Customers work a cafe and a co-working space in Hanoi, Vietnam, on Thursday, July 20, 2023.
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Higher costs had the biggest impact on Asian businesses in 2023, even as they continued to grapple with a global economic slowdown and rising borrowing costs, according to a survey by UOB.
More than 4,000 businesses in Southeast Asia and Greater China were surveyed in China, Hong Kong, Thailand, Vietnam, Malaysia, Singapore and Indonesia.
Of those polled, 32% said they were impacted by high inflation, another 32% said they faced increased operating costs, while 24% said rising labor costs hurt their business, UOB’s 2024 Business Outlook Survey reported.
The online survey, carried out from last December to the middle of January, polled 4,050 small- and medium-enterprises and large companies.
Apart from rising costs, 27% of the respondents said they were affected by an overall economic slowdown, while 23% said a higher interest rate environment took a toll on their businesses.
Still, about four out of 10 companies said they felt “very positive” about the business environment in 2023, while 32% said they were “somewhat positive,” the survey showed. Indonesia (56%) and Vietnam (47%) were the most positive markets.
Some 35% of the companies polled said the business environment in 2023 declined compared to the previous year.
To combat future headwinds, 30% of the companies said reducing business costs will be their top priority in the next one to three years. Establishing new clientele (26%) and digitizing their business (26%) were also high on the agenda.
More than 80% of respondents said they were interested in overseas expansion as they sought to increase revenue and boost profitability.
Of those looking to expand outside their home country, over half (56%) said they were keen to expand their business in Southeast Asia, while 30% said they were seeking to break into the Chinese market. Only 18% were looking to Europe as the top location for future expansion.
In Southeast Asia, Malaysia (45%), Singapore (41%) and Thailand (40%) were the top picks.
Firms in Indonesia and Vietnam were the most willing to expand, while firms under manufacturing and engineering or tech, media and telecom displayed the strongest interest to grow overseas.
Finding the right local partners was the biggest concern for those looking to grow their businesses overseas, with nearly 40% saying it was the top barrier for them. A lack of in-house talent to steer expansion projects, as well as insufficient finances were other factors.