant hit due to Covid, the region’s industry is starting to rise again. Before too long, Southeast Asia might be near the top of the world market. You have a great opportunity to get in on the action by sourcing affordable products for your import-export business.
Importing or exporting to Southeast Asia takes a lot of preparation and knowledge about the current trade climate. Here are some things to keep in mind as you loop Southeast Asia into your supply chain.
The Association of Southeast Asian Nations
The Association of Southeast Asian Nations (ASEAN) is an economic union consisting of 10 Southeast Asian countries that was established in 1967. It’s made up of Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia. The primary goals of ASEAN are to foster economic growth and collaboration.
Some projections show that the Southeast Asia region may become the fourth-largest economy in the world by 2050. With a burgeoning middle class, Southeast Asia has billions in spendable income to contribute to the world economy.
The top imports from ASEAN countries to Western countries are machinery, garments, raw materials, and agricultural products. If you’re looking to import goods in one of these categories, you can find a great supplier in one of the ASEAN nations.
Of the 10 ASEAN members, the most popular import countries are Indonesia, Malaysia, Thailand, Vietnam, and the Philippines. Each of these countries already has a well-established trade economy that you can rely on while building your import-export business.
Relevant free trade agreements
One of the first things you should do to help you choose where to find a supplier is to check which countries have a free trade agreement (FTA) with the country you’re importing to or exporting from. A free trade agreement establishes a relationship between two or more countries that reduces or eliminates tariffs and removes obstacles that hinder the movement of goods.
If you’re importing to Canada, you may be able to take advantage of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It eliminates taxes on most exports and imports, improves customs efficiency, and makes space for Canadian small businesses in the region. The ASEAN countries that are part of CPTPP are Singapore, Brunei, Malaysia, and Vietnam.
If you’re importing to the US, the only ASEAN country that has an FTA you can benefit from is Singapore. Still, there is a lot of movement between the US and Southeast Asia, so you can typically find an affordable tariff rate.
What about China?
As much as Southeast Asia’s economy has grown in the past decades, it still pales in comparison to its northern neighbor. There seems to be a trend of diversifying supply chains that may work in Southeast Asia’s favor, however.
With the US-China trade war still ongoing, many businesses are shifting their supply chains out of China to avoid heavy tariffs. They’re also concerned about future wage increases in China as well as a graying workforce that will likely shrink in the years to come.
In fact, several huge companies have moved at least part of their manufacturing to Vietnam in the past few years. These include Apple, Nike, LG, and Panasonic. Even some Chinese companies have shifted their production to Vietnam. Of all the ASEAN countries, Vietnam saw the most economic growth in 2020, an impressive 2.6% during an extremely challenging year.
Is the majority of your supply chain based in China? It might be time to consider moving some or all of it to a Southeast Asian country to save money and maintain stability in the future. That being said, China is still home to tried and true manufacturers that can make virtually any product imaginable. Southeast Asia is still limited to certain industries, but it promises to expand as more and more companies arrive at its doorstep.
Tips for exporting to Southeast Asia
Are you ready to think about exporting your goods to Southeast Asia? Here are some tips you might not have thought about.
1. Consider religion, culture, and climate.
What do you plan to sell? Your products need to fit into the religious and cultural framework of your target market. Indonesia and Malaysia are majority Muslim countries, while Thailand is majority Buddhist and the Phillippines is majority Catholic. If you’re selling clothing, for example, you’ll need to take into account the religion and climate of the country you’re targeting. Make sure to conduct extensive market research to find out whether your products are attractive to Southeast Asian buyers.
2. Select the right country or countries.
Each Southeast Asian country has its own population with specific needs. You’ll want to figure out where the demand for your products is highest. If you’re selling high-end electronics, you might want to break into the Singapore market. For foods and beverages, look to Indonesia, Malaysia, or the Philippines. Don’t forget that Indonesia and Malaysia will require halal certification.
3. Research important regulations.
Of course, each country has its own set of rules and regulations to follow. First, check whether the country you’re exporting from requires an export license. Then, look into the tariffs and taxes that must be paid in order to ship your goods. Don’t neglect to fill out all of the proper paperwork so your shipments reach the proper destination. You can make this process much easier by hiring a customs broker.
Tips for importing from Southeast Asia
If you’d rather import goods from Southeast Asia to your home country, here are some things you should keep in mind.
1. Perform a competitive analysis.
Depending on which products you’re considering importing, the market may already be flooded with items from Southeast Asia. If that’s the case, you’ll need to do something to differentiate your products or find a different set of products altogether. Analyze the competition in your home country to figure out how you can attract enough customers to succeed.
2. Find the right supplier.
There are hundreds of suppliers to choose from in Southeast Asia for any given product. First, narrow it down to a specific country that you’re comfortable working with. Make sure you test out your potential supplier before committing to them. Mutual trust is key when it comes to building a relationship with your supplier.
3. Assess the risks of importing.
Unfortunately, there’s nothing you can do to avoid the risks of importing. But you can take action to prepare your business to overcome whatever obstacles might come. Potential risks include damage of goods in transit, supplier issues, transport delays, customs clearance problems, and currency fluctuations. Come up with possible solutions to each of the risks you anticipate. Don’t forget to invest in international insurance.
As you break into the Southeast Asian market or work with a supplier in an ASEAN country, you need a customs broker who can help you with importing and exporting. At BorderBuddy, we take care of the details of the customs process so you don’t have to. Give us a call today.