What Malaysia gives you in ASEAN, and what it does not

Companies from outside Southeast Asia often choose Malaysia as their first base in the region, and the reasons are sound. The mistake comes later, when a board paper describes the Kuala Lumpur office as "our ASEAN entry". It is an entry into Malaysia. What it gives you beyond Malaysia is real, and narrower than that phrase suggests.

What it does give you

The first thing most visitors notice is language. English is widely used in Malaysian business, so correspondence and contracts can usually be handled in English. For a company arriving from Lagos or London, that removes a layer of translation from every negotiation, and it means the agreement you sign is one your own lawyers can read.

The second is geography. Malaysia lies along the Strait of Malacca, one of the world's main shipping lanes, and it has major container ports on that coast: Port Klang near Kuala Lumpur, and the Port of Tanjung Pelepas at the southern tip of the peninsula. Goods bought in Malaysia leave from ports that the shipping lines already call at, which matters when you are pricing a route to a market on another continent.

Third, Malaysia makes things. It has an established manufacturing base, notably in electrical and electronic products, so a buyer can often deal with the manufacturer directly. A company looking for a contract manufacturer or a licensor will find candidates there. Malaysia is also a centre for halal certification and for Islamic finance, which counts for food and consumer-goods companies selling to Muslim customers.

Then there are the agreements. Malaysia is a founding member of ASEAN, and it is a party to two wider trade agreements, the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). A company established in Malaysia sits inside all three.

What it does not give you

It does not give you one market. ASEAN is an association of sovereign countries that cooperate closely, on trade among other things. It has no single regulator and no single currency.

The neighbours differ in almost everything a market entry depends on. Indonesia, Thailand, Vietnam and the Philippines each have their own regulators and their own distribution habits, and in most of them business is done in the national language. A product registered for sale in Malaysia is not thereby registered anywhere else; for most regulated goods, registration is still done country by country. A distributor with strong reach around Kuala Lumpur may have no reach at all in Jakarta or Bangkok. Prices, payment terms and the share of trade that runs through modern retail all vary.

The trade agreements reduce tariffs between members. They do not remove the work of entering each one. Their memberships also differ: RCEP and CPTPP each reach countries outside ASEAN, and not every ASEAN member belongs to both. A tariff preference applies only when the goods meet the rules of origin in the agreement you are claiming under, and someone has to document that for every shipment.

So a company that treats Kuala Lumpur as its ASEAN headquarters, and expects sales to follow across the region, tends to find a successful Malaysian business and a list of neighbours where nothing much has happened.

How to use Malaysia well

Treat Malaysia as a market in its own right first. Test your offer against the Malaysian manufacturers and the foreign suppliers already selling there, because the agreements that let you in let them in too. Win customers in Malaysia before you plan the next country.

Then give each further country its own plan, with its own diagnosis of demand, cost and registration. Malaysia can still help. Your contracts can be drafted from the start so that they extend to other ASEAN members later, with territory clauses that name Malaysia now and say how a second country would be added. Your supply arrangements can be set up so that the origin paperwork is ready when you claim a preference. Your regional team can sit in Kuala Lumpur.

None of that makes the second country easier to win. It makes it cheaper to enter once you have decided to.

We should be plain about our own position. We work from Kuala Lumpur today, and wider ASEAN is third in the order in which we plan to expand. A company that needs a team on the ground in Jakarta or Ho Chi Minh City this year should hire one there. A company that wants to build a strong position in Malaysia first, and to structure it so the next country can follow, is the company we can help now.