What EU businesses need to know before entering APAC

By Coco Liu, Chief Growth Officer, HLB International

Accounting for roughly three-fifths of global growth, the Asia-Pacific region (APAC) is now considered the primary driver of the global economy. While many would look to bona fide financial hubs like Singapore and Hong Kong or established countries such as China and Japan, there is also considerable activity in economies across Southeast Asia and beyond. Given the enormous potential of this expansive market, it’s not surprising that European businesses today are eyeing up opportunities in APAC. 

According to a 2024 survey by CSC Global, almost half (46%) of multinational companies saw the APAC markets as targets for operational expansion. However, while there are countless new customers and supply chains available in the region, there are also challenges to match them. Before embarking on this cross-border journey, there are a number of considerations for decision-makers.

The one-market mentality trap

Thinking of APAC as a single market is the first, largest mistake organisations often make when expanding into the region. This vast corner of the globe is made up of 45 distinct economies and more than half of the world population, and treating it as a single entity is a risky approach. 

Rather than assuming a single strategy will work universally across APAC, businesses need to consider the key motivation behind the move and then identify the right territory within the region. Just because an approach worked in Singapore doesn’t automatically mean it will work in Vietnam or Indonesia, as customer expectations, competition, purchasing power, regulation, and routes to market vary hugely from country to country.

Beyond a purely operational perspective, the political stability and legal framework of a country must also be reviewed before entering that market, not to mention the market-entry conditions. According to OECD data, foreign-investment restrictions remain significantly higher in markets such as Malaysia and Indonesia as compared to Singapore. Requirements for ownership, approval and operating requirements can vary from one jurisdiction to another for European businesses. 

Another area where the one-market mentality can trip up expansion concerns is tax, auditing, and reporting. The standards for accountancy and financial planning can range from close alignment with IFRS to local GAAP requirements that demand specific statutory reconciliation, while tax filing deadlines, statutory audit triggers and profit repatriation rules can vary significantly from one market to another. Every jurisdiction has its own ways of doing business, its own requirements, and its own challenges, all of which make a single-minded approach the wrong way to enter APAC.

What does entering a territory really mean?

This is the question businesses must ask themselves when identifying the right territory for expansion. There is more than one way to establish a presence: exporting directly or working with a distributor, seeking a partnership or joint venture, or even setting up a local sales team or separate legal entity might be the best fit. 

This choice will have far-reaching consequences for almost every part of the expansion: tax, employment, contracts, invoices, IP protection, audit, reporting, and moving profits back home. For instance, the decision to sell directly into a market like Singapore could trigger requirements for a local Goods and Services Tax as sales grow, whereas doing so under a separate entity or local partnership would trigger its own concerns. 

Meanwhile, moving goods or services across borders can also bring transfer pricing scrutiny, withholding taxes and indirect tax considerations into play earlier than many businesses expect.

When it comes to employing people, signing contracts, invoicing customers or paying tax, the way you’ve entered the market will have a serious impact. Terms of employment such as terminations and severance vary significantly between regions, as is true of paid leave, social insurance, and working conditions, which vary not only by jurisdiction, but also by the legal status of your business within each jurisdiction. 

The operating structure will affect auditing and reporting, as well as how easily profits can be repatriated and whether the business creates compliance obligations before it has built the right local infrastructure.

Future-proofing for regional complexity

Multinationals today have been managing increased complexity in recent years, with conflict, tariffs, and rising regulation all weighing on operational challenges. Expanding into new regions can lead to geopolitical complexity combining with local complexity to make conditions harder than ever to do business. 

For a European business moving manufacturing or sourcing into APAC, European regulation can still shape the economics of the decision. The EU’s Carbon Border Adjustment Mechanism, for example, puts a carbon price on the embedded emissions associated with certain imported goods, meaning production choices in Asia can affect cost, reporting requirements, and competitiveness back in Europe.

Certainly, sustainability can no longer be treated as just a local compliance issue. For companies expanding into or sourcing from APAC, ESG transparency and supply-chain data need to be built into the plan from the very beginning and not stumbled into too late. 

The same applies to supply-chain design. Recent disruption has pushed many businesses away from purely cost-efficient supply chains and towards models that are more resilient and diversified. As firms grow across APAC, they need to assess environmental impact, geopolitical exposure and operational risk together rather than treating them as separate exercises.

It’s therefore essential for businesses to enter into any new growth strategies with an understanding of the financial risks and challenges that could emerge, and strategies in place to mitigate them. AI and digital transformation will also play a growing role here, particularly in predictive analytics, risk assessment and operational forecasting, as the firms that use technology to monitor and manage cross-border complexity will be better placed than those still relying on legacy systems and fragmented reporting.

The best-laid plans

By now, I hope the concerns and considerations above have painted a picture of why rushing into cross-border expansion can lead to a serious headache for businesses. Take, for instance, a UK tech firm winning a major contract with an Australian business that would require employees on the ground in just a matter of weeks. This might seem like a fantastic opportunity, but it would quickly run into issues around payroll, tax, visas, and questions around the legal status of the new entity. Winning the contract before the tax nexus, employment compliance, and statutory accounting setup have been considered can quickly turn a sales success into an operational liability.

What’s more, the investment required for entering a new market in this way would be considerable; meanwhile, it may be a while before meaningful revenue begins to arrive. Accurate forecasting and financial foresight across initial and continuing costs are critical, as failing to consider the necessary factors in advance can turn a great opportunity into a self-made crisis. 

The businesses that expand successfully tend to share a few traits: they focus on specific jurisdictions tied to clear strategic goals, involve accounting, legal and advisory specialists before major commitments are made, and build local partnerships that give them credibility on the ground. At a recent forum in Chengdu hosted by the Chengdu Municipal Commerce Bureau and Chengdu Law Society, with HLB International as a supporting organisation, this was clear in discussions about how cross-border growth depends on strong local relationships, institutional trust, and coordinated support across markets.

Again, it’s no surprise that so many European businesses are eyeing fresh or continued expansion into APAC, and it seems certain that the region will continue to contribute heavily to global growth. How well these businesses fare will depend on the due diligence they undertake before expanding, how good their support networks are, and how they customise their entry strategy to the specific market that best suits their needs. 

Coco Liu is Chief Growth Officer at HLB International, a global network of independent advisory and accounting firms. Through the power of 58,538 professionals across 155 countries, HLB International combines local expertise and global capabilities to service clients’ needs. Coco holds an MBA with Distinction and has completed the Women Transforming Leadership Programme at Saïd Business School at University of Oxford. Speaking Chinese, English and Dutch, Coco has a deep understanding of different ways of doing business across the globe under the influence of cultural dynamics and social attitudes.