Starting a Business in Asia

“Like a lamb led to the slaughter” sounds a bit over the top, but it might spark your interest. It’s a biblical quotation* relevant in the context of a recently-arrived foreigner going into business in a country or region he or she knows very little about. There is both high risk and the likelihood (some would say inevitability) of failure and loss of money.

To avoid the minefields of starting a business in Southeast Asia in one of the popular expat locations of Bali and Indonesia, Thailand, Philippines, Malaysia, Singapore, Laos, Vietnam or Cambodia – not to mention any foreign country – you might first consider an alternative which might allow you to sleep easier in your adopted new home.

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 …..? Start with a big one!” This invariably results in laughter all around, including those who’ve heard it many times 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 and not taking enough care of finances one way or another. The sharks are waiting in the warm shallows for new blood.

In spite of ‘due legal process’, 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 local business partner who may also be the girl friend, wife or lover.

Two major issues are finding people you can really trust, both personally as well as in business and coping with the many differences between Eastern and Western cultures and different ways of thinking and doing business.

Learning the language helps a lot in understanding the people and will be an asset in many aspects of living, socialising as well as in business. Visit our language learning and dictionaries (including translators and talking dictionaries) pages.

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.

Three sites, nasty-bali.org, fugly-bali.org and balibs.org comment in detail about corruption and the ethics of the police, Indonesian government and foreign-run business in Bali, and articles to support their almost entirely negative point of view. If you are intent on starting a business in Bali (or anywhere in Indonesia), these sites will probably put you off! But there are of course (at least) two sides to every story.

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.

If you do intend running a business in Indonesia, it would be wise also to learn the main language, Bahasa Indonesia. Courses are available there, but there’s an easy, fun way to get started, using your mobile phone: General vocabulary, Business, Legal, Medical and Computer terms. Instant download.

Thailand

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.

Philippines

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

Malaysia

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’.

• “…but I was like a gentle lamb led to the slaughter; and I did not know that they had devised plots against me”. [from the Book of Jeremiah]

See also our Foreign Business in Thailand and Running a Thai Bar pages.

There are other ways of earning income while living or retired in a foreign country. Here’s the alternative we found, and only wish we’d gone ahead with it sooner!

We don’t recommend that foreigners go into a conventional business in Asia unless they know their markets and potential partners very well. However, there is no reason not to operate an online business which can be based anywhere.

Income in Singapore (or anywhere) by Internet

Budding Asian entrepreneurs need look no further for advice on how to do this than Singapore’s own master of internet marketing, Ewen Chia.