ExportWise spoke with Chia Wan Liew, EDC’s Singapore-based Chief Representative for Southeast Asia since May 2013, for his thoughts on Indonesia and the Philippines – two of the region’s most active markets for direct financing.
How strong is the Canadian presence here?
Canadian presence in Southeast Asia is still fairly limited despite this being one of the most robust growth regions globally. ASEAN companies do not usually think of Canada when doing business abroad. Likewise, Canadian companies gravitate towards China, Japan and India when they think of Asia. However, the awareness of Canadian companies about the potential of these two markets is gradually growing.
Where will Canadian businesses find opportunities in this market?
The Asian Development Bank estimates that Indonesia alone needs to invest more than $300 billion US to address the country’s current infrastructure deficit. These include construction of new road systems and expansion of existing roads, civilian airports, railway systems, seaports, power generation plants and distribution networks.
Logistics and transportation systems are other areas that present opportunities for Canadian companies, particularly in the aerospace sector. The demand for ICT equipment also saw a number of Canadian SMEs venturing into these markets within the last five years. Agri-food is another sector that Canadian companies should pay close attention to. The extractive sector, especially oil and gas in Indonesia, has also attracted a lot of mining services companies and equipment suppliers from Canada.
What socio-economic factors are driving these opportunities?
The purchasing power brought on by the burgeoning middle-income class will provide much of the impetus that will sustain this region’s remarkable growth story. The phenomenal growth is creating a lot of pressure on the physical infrastructure of these two countries.
Any key hurdles that Canadian companies should prepare to face in the Philippines and Indonesia?
Bureaucracy and government inefficiencies are challenging. Decision-making can be very protracted; different agencies may have different requirements, and government regulations can be inconsistent and unpredictable. Canadian companies that lack a physical presence here also face a big challenge, as is a lack of capacity to commit resources – both time and money – to the market. Corruption is endemic in both countries, however the present regimes are making good progress in the fight against corruption. For Indonesia, the language barrier can sometimes pose hurdles.
What are your top dos and don’ts for Canadian businesses that want to succeed here?
Be prepared to commit resources and stay in the market. Spend time understanding the local regulations and business environment. Identify good local partners and hire good local legal counsel for advice. Leverage the resources of the Canadian government and local business council. My top don’ts: Don’t engage in illegal business practices; don’t take a short-term approach to doing business and hope to reap profit and success within a short period, and don’t negotiate large contracts without the help of good local counsels.
What cultural practices and sensitivities should Canadians be aware of?
Email and e-conferencing are not effective modes for building business relationships. Indonesian and Filipinos appreciate meetings in person. Indonesians are generally very polite. They do not like to voice their disagreement openly. Avoid challenging or correcting mistakes directly.