Foreign Business Ownership in SE Asia
For someone used to doing business in the West, there is the risk and likelihood of failure and loss of money in a short time.”Like a lamb led to the slaughter” may sound over the top, but it can and does happen, especially to recently-arrived foreigners going into business in an environment they have limited knowledge or experience of.
Starting a business in Southeast Asia in a popular expat location like Thailand or Indonesia, particularly Bali, sounds appealing to those who have vacationed there and decided to live there permanently. Other places include the Philippines, Malaysia, Singapore, Laos, Vietnam and Cambodia, with Myanmar (formerly Burma) attracting more attention now.
Attempting to start, run (or take over) a business in Asia, or become otherwise involved in the local economy, is likely to be rocky ground and should be approached and entered with extreme and constant caution. There is an often-repeated ex-pat joke: “How do you make a small fortune in [insert country]? Start with a big one!” This invariably results in laughter all around, including those who have heard it before, but all too often it is the truth. Many an intrepid ex-pat has lost everything, sometimes by falling in love, (love is blind), throwing caution to the wind, trusting local partners (personal or business) and not understanding or taking enough care of finances. The sharks are waiting in the warm shallows for new blood.
Even with recommended ‘due diligence’, foreigners are always going to be at a disadvantage when in dispute with locals, and only a few lucky ones are successful – with or without (and sometimes in spite of!) a business partner who may also be the girl or boy friend, wife or lover. The two main issues are finding someone you can really trust, both personally as well as in business and coping with the cultural differences between East and West resulting in different ways of thinking and doing business. Learning the local language can help in understanding the people and will be an asset in many aspects of living, socialising as well as in business.
Previous Business Experience
Another word of warning, this time to those who have never run a successful business in their own country. They should be very wary about trying to do it in Asia. The odds are stacked against them before they start and stories of failure and loss are legendary and well documented on internet forums.
Local Partners and Joint Ventures
In many countries, not only in Asia, the only way to own a business is by having a local partner or partners, and making it a ‘joint venture’. Apart from your own personal relationship with a local, you will quickly discover that there are local ‘businessmen’, with unsuccessful and usually under-capitalised businesses, some of whom are going to be plain con-men. These people (they could also be fellow ex-pats – possibly even less trustworthy than the ‘natives’!) see a foreigner who is looking for an opportunity as ‘fair game’. They will go to extraordinary lengths to portray themselves as having important connections with the right people in government (often claiming to be a related to a high-ranking official) who can pull all the necessary strings as far as licenses, permits etc are concerned, with promises of great mutual benefits if you go into business together. Your new potential partners may also be introduced to you by your wife or other friend.
It is very difficult, especially for a foreigner, to check on anyone’s credentials in these countries. You rely mainly on the word and assurances of those whom you think of as friends or even family, but this is misleading and you should tread very carefully indeed before making any financial commitment with anyone. Asians tend to categorise people by family connection or general acceptance by their peers. “He is a good man” or “he has a good heart” is not something you would take at face value back home, and there is even less reason to do it when on foreign soil. Be warned, ask to see some proof of honesty or fair play in business, and do as much undercover research as you can before making important decisions.
While you cannot avoid them, do not trust or rely on local lawyers too much. Use them only for applying for the legal papers required for business applications, work permits and visas. Always get a written quote beforehand. Local lawyers generally make the worst business partners as they know the law and you don’t. You will always be at a disadvantage. Countries where you should be particularly careful are Indonesia, Philippines, Laos (Lao PDR), Thailand and Malaysia, all of which are high on ‘corruption’ lists – and where power, business and politics are inextricably entangled.
Treading on ‘local toes’
While foreigners are generally seen as wealthy by the average local resident, they can also be seen as a threat to local businessmen. It is not a good idea to do something better or more successfully than your competitors, whether you have local partners or not. They have their own ways of dealing with this, some not exactly ethical, and some quite frightening!
Indonesia including Bali – the island is also a province
To stay in Indonesia, in the capital Jakarta or the popular resort island of Bali and work or start a business, you need to be aware that visas, visa extensions, work permits (KITAS) etc are important issues. You need to use a ‘facilitator’ in the form of a consultant, law office or other agency, to apply for any legal document. These people have connections – relatives or friends in government departments (including police and immigration) who can smooth the way for business and visa applications. It is virtually impossible to run a business or work in Indonesia without using them and paying their fees over and above the official ones. Local partners are likely to be dishonest, corrupt, or both. This applies to all businesses, wholly owned by locals, or foreign-run with a local (possibly sleeping) partner. Although little can usually be done about this, being aware of how things work in many parts of SE Asia certainly helps avoid unnecessary problems.
For those with the right approach and realistic expectations, a new business venture in a foreign country can become successful. The best chance is to accept advice from those who have gone before you. Learn from ones who made it (and how) and not rely on or be put off by the bitter experiences of those that didn’t. Expat bars, clubs and forums are full of them.
Read more about Starting a Business in Bali
There are government-sponsored schemes for medium to large enterprises (BoI), a little outside our scope, so we will limit our advice and observations to smaller businesses that ex-pats might want to own or operate. Visit our page on Foreign Business in Thailand. From a small business aspect we cover the topic in some detail (from experience). Many of the problems likely to be encountered by foreigners trying to run businesses in Thailand are similar in SE Asian countries like the Philippines, Laos, Indonesia and Malaysia, Vietnam or Cambodia.
As mentioned elsewhere on our pages, we can do no better than recommend you get this guide on living and working in the Philippines, written by Australian businessman and author Perry Gamsby, who has ‘been there, done that’ and is still doing it!
Read our review of Making a Living in the Philippines or visit the author’s website. As mentioned above, many aspects of foreign business ownership in the Philippines apply in other Asian countries too. You can do it, but make sure you perform ‘due diligence’!
Making a Living in the Philippines
This is an up-to-date, thoroughly researched 265 page e-book that explains just about anything you need to know to operate a BUSINESS, GET A JOB or INVEST money in the Philippines. Purchase includes free forum membership and newsletters – all for less than $30 (with money back satisfaction guarantee).
We lack personal experience here too, but if you search Google for ‘malaysia sucks’ you’ll find some who rant about their money-losing experiences there. The choice of business partners is going to have a crucial effect on success in Malaysia. More classic tales of ‘lambs to the slaughter’.
See also our Foreign Business in Thailand and Running a Thai Bar pages.