Guangzhou Procurement Firm Looks to ASEAN Expansion
Interview with Faming Zhao, Founder of Guangzhou Branch of CTECH Global Pte Ltd
02 March 2022
The rapid growth of biotechnology in recent years has generated massive opportunities for some businesses. CTECH Global Pte Ltd Guangzhou branch specialises in international trade and the commercialisation of scientific research achievements in areas such as biotechnology, organic chemistry and material science. At present, it mainly acts as a procurement agent for advanced equipment, consumables and raw materials for biology laboratories, pharmaceutical companies and multinational companies in mainland China and Southeast Asian countries.
Faming Zhao, the founder of CTECH Global, said the last decade saw a number of mainland industries start to relocate their labour-intensive manufacturing plants to ASEAN countries. Active investment in electricity, water conservancy, copper mining, chemistry and other fields by state-owned enterprises under the Belt and Road Initiative (BRI) also fuelled demand for laboratory equipment and instruments. Because of these developments, Zhao started up his business in Singapore in 2011 in order to sell such products to China. The Guangzhou branch of CTECH Global opened for business in 2016 for the procurement and marketing of these products. Since then, the business has expanded to Myanmar, and has plans to enter Indonesia and Malaysia.
In Zhao’s view, ASEAN has many opportunities waiting to be tapped and its consumption level is on the rise. Policies such as free trade agreements and the BRI are also helping to promote trade and cultural exchanges between China and the ASEAN countries. Because CTECH Global mainly deals in technological equipment and products rather than ordinary manufacturing goods, Zhao explained that it has not come across too much competition in these countries, saying: “Our business is rather exclusive and the market is not big. No one can imitate our products and there are few agents around. Even in Singapore and Malaysia, not that many companies are capable of accepting contracts to produce such products for countries in Europe and America.”
The business environment in ASEAN is also favourable for CTECH Global. Pointing out that English is commonly spoken in ASEAN countries and many people there are ethnic Chinese, Zhao said: “In all those places we visited, we only needed translators in Indonesia.” Apart from in Singapore, the cost of doing business is lower in ASEAN countries than in Greater Bay Area (GBA) cities. For example, in Myanmar it is only 40% of that in Guangzhou, although Zhao admits that efficiency is lower there.
However, Zhao reminded GBA companies that they must overcome cultural differences in ASEAN markets if they are to succeed, saying: “In Malaysia, for instance, employees need to pray three times a day. In Myanmar, people spend half a day visiting temples. We must respect the religious practices of local employees when working with local partners. We also need to have a good grasp of interpersonal skills suited to the local society.”
Another obstacle to be overcome is brand building. People in Southeast Asia still do not know much about mainland brands. GBA companies need to train local after-sales service personnel and provide good after-sales service for products in order to increase the confidence of local consumers in mainland brands.
Zhao suggested making good use of procurement as a means to expand business in ASEAN countries, saying: “Financial and tax issues are rather complicated and local policies are not very transparent. There are many uncertainties. GBA companies could consider buying local companies and tuning them to suit their own business strategies. This is much easier than setting up one’s own company.
“They should also co-operate more with local service providers, particularly in legal services. Some ASEAN countries have restrictions on foreign investment. We need to comply with local laws and regulations in our sale of medical devices and other professional equipment. Local law firms can help us tackle legal issues.”
Pointing to Hong Kong’s role as an important logistics transit point, Zhao said: “Hong Kong is a free port with few restrictions on logistics. Some of our products cannot be shipped directly to the mainland from overseas. These will first be sent to Hong Kong for transshipment to mainland cities by water. Moreover, with its pool of talent familiar with the mainland market, Hong Kong is an attractive business location for us.”
In Zhao’s view, Singapore mainly gears itself towards Southeast Asian countries while Hong Kong largely serves the mainland market. Looking at CTECH Global’s business situation in Singapore, Zhao said he is considering using Hong Kong’s financial services to resolve the problem of fund flow between the company’s Guangzhou and Singapore operations.
Looking to the future, Zhao believes the increasing share of online sales in the business revenue of companies is reflective of the growing impact of the internet on society. Information is more transparent, but customers are also becoming more demanding. Traditional businesses must be able to find their place in the internet era and provide customers with more value-added services to offset the impact of the internet.
Zhao has devised short-, medium- and long-term plans for the future in view of the changing strategies of multinationals in Asia, but explaining how recent events had disrupted them, he said: “We had made aggressive plans to open up the ASEAN market, but the pandemic threw all our plans into disarray. Logistics is slowing down and freight rates are soaring. Supply bottlenecks prevail and cash-on-delivery has become the payment norm.”
Nonetheless, Zhao is convinced that Southeast Asia will offer massive opportunities for GBA companies when market potential is unleashed once the Covid-19 pandemic is over.
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