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The big benefits of doing business in Southeast Asia

The next Silicon Valley?

Dateline: Mexico City, Mexico

The model that many expat entrepreneurs and digital nomads have followed has been to move to Southeast Asia, enjoy the low costs of living and freedom from US income taxes, and make money selling a productized service or other offering to Americans back home over the internet.

This strategy has often included following the 4 Hour Workweek model of outsourcing your technical work to people in India, the Philippines or another less developed country. While this model is still possible, I’d suggest that those that are looking for something more ambitious — say, those that might have been attracted to Silicon Valley ten years ago — should consider a business that’s not only based in Southeast Asia, but markets to its people as well.

In PayPal founder Peter Thiel’s autobiographical treatise, Zero to One, he extolls the virtues of innovation over globalization and that to create a great startup you need to create something completely new rather than copying an already existing concept. While this might be true in the United States, it’s certainly not true in Asia. Several of the world’s newest unicorns (companies valued at over $1 billion) are Asian startups that simply copied existing American concepts.

Examples of this are Flipkart (an Indian version of Amazon), valued at $15.2 billion, and Meituan (a Chinese version of Groupon), valued at over $18 billion.

With a little bit of thought and local knowledge, bringing an American concept to Asia can lead to huge returns.

While India and China have had their time in the spotlight, the part of Asia that has the brightest future is Southeast Asia.

The reasons for starting one of these companies in Southeast Asia are numerous.

The 10 member countries of ASEAN have a combined population of 620 million (almost twice that of the United States) and a GDP of almost $2 trillion. In comparison, the EU has a population of 504 million, while China and India have populations of 1.3 and 1.2 billion respectively. The ASEAN economy is already larger than India’s is today, and close to what China’s was 10 years ago.

While China and the rest of the world’s growth is slowing down, the ASEAN countries are a lone bright spot. Indonesia, for example, has experienced 841% growth over the past decade and has 74 million members in the middle class today, yet is expected to double that number by 2020.

I believe there are five main reasons that anyone considering moving to Silicon Valley should instead move to Bali, Singapore or Saigon to launch their venture.

Five reasons you can discover the next unicorn in Southeast Asia

1. Diversity

Southeast Asia’s diversity is its strength and gives it a unique advantage over India and China. It is home to the wealthiest and most advanced country in the world — Singapore — and has advanced, finance driven economies in Malaysia, Thailand and Singapore, export driven economies in the Philippines and Vietnam, and low cost commodity driven economies in Myanmar, Cambodia and Laos.

Singapore is now home to tech accelerators and a startup ecosystem that rivals any in the world, with venture funds specializing in everything from healthcare to FinTech startups. It is a world class city in every metric.

Growing countries like Malaysia have many of the same positive attributes as Singapore, while also having further diversified economies.

Combining the capital and technology of the advanced nations like Singapore with the labor and resources of developing nations like Myanmar, an economically unified Southeast Asia is an exciting place to start any type of business.

2. Low costs of doing business

Average manufacturing wages in Vietnam are still just $107 a month, and in countries like Laos they’re just $45 a month.

The region has a large and growing labor pool, high birth rates and a relatively young population. Other than Thailand and Singapore, every other ASEAN country has a median age under 30.

Renting office space is also much cheaper in the region than in the West. Average prime office space rents per square meter are as low as $21 in the Philippines. Plus, if you want to save on the cost of renting an office, the region is home to some of the best cafés and co-working spaces around.

Malaysia and the Philippines have highly literate, English speaking workforces, which is useful not only for someone launching a service-sector company, but also leads to opportunities in complementary industries.

3. Sound government finances

Unlike the US — where trillion dollar deficits are normal — most ASEAN countries have learned from economic crises of the past. Most public debt as a percentage of GDP in Southeast Asia is very low, making the region better at handling any future recessions than the rest of the world (as it did in 2008).

4. Widespread tech usage

While Southeast Asia has long been a low-cost production center, it is now also a center for consumerism.

Every single ASEAN country now has more mobile phone subscribers than actual people. Vietnam, for example has 122.3 million mobile phone subscribers, while its population is 89.7 million.

Jakarta, Indonesia’s growing capital city, accounts for an estimated 2.4 percent of Twitter’s worldwide traffic all by itself.

E-commerce is still in its infancy in Southeast Asia compared with India, China, and the rest of the world, but it has potential for explosive growth due to Asians’ love for both shopping and technology.

5. Unicorns that have already done it

There are already several companies that have taken what works elsewhere and applied it to Southeast Asia. GrabTaxi, a Malaysian equivalent to Uber has a $1.8 billion valuation. Traveloka, an Indonesian Kayak, has a valuation of $1 billion.  Garena, a Singaporean company that distributes Electronic Arts and Riot Games video games online, has a $2.5 billion valuation.

While these companies have already succeeded, tech is still a very nascent industry in this fast growing region. Anyone with the motivation to move here and take time to understand the culture will have a far greater chance at success than they would back in the US.

To learn more about what’s possible overseas or with an online business, I invite you to read my book, The Best Offshore Companies.

If you liked this article and are curious how to apply the Nomad Capitalist lifestyle for yourself, check out the quick video below. Then, if you'd like some help doing it, click here to let me know.



Andrew Henderson

Andrew Henderson

Andrew has been internationalizing since 2008, and has learned what works and what doesn't work when it comes to reducing taxes, increasing personal freedom, and creating wealth. Click here to work with him personally.
Andrew Henderson

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