MORE than 80 per cent of businesses in Asia are looking to expand internationally for revenue and profit growth in the next three years, but face challenges in finding overseas partners, and legal and tax support, according to the UOB Business (SME & Large Enterprises) Outlook Study 2023.

The bank’s findings were from an annual survey of small and medium-sized enterprises (SMEs) and large enterprises in Asia. This year, the scope of the study was expanded beyond Singapore to include companies in Indonesia, Malaysia, Thailand, Vietnam and China for the first time.

Of over 4,000 businesses surveyed, 83 per cent, or four in five, want to expand overseas. The desire is most pronounced in companies in Indonesia, China, Thailand and Vietnam, while those in Singapore, Malaysia and Hong Kong are more hesitant. Top sectors looking to expand are industrials, oil and gas, followed by wholesale trade, and technology and media.

Asean and China are the top two markets businesses want to expand to, with only one in four companies interested in expanding beyond Asia. Within Asean, Singapore ranks at the top of countries for businesses to venture into, while Thailand and Malaysia tie for second place.

But challenges in expanding overseas are holding businesses back, top among which are difficulties in finding the right partners to work with, lack of in-house talent, as well as lack of legal and regulatory compliance and tax support. 

Most businesses cited needing more support to venture overseas, including connecting with overseas partners and clients, and tax incentives.

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About four in five companies also value having a cross-border digital trade platform for their overseas expansion.

In addition, around 60 per cent of SMEs surveyed highlighted that their supply chains have been affected by ongoing geopolitical tensions. Some 90 per cent of businesses have been affected by high inflation, with increased cost of supplies and greater challenges in procuring suppliers.

About 30 per cent of companies are now trying to diversify their supply chain by building stronger relationships with their suppliers and tapping data analytics to help in their decision-making.

To ease supply-chain woes, SMEs want more support for tax incentives, employee reskill-and-upskill training programmes, easier access to funding, and connections to the right technology and solution providers.

Aside from supply-chain concerns, the study also found that sustainability practices were not widely implemented among businesses.

Although around 90 per cent of businesses believe in the importance of sustainability, only 45 per cent have implemented sustainability practices. Only 38 per cent of SMEs in Singapore have these practices in place, compared with more than half of SMEs in Thailand and Vietnam.

Businesses have attributed the low implementation rate to concerns about increasing costs for customers, which will in turn hurt their profits and revenue.

However, UOB head of group commercial banking Eric Lian highlighted that regulators, industry leaders and corporates are becoming more rigorous and disciplined in achieving sustainability standards within their supply chains.

“Businesses that are slow to embrace environmental, social and governance may lose out on business opportunities,” he added.