As Asean and India mark 30 years of bilateral relations this year – 2022 was coined the “Asean-India Friendship Year – Asean remains well-poised to play an important role in enabling India’s growth ambitions. Mindy Tan specially for The Business Times.
Rajendra Srivastava, Novartis Professor of Marketing Strategy and Innovation at the Indian School of Business (ISB), noted that Indian businesses are looking at Asean markets for reasons including the large market size, growth rate and cultural and geographical proximity.
“Indian products, from 2-wheelers and 3-wheelers for transportation, to halal shampoo, to cosmetics and food products are culturally suited for Asean markets due to presence of the Indian diaspora, as well as the long history of trade between the Indian sub-continent and Southeast Asia,” he noted.
“These markets have price sensitive lower-end segments that cannot buy in large western market packages because they often shop when they receive their monthly or often daily or weekly wages,” he added, noting that India has an advantage in serving these price sensitive segments of the markets.
Prof Srivastava, who was the former dean at ISB, further noted that means of reaching customers are also quite similar across the economies.
“India-based companies like Reliance Retail or Flipkart have worked on business models where a consumer can order online, and the products can be picked up from or delivered by a kirana store,” he said.
And just as India has its kirana stores, Indonesia has warungs and Philippines has sari-sari.
“These omni-channel innovations integrating large online retailers with market access capabilities (provided by) micro neighbourhood stores work not only for India but also for Indonesia, Malaysia, Vietnam,” he said.
Beyond the region’s geographical proximity, expanding cultural relations and a promising economic outlook, friendly bilateral relations between Asean and India have driven strong government-level collaboration along the India-Asean corridor, noted Chandandeep Kaur, regional head global subsidiaries, India & South Asia, Standard Chartered India.
“We expect Asean’s favourable demographics, including its rising middle class, growing industrial sector, and expanding trade connections to play an increasingly beneficial role for Indian enterprises seeking new opportunities beyond its own shores,” she said.
According to the survey of senior executives from 41 companies based in India, 63 per cent said their company intends to increase investments into Asean over the next 3-5 years, on the back of the ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement.
India in 2019 declined to join the RCEP agreement citing “significant issues of core interest that remained unresolved”.
The report on the India-Asean corridor, commissioned by Standard Chartered and prepared by PricewaterhouseCoopers, also found that 46 per cent said they expect more than 10 per cent growth in their Asean revenue over the next 12 months.
Dr T Chandroo, chairman of the Singapore Indian Chamber of Commerce and Industry (SICCI), told BT that because India is not one of parties to the RCEP, Indian companies are actively establishing local presence in Asean to benefit from the regional trading framework.
“There is not a single month that passes by in our Chamber that we do not have an engagement session with Indian economists, chief ministers … and leading government officials on trade and business opportunities,” he said.
“Singapore is a regional financial, legal and trade hub which makes it a first stop. India (also) has deep cultural and business linkages with Vietnam, the Philippines, Thailand and Indonesia,” added Dr Chandroo.
Growth in the region
In terms of growth sectors, the report highlighted five, comprising information technology and new economy businesses, pharmaceuticals, renewable energy, automotive, and trading.
For new economy businesses, growth opportunities abound in Asean’s booming digital sector noted the report, adding that many Indian unicorns are targeting Asean for growth.
India’s education technology unicorn Byju’s for instance acquired Singapore-based Great Learning in a US$600 million deal in 2021 in an acquisition that helped Byju’s gain expertise in professional courses such as data sciences, business analytics and cloud computing.
Meanwhile, a booming consumer market is driving growth in sectors such as pharmaceuticals, energy and automobiles.
On the pharmaceutical front, an aging population in certain markets such as Thailand and Singapore, and growing prevalence of lifestyle-related diseases is expected to boost healthcare spending across the region.
As one of the largest manufacturers and exporters of generic medicines, Indian pharmaceutical companies are well-positioned to address these needs, stated the report.
Said Standard Chartered’s Kaur: “In particular, Malaysia and Thailand are attractive destinations for India’s IT companies; Malaysia provides significant opportunities for Indian manufacturers; and Vietnam and the Philippines appeal to infrastructure investors from India.
“Asean’s growing digital penetration and adoption, increasing awareness of climate change impact and advanced production capabilities make the region an ideal destination for Indian companies’ business expansion.”
SICCI’s Dr Chandroo noted that for Singapore and India, opportunities exist in deeptech, cleantech, and genome and bio-informatics research.
For the former, artificial intelligence and Internet of Things hold much potential in a wide range of areas, including the construction and built environment sector to build smarter and more sustainable cities, he said.
“Amongst the Indian business community in Singapore, we have many companies both large and small that are experts in these areas and are more than ready to enter joint ventures with suitable business partners from India,” he said.
According to the Standard Chartered report, Singapore is expected to be one of the key beneficiaries of companies in India expecting to invest more in the region – more than 8 in 10 (84 per cent) said they consider Singapore a key target market in Asean and plan to establish their regional headquarters in the city-state.
It also found that almost three-quarters of Indian businesses are seeking local partnerships to ease their entry and enhance their market presence in the region.
This is as they expand their production networks in Asean to improve their regional competitiveness and target global exports (39 per cent).
A notable share of the companies are also looking to adopt sustainability principles (41 per cent) and embark on a digitalisation journey (34 per cent).
One of the ways Standard Chartered is able to help companies looking to internationalise is by lowering the compliance burden by providing guidance on market regulations.
In the case of a leading Indian engineering, procurement and construction company, Standard Chartered was able to provide the Project Export Memorandum approvals as required by the Reserve Bank of India, as well as support the company with the issuance of cross-border bank guarantees. The bank also opened local currency accounts for the client to manage project expenses and remit funds to India.