New end market is primary draw for doing businesses in Southeast Asia

Amsterdam, July 30, 2008 - China has been the cornerstone for many businesses operating in Asia.  Increasing labour and commodity costs however, are causing those businesses to rethink their growth plans incorporating a phenomenon known as the ‘China plus one’ strategy, by which firms seek to distribute their operations more widely in the Asian region, in addition to their presence in China.  While China and India continue to grab the headlines, many of those businesses are seeing a rapid increase in profit levels from elsewhere in Asia – in many cases outstripping returns in China. 15% of respondents expected revenue growth of over 25% annually from their operations in Southeast Asia, almost double the proportion of firms that boasted such rates during the previous three years.

That’s one of the findings of a new report ‘Rich pickings – opportunities in Southeast Asia’s emerging markets’ produced by leading global credit insurer Atradius in conjunction with the Economist Intelligence Unit. The report is based on a survey of businesses, most of whom have their headquarters in Europe and the US.

Another reason that businesses are looking towards the second tier of emerging markets is the current dearth of manufacturing capacity in India. A potent mix of Indian bureaucracy, politics and scarcity of facilities means that manufacturers are simply looking elsewhere to set up.

“Infrastructure problems aside, the Asian market holds huge opportunities for both western investors and exporters”, says Tommie Sjödahl, Atradius’ Chief Market Officer responsible for Asia. “With traditional markets shrinking, or at best stagnating, as a result of the global economic downturn, businesses are turning – indeed in many cases because they see no other opportunities – to the markets of Southeast Asia”. 

The Atradius report ‘Rich pickings’ can be found in the Publications section of the Atradius website at http://global.atradius.com/creditmanagementknowledge/publications/latestreleases.html. More than half of the businesses who participated in the report noted that the potential of Southeast Asia as a new end market was one of their main reasons for setting up operations in these countries. The Atradius report shows that the Southeast Asian economies that make up the ASEAN bloc are attracting ever increasing interest from foreign firms looking to invest, sell into, source from or find partners in the region. “The resilience of these markets to the global downturn can be traced back to the lessons that they learned from the Asian financial crisis in the late ‘90s”, explains Sjödahl, “and that’s a positive omen for western firms seeking to grow their business in Asia.” 

About Atradius: 
Atradius provides trade credit insurance, surety and collections services worldwide, and has a presence in 40 countries. Its products and services aim to reduce its customers’ exposure to buyers who fail to pay for the products and services customers purchase. With total revenues of approximately EUR 1.8 billion and a 31% share of the global trade credit insurance market, its products contribute to the growth of companies throughout the world by protecting them from payment risks associated with selling products and services on credit. With 160 offices, it has access to credit information on 52 million companies worldwide and makes more than 22,000 trade credit limit decisions daily.

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