Southeast Asia: An attractive manufacturing base for growing global firms

Only 9% of companies have no plans of expanding in the region.

Southeast Asia continues to prove its appeal as a manufacturing base for many companies looking to expand their operations in the region, according to a new research commissioned by HSBC Commercial Banking

The HSBC Global Connections survey, published on Wednesday, showed international firms continue to see the region mainly on its supply chain connectivity rather than a consumer market, and global manufacturers are particularly drawn to its able and affordable workforce. 

Skilled workforce ranked the region’s most attractive market feature among businesses in 2023 as pointed out by 27% of respondents, up from second last year.

Meanwhile, 25% of the global firms pointed to competitive wages as a main factor to expand in the region, which has dipped slightly from 27% last year.

ASEAN’s growing digital economy is also a key factor drawing businesses to the region as identified by 26% of the respondents.

"Southeast Asia is clearly an attractive manufacturing base, with increasingly advanced supply chains and a highly skilled workforce attracting global firms to the region," said Amanda Murphy, commercial banking head for South and Southeast Asia at HSBC. "But the consumer story is also one to watch for international businesses as digital adoption and domestic spending power grow."

Across sectors, international companies have expressed greater optimism with respondents expecting sales in the region to jump 23.2% in the next 12 months, up from their 20% projected growth during last year’s survey.

About 91% of the respondents said they have plans to expand in any of the 10 ASEAN countries. Over half of the firms plan on significantly increasing their inorganic growth in the region, or those achieved via mergers and acquisitions, this year and next year according to the study.

Companies from mainland China and Australia expressed the highest inorganic growth ambition. 

Meanwhile, Singapore, Malaysia, and Thailand were the top three markets for expansion for companies with existing presence in the region, while Malaysia was the most preferred debut market for those that are yet to enter ASEAN.

The survey polled decision-makers from over 3,500 companies with interest in at least one ASEAN market. Nations covered in the survey were mainland China, India, the UK, France, Germany, the United States, Australia, Hong Kong, and Gulf Cooperation Council countries.