Shared Services in ASEAN: Taxes and Talent Present Opportunity

The Association of Southeast Asian Nations (ASEAN), with its combined population of approximately 625 million people, and nominal GDP of more than $2.6 trillion, is a force to be reckoned with. If the region represented a single country, it would rank as the seventh largest economy in the world. For shared services leaders around the globe this presents a significant opportunity.

Looking at our ASEAN report, what stands out most is the significant growth of shared services across the ASEAN region. Since 2010, the number of SSCs has grown by nearly 70%. Most of this growth is led by Malaysia, the Philippines, and Singapore – with Malaysia currently hosting the largest percentage of ASEAN SSCs (more than a third). We also see a lot of growth spurred as a result of the global financial crisis of 2008.

Some interesting differences emerge as we drill down into industries. For the retail trade, automotive, and agriculture sectors, Singapore leads in SSC population by a large margin; for real estate the Philippines hosts nearly half of all SSCs in the region; but in most other industries Malaysia is comfortably ahead.

With data analytics high on everyone's agenda, it's interesting to note, too, that most of the analytics talent employed across the region is located in Malaysia – home to nearly half of all analytics-based services. Again, differences appear when we drill down into specific industries; for example, in banking, finance, and insurance the Philippines equals Malaysia in terms of analytics-based shared services.

Other global trends are equally represented: nearly a fifth of all shared services centres are now multifunctional; analytics is a growing capability; and we see more activity around marketing and compliance.

For organizations looking at new opportunities in emerging markets, this report highlights the opportunity that is Indonesia, which produces the most graduates annually and offers low salaries compared to its neighbours.

The report also identifies ASEAN countries’ cost of doing business, tax and salaries and demonstrates that in many cases cheap office rental is significantly offset by higher corporate tax rates. Similarly, the ability to identify risk, whether regulatory, geo-political, or currency-based is a valuable tool for enterprise leaders evaluating a more global footprint.

So, while Vietnam and Thailand show a very small currency risk, organizations will have to weigh up the advantages of a relatively untapped market compared to the more prevalent regulatory risk of both countries. The overall "risk" winner? Singapore, no surprise. But then there are the costs…

READ MORE: Find out for yourself which ASEAN countries best match your operational objectives in this visual data report.