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Thinking of exporting to Asia? Here are 7 common pitfalls to guard against

July 5, 2018

Tips to succeed with exporting to AsiaUK exports to Asia are now worth 18% of the UK export market – that’s £98.6 billion. China is now the eighth largest export market for the UK – with India and Singapore being among the UK’s largest trading partners in the commonwealth.

Trading to Asia offers an entirely new world of possibility for UK businesses to export their products and to build a global brand – and with Brexit fast approaching and the future of British trading unclear, exporting to Asia is becoming increasingly popular.

Asian countries are currently boasting rapid economic and population growth. Within this booming population, increasing salaries mean there is a rising middle class – the fastest growing in the world. The highest number of billionaires and millionaires on any continent are also located in Asia.

As a result, Asia’s population has an increasingly disposable income and consumption is increasing.

60% of Global buying power lies in Asia

The demand for products and brands is at an all-time high and this is set to continue for the foreseeable future. Health-care spending alone is expected to exceed $3.5 trillion by 2020.

Indeed, collectively, Asia represents 60% of the total buying power of the world. Happily for British business, the population also has a penchant for high-quality British-made goods – from whiskey to chocolate.

And the good news keeps coming. Exporting to Asia has never been easier.

The fast-improving infrastructure in many Asian countries, coupled with the cheap warehousing and logistical costs mean that it’s becoming more and more feasible to trade there.

The lower cost of labour in Asia also allows western businesses to operate in these markets at a reduced cost – minimising the risk normally associated with entering a new export market.

Adoption of IFRS and Corporate governance codes by many countries across Asia is also making it easier to trade with Asia.

Guard against the pitfalls of exporting to Asia

Exporting to Asia can be extremely profitable if done in the right way. However, it can also become very messy and expensive to fix if anything goes wrong.

It’s impossible to ignore the risks surrounding exporting to Asia and it’s important to be aware of these and protect your business as best you can. There are a few things you can do to properly guard yourself against potential pitfalls

1. Register your intellectual property

Registering your intellectual property in Asia can be a painful and laborious task. It is very time consuming and can be very expensive, but it is an essential part of exporting so make sure you build this into your timeline in order to avoid any nasty, unexpected delays.

It can be very difficult to navigate the regulatory environment that protects intellectual property in Asia. Even if you have a team around you that can speak the language and help you break through the language barrier, the cultural difference can be much more difficult to understand.

With over 50 different governments within Asia, most without any well-established processes or procedures – it can become a very difficult process.

2. Have cash reserves

Unlike western markets, Asia requires a cash intensive structure. In order to survive and deal in those markets, it’s important to have plenty of cash reserves.

3. Be careful of who you partner with

Markets in Asia have a tendency to favour their own national companies over foreign companies – so it might be an idea to partner up with an Asian company. However, searching for a knowledgeable and trustworthy company in these markets can be very difficult given the language and cultural barriers.

Avoid signing up with any partners without carrying out thorough background research and providing clear and enforceable paperwork and responsibilities.

The methods of conducting business in Asia are very different, so it’s important to be as clear as possible before you decide to become business partners.

4. Get trade credit insurance

The average credit period and rates for importers/distributors on payment of goods changes in every Asian country – but securing your transactions using trade credit insurance can help you to trade successfully in Asian markets.

5. Government difficulties

Even within the same country, government authorities will have different ways of handling things and will have different practices. This can cause huge confusion, and also waste your time, energy and resources.

The inconsistent law and policies can be very frustrating – it can often depend on the individual officer or judge you are dealing with.

Some Asian countries can even have the laws suddenly change with no prior indication – which can have game-changing consequences. Be aware of how much governments can vary across Asia and prepare for all situations.

6. Think about taxes

Every country in Asia has their own unique tax structure and method of payment. It’s a good idea to consult a tax professional to properly calculate all the taxes applicable to your product and the revenue that would be generated by its sale.

Many Asian countries impose very strict penalties on tax-related crimes – even if their crime was an honest mistake.

7. Infringement and counterfeits

Many Asian countries are infamous for intellectual property theft and extortion. A huge worry among businesses is the lack of control over counterfeit products in Asia – patent and trademark infringements are common and the counterfeit of goods is also a huge issue.

The rise of digital technology has meant that news of new products easily reaches their neighbouring countries, which can invite trouble from a market that you might hope to enter in a few years.

Trading in Asia can be a positive step towards making your brand a global one.

Exporting to Asia takes up such a huge portion of the UK export market that it can be a very successful business venture – but it is a very difficult situation to navigate so seek as much expert help as you can in order to legally set up and run a successful business in Asia.

About the author

This guide has been written exclusively for ByteStart by Siddharth Shankar is a leading expert in trading with Asia and CEO of Tail’s Trading, an innovative new solution for SMEs exporting to Asia.

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