Attractive market

Eyeing ASEAN as a burgeoning e-commerce magnet, the HKSAR government has broadened the scope of its E-commerce Easy program which initially focused on the mainland, to include the ASEAN market as part of a HK$1 billion ($128 million) injection into the Dedicated Fund on Branding, Upgrading and Domestic Sales that helps small and medium-sized enterprises to expand.

Since its debut in July, the program has attracted 102 applications, with eight having been given full or conditional approval so far. The new initiative provides a springboard for Hong Kong firms to establish digital storefronts and drive advertising campaigns on third-party e-commerce platforms.

"Hong Kong enterprises can use this opportunity to tap into key ASEAN markets and delve into the potential of video commerce. It's a good chance for them to gauge the response to their products and services in new markets," says Patrick Yeung Wai-tim, CEO of the HKGCC.

Many of Hong Kong's businesspeople in the private sector have gained a foothold in Southeast Asia. According to a survey of 120 Hong Kong manufacturers conducted by the Federation of Hong Kong Industries in May, nearly half of them are already operating in ASEAN member states.

However, the HKSAR's absence from the Regional Comprehensive Economic Partnership Agreement has left its enterprises at the mercy of high tariffs, notes Steve Chuang Tzu-hsiung, chairman of the FHKI.

When the RCEP — the world's largest free trade bloc, which links 15 Asia-Pacific economies, including all the ASEAN member states, and accounts for 30 percent of the global GDP — took effect in 2022, Hong Kong applied to join.

It has since lobbied intensively for ASEAN's backing to join the grouping, and Chuang says this must come to fruition.

The FHKI poll showed that Vietnam is the top choice for investment among 60 percent of the respondents, pointing to the country's early market reforms that mimicked China's development path. But Vietnam's less impressive economic perks — rising wages and land costs, along with labor shortages — are prodding investors to think twice.

Cambodia drew about 10 percent of the companies surveyed for its low costs of doing business, while Laos remains largely untapped, receiving a mere one percent of investments from Hong Kong.

However, ASEAN's appeal is threefold, explains Chuang. "It offers alternative production bases, vast consumer markets and fresh opportunities for Hong Kong's professional services."

The survey revealed that 60 percent of the companies have invested in garments and textiles in ASEAN, while toys and plastics account for 11 percent, and professional services make up 17 percent.

A recent move by the HKGCC — the city's oldest business organization, with about 4,000 members — has unraveled a gravity shift by Hong Kong enterprises. A delegation from the chamber visited Cambodia and Vietnam and met government officials and business organizations there during a five-day trip. "Some of our members are following up on potential business opportunities," Yeung reveals. "Chamber members plan to visit Indonesia early next year to help them better understand the country's markets."

Complex landscape

Neville Lai, an independent international affairs strategist with a focus on East Asia, warns that raking in dollars in the lucrative markets of Southeast Asia demands patience and a crafted strategy amid simmering geopolitical tensions.

While ASEAN has often maintained a diplomatically ambivalent stance between China and the United States for decades, the prospect of another Donald Trump presidency may force these countries to pledge allegiances more pronouncedly, says Lai.

In Lai's view, the logistics and supply chain sector is particularly vulnerable to geopolitical tensions, requiring companies to stay ahead of rapid changes in the political landscape. "This calls for creating a team with specialized geopolitical knowledge, buttressed with robust scenario planning and strategic foresight," he says.

Indonesia's enormous market potential, as ASEAN's largest economy with a population of 280 million whose median age is below 30, has made the country one of the primary entry points for Hong Kong e-commerce enterprises planning to make inroads into Southeast Asia.

Kevin So, CEO and co-founder of e-commerce service provider Egogo Hub, notes that Indonesia has tightened its grip on goods imports in recent years to protect its clothing, footwear and bags market.

Indonesia's de minimis threshold — the value of goods below which imports are duty-free — has been slashed from $100 to $3 in a series of reductions between 2017 and 2022. And the authorities now require a minimum $100 price tag for imported products to be sold on e-commerce platforms.

Some firms are adapting to the change by setting up shop locally. About 10 percent of So's clients have established Indonesian production lines and hired local people in a trend that's expected to grow. However, he warned against viewing Indonesia as a quick fix for faltering domestic sales. "The preparation work is extensive and complex. Those seeking instant results invariably stumble. Companies thinking of merely trying to boost their annual sales when Hong Kong business is down, typically, are struggling here."

Many Hong Kong companies export digital products to Indonesia, such as surveillance cameras, data cables, driving recorders, and small home appliances, as the country's limited domestic computer, communication and consumer electronics manufacturing capacity makes government regulations receptive to imported electronics.

"Indonesia's electronics manufacturing gap has created an open import environment," says So. "While Hong Kong companies handle branding and distribution, more than 90 percent of these 3C products are manufactured on the mainland.

"The most challenging phase is when brands first enter the Indonesian market. Despite Indonesia's market size, the initial preparation work requires significant investment in human resources, time and capital, compared with pure trading operations."

So, who has spent about six years helping Hong Kong companies navigate Indonesia's market through services ranging from warehousing to digital marketing, recommends an online-first approach for market entry to gather immediate local feedback.

William Lo Wai-lam, general manager and principal consultant of WeBoost Consulting, says Indonesia and Vietnam have captured the lion's share of attention among Hong Kong e-commerce businesses.

Lo, who has spent two decades advising businesses in the region, sees ASEAN as a lopsided market. On one side sit Vietnam and Indonesia, where penny-pinching consumers drive demand for affordable goods. On the other, Singapore and Malaysia beckon with their deep-pocketed buyers and premium prices.

"Companies must adopt an approach to cater to each market's consumption power," he says.