Foreign firms operating in Southeast Asia are demonstrating a high level of confidence as they look to expand their footprint in a market of some 640 million people, says HSBC.
According to the bank's latest survey "HSBC Navigator: SEA in Focus", nine in 10 (89%) foreign companies with a foothold in Southeast Asia plan to grow their presence in the region over the next two years. Three in five (61%) expect organic growth of 20% or more over the next 12 months.
More than 1,500 companies from six of the world's largest economies -- China, France, Germany, India, the UK and the US -- took part in the survey, with all of them having operations in Southeast Asia or planning to do so in the future.
With markets continuing to open up, the economies of Southeast Asia are primed for growth. Specifically for Thailand, HSBC expects the economy to grow by 3.8% in 2022 despite global uncertainties.
Given the strong expectations of growth, Thailand is the most popular choice for companies planning expansion into new Southeast Asian markets, with 23% intending to enter the market in the next two years. It was also the second market in the region behind Singapore to have the largest presence of foreign firms already operating (37%).
"This comes as no surprise as Thailand is the second largest economy in Asean. International firms are leveraging Thailand's competitive wages, increasing domestic income and wealth, growing digital economy and sizeable market as a destination to scale their businesses globally," said Krisda Phatcharoen, head of wholesale banking with HSBC Thailand.
Thailand is also considered a leader in Asean when it comes to technology, with particular strengths in biotech, edge technology, cybersecurity and digital payments.
Furthermore, 27% of international companies agreed that Thailand has handled the Covid-19 pandemic effectively, placing it second only to Singapore for the quality of its response.
"To continue to be the preferred destination for investment, Thailand will have to constantly upskill its workforce, especially in digital and sustainability," said Mr Krisda.
He noted that among international companies looking to invest in Asean, one in four (26%) plan to invest more than 10% of their operating profit to increase digitisation and one in five (21%) plan to invest more than 10% of operating profit to improve their sustainability.
Finally, with research into social trends indicating that four in five Thais are more willing to put money behind sustainable brands, this presents a large opportunity for international businesses as foreign brands are seen as "dominating Thailand's sustainability space", said Mr Krisda.