An increasing number of small and medium-sized enterprises (SMEs) and large enterprises in ASEAN and Greater China are eyeing international expansion to boost revenue and profits in the post-pandemic economy but face several hurdles.

The UOB Business Outlook Study 2023 (SME & Large Enterprises) reveals that 83 per cent of businesses are keen to expand overseas, with Indonesian, Chinese, Thai, and Vietnamese companies showing the strongest desire. However, challenges such as difficulty finding the right partners to work with, lack of in-house talent, and regulatory compliance and tax support are holding these businesses back.

The survey also highlighted the importance of having a cross-border digital trade platform for international expansion, with most companies citing the need for additional support in connecting with overseas partners or clients and tax incentives.

The ASEAN and China markets were identified as the top two destinations for expansion, with Singapore, Thailand, and Malaysia being the most important countries in the ASEAN region. Only one  in four companies want to expand beyond Asia, as per the study.

Supply chain concerns

A majority of SMEs, around 60 per cent, report supply chain challenges due to ongoing geopolitical tensions.

Companies are feeling the heat from the impact of global inflation on their cost of supplies and the challenges in procuring suppliers. About three in 10 companies are taking steps to diversify their supply chains and strengthen relationships with suppliers, while also leveraging data analytics to help decision making.

However, SMEs are calling for more support in the form of tax incentives, employee training programmes, easier access to funding and grants, and connections with technology and solution providers to help ease their supply chain woes.

Low adoption of sustainability practices among businesses

The study also found that despite 90 per cent of businesses acknowledging the importance of sustainability, only 45 per cent have actually implemented sustainable practices.

More than 50 per cent of SMEs in Thailand and Vietnam have adopted sustainability practices, while only 38 per cent of SMEs in Singapore have these practices in place.

When implementing sustainability practices, businesses cited that they are primarily concerned with the increase in costs to customers, and the impact it will have on their profits and revenue.

Businesses in ASEAN are calling for more tax incentives and sustainable financing options, while businesses in Greater China want connections to industry peers and access to business analytics and insights.

According to Eric Lian, the Head of Group Commercial Banking at UOB, there is a growing emphasis on sustainability standards within supply chains among regulators, industry leaders, and corporates.

“Businesses that are slow to embrace ESG may lose out on business opportunities. The study found that less than half of businesses have incorporated sustainability practices," he warns.

The study, which has been conducted annually in Singapore since 2020, surveyed more than 4,000 businesses in Asia. For the first time, it was expanded beyond Singapore to also survey companies in other key markets in Indonesia, Malaysia, Thailand, Vietnam, Mainland China, and Hong Kong SAR as it aimed to understand the business outlook and key expectations among SMEs and large enterprises across these seven markets in ASEAN and Greater China.