Building on the growth of ASEAN’s services economy

The services sector has emerged as a key engine of growth in Southeast Asia. Trade in services in the 10 countries that make up the Association of Southeast Asian Nations (ASEAN) is now close to a trillion-dollar market, having surged from USD563.7 billion in 2012 to USD933.6 billion in 2022.¹

As in other regions, ASEAN’s total services trade accelerated in the post-pandemic era, posting 16.4% year-on-year growth in 2022 to surpass pre-crisis levels. For services businesses looking for future sources of growth, however, ASEAN stands out as a compelling opportunity, supported by deepening integration into the global economy, advancing digitalisation and a rapidly growing consumer base.

The services sector in ASEAN is increasingly attracting global businesses, while local leaders are venturing into new markets and leveraging new technologies to expand across the region and the globe.

Total services exports across the region reached USD467 billion in 2022, with transport, travel, and financial services all posting high growth.²

The ASEAN services sector is benefiting from the region’s strong economic growth and rising spending power, which fuels demand for transport, travel and financial services. In turn, that growth encourages both domestic and international businesses to expand in ASEAN, boosting their need for legal, financial and advisory services.

Armed with an educated workforce, digital literacy, and extensive regional connectivity, professional service providers in the region are poised to capitalize on the wider macroeconomic picture.

However, to fully harness the potential, firms must pay close attention to distinctions across the region’s many markets, particularly when it comes to the quality of education and language skills.

The appeal of Southeast Asia to international businesses is often rooted in the coupling of a skilled workforce with competitive wage rates, making the region particularly attractive for the expansion of manufacturing businesses.

In a HSBC survey in 2023, ASEAN's skilled labour pool emerged as the region's most compelling feature for international businesses, climbing from a second-place ranking in our 2022 study.

However, within that allure lies a set of challenges confronting overseas employers.

Personnel issues have consistently ranked among the top three challenges for international firms, a trend observed in both our 2022 and 2023 surveys. In the latest study, 28% of respondents cited challenges in talent deployment among their top three hurdles, reflecting the complexities of navigating the region's labour market dynamics.

An equal percentage of respondents acknowledged grappling with cultural differences, underscoring the importance of cultural intelligence for businesses looking to expand into new markets.

Discrepancies in skill levels between individual markets are also still prevalent. To capitalize on regional growth, businesses could benefit from prioritising talent development initiatives. Nurturing professionals, helping them to acquire specific skillsets and meet the needs of a particular business sector, represents one of the most effective investments in the region.

Cultural disparities, language barriers and a lack of local expertise are long-held concerns for businesses venturing overseas. Yet these traditional hurdles are coming down as technology and digital connectivity makes it easier to manage remote teams and communicate across borders. With a high internet penetration rate and a diverse range of skillsets on offer in different locations, ASEAN’s services economy holds enormous potential for further growth.

HSBC has been navigating these challenges and opportunities in ASEAN’s financial services industry for over 135 years. With over 200 banking outlets catering to 30,000 corporate clients across six major ASEAN markets, we are ideally placed to support services businesses who are looking to expand across borders or optimise their existing operations.

Our ASEAN Desk Network puts individual specialists around the world at your disposal to provide insight into local business practices, cultures and legal environments. They can also help clients access the banking products and services they need to capitalize on growth opportunities and lay the groundwork for market entry strategies.

We offer a robust suite of services designed to support payroll, digital payments and collections and liquidity management in multiple currencies across regional markets.

As ASEAN continues its trajectory of economic expansion and global integration, the outlook for the services sector is bright. We are ready to help businesses navigate this dynamic region and capitalise on ASEAN’s accelerating potential.