Having established operations in core jurisdictions such as China, Hong Kong, and Singapore, many multinationals are doubling down on their efforts to invest in the Asia-Pacific region, tapping into trends such as growing consumer demand, increasingly urbanized populations, and relatively high technology skillsets.
Our recent research with 300 general counsels (GCs) and senior in-house legal professionals at multinational companies within the Americas, Asia Pacific, and Europe found almost half (46%) of these businesses plan to set up new global subsidiaries in the Asia-Pacific region in the year ahead.
Significantly, looking at respondents from Asia Pacific alone, a clear majority (97%) said their organizations would expand their operations into the Asia-Pacific region itself, underscoring a view that there is still plenty of room for growth for multinationals. So what factors are driving these positive trends, and which countries are next in line for the establishment of new entities, whether funded by external or regional investment?
Asia Pacific: Far from homogenous
One challenge for firms and GCs is that Asia Pacific is far from a homogenous region—a one-size-fits-all template will not work, and each country needs to be addressed case-by-case. For GCs, this can often mean greater regulatory complexity.
For example, Singapore and Hong Kong are known as business-friendly locations, where a new subsidiary and corporate entities can be established quickly and easily.
While incorporation rules in countries such as Japan, South Korea, and Australia are markedly different, they do not dissuade multinationals from choosing to do business there and continue to offer material growth opportunities for international firms. Likewise, the regulatory landscape in territories like Vietnam, India, and Indonesia—all of which have been buoyed by strong consumer markets, growing levels of wealth, and positive institutional and economic sentiment—continues to develop and encourage more investment as a result.
Diversification on the rise
Geopolitical trends are contributing to this diversification of interest, which adds to the complexity for GCs managing legal and secretarial processes.
There are also areas of dissonance between countries’ adoption of digital technologies. Some countries, like China in particular, have all but replaced cash with phone apps and electronic payments, but still operate with relatively high volumes of paper documentation in terms of the business environment. That means that multinationals encouraged to diversify their entity portfolios can find it difficult to manage a range of different operations working with multiple languages, legal systems, and cultural nuances.
Indeed, respondents surveyed in Asia Pacific for our General Counsel Barometer 2024 report ranked “overcoming communications and cultural differences” highly in terms of challenges when managing corporate governance and secretarial operations. They also said their biggest priority for managing legal operations was to expand and strengthen their teams, in contrast to those in North America and Europe who said their priority was to increase automation.
In our view, this doesn’t necessarily mean that GCs in the Asia-Pacific region don’t rate automation highly, but more that their teams have traditionally been quite lean—and now need to expand to meet the complexities of running a greater number of disparate entities.
Future trends
It will be interesting to see how centralized models of governance, together with automated processes, develop across the Asia-Pacific region in the future. We believe it will take the whole business ecosystem, including governments, to drive the changes needed to digitally transform business flows.
In terms of future geographic reach in the region, we’ve seen demand grow for our services from companies expanding into Japan and India, and believe this will be followed by accelerating interest and investments in the Philippines, Indonesia, South Korea, Thailand, and Malaysia.
The fact that there are so many countries presenting opportunities—not just from targeting youthful consumer markets, but also from technology skillsets—should mean a successful future for the broad Asia-Pacific region.
However, while the region is full of potential for success, the effort required to manage local entities that operate with multiple languages and legal frameworks should not be underestimated. This is where working in partnership with a global corporate service provider like CSC can pay dividends, because we have a presence in multiple jurisdictions and understand local nuances.
CSC on the ground in key jurisdictions
As a truly global company with a wide reach, CSC has already built a level of trust with multinational companies that plan to expand into the Asia-Pacific region, either for the first time or following initial forays into China, Hong Kong, or Singapore. We have offices on the ground, and strong partnerships with experienced third parties where required. It means we can offer a full scope of services such as corporate secretarial, compliance, accounting, and payroll, to support operational and holding company entities. Our Asia-Pacific service teams work closely together as one, enabling us to provide consistent service to our clients and implement holistic solutions for them in the region.
CSC’s Global Subsidiary Management solution harnesses the power of CSC Entity ManagementSM, our market-leading technology platform to support centralization and the complete oversight of critical legal entity data—reducing uncertainty and risk. Our technology combines with a centralized service model that allows us to deliver our Global Subsidiary Management solutions not just in the Asia-Pacific region, but in 140 jurisdictions around the world.
Interested in finding out more? Download and read our latest General Counsel Global Barometer 2024 report.
