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Expats jump into Asia's tech hubsBy 줄리 잭슨 (Julie Jackson)
Published : July 20, 2015 - 19:51
“What I’m seeing is a real increase in entrepreneurship and a real increase in mobility, especially among younger entrepreneurs,” said Peter Wall, cofounder of Hubud, a coworking space in Bali, Indonesia.
However, it is not easy to set up a foreign start-up across the region. While some hubs, like Singapore, are keener to globalize and attract foreigners, others have a lot of red tape and legal barriers.
South Korea has not been the most accommodating place for foreign start-up entrepreneurs either, with complicated visa processes and quotas on foreign employees, as well as a lack of public funding.
Despite varying difficulty levels by region, many foreigners are still willing to realize their start-up goals in Asia.
“I have this theory that the more difficult it is to do things, the more resourceful you become and the more successful you become,” Wall said.
The Korea Herald analyzed 10 regions across Asia on start-up conditions by comparing several key factors, such as start-up trends, incorporation costs and foreigner employment conditions, that would affect foreign entrepreneurs’ ability to found start-ups in the area.
The advantages of setting up in Japan are its huge market, solid infrastructure and world-leading robotics industry, says Chiew Farn Chung, the Malaysia-born cofounder of education technology company ClassDo in Tokyo.
“The infrastructure is insanely good, the opportunity here is seriously large. You can actually do a lot with the really fast broadband speed,” he added.
Foreigners can also set up a company in Japan even without permanent residence through an investor visa or consultant visa.
However, Japan’s high corporate taxes and language and cultural barriers may be drawbacks for aspiring foreign entrepreneurs.
“As a foreigner, it would be hard to get people to trust you and to work with you, and to invest in you, especially if you don’t speak Japanese,” Chung said.
Japanese engineers are less willing to leave their cushy jobs and jump into start-ups in general and, as a foreigner, it would more difficult to earn their trust for them to make that jump.
Chung added that the Japanese government barely provides funding or support for foreigners, and when they do it is “more of a hassle more than anything.”
Additionally, many Japanese companies do not have global aspirations as the Japanese market is big enough for them.
Costs to incorporate: 1 yen of capital (but should invest 5 million yen, or $40,000, if looking to apply for an “investor/business manager” visa) and 150,000 yen-240,000 yen in fees. Foreigners must appoint a local resident director of any nationality.
Hiring foreigners: Foreigners with permanent residence and spouse/child of Japanese citizens or permanent residents can be hired for any job. Foreigners with other residential statuses can only work in a limited number of job categories (includes “skilled labor” and “engineer”). Foreign students cannot work in Japan.
Visa: Applicants must first secure office space and have at least 5 million yen ready in hand to invest or hire at least two full-time workers before applying.
China is the second-biggest start-up market and the leading “mobile-first” (first encounter with Internet via mobile) market in the world, said William Bao Bean, partner at global accelerator program Chinaccelerator in Shanghai.
“There’s a lot of innovation coming up in China, which is particularly useful in (introducing products to) other emerging mobile-first markets,” he added.
There are foreign start-ups across many different industries, such as games, education, business-to-business and hardware.
Bean said foreign start-ups in China are mostly concentrated in big cities such as Beijing and Shanghai, although there is a small number of start-ups for gaming in Chengdu and for hardware in Shenzhen.
Foreigners do not need a visa to set up and can later obtain work visas through their own company.
However, setting up in China is heavily dependent on hiring agents, which is not legally required but “you’d be an idiot not to use one,” due to their ability to circumvent many start-up restrictions.
“In China, there is always a way,” Bean said.
The Chinese government forbids foreign companies from entering certain areas such as Internet video streaming, payment and media, and there is also a quota on hiring foreigners based on start-up capital, where 100,000 yuan ($16,000) provides visas for five to six foreign employees, and companies must bring in 1 million yuan worth of foreign capital over the next 20 years.
Setting up a foreign company in China takes six weeks and costs $10,000, but most circumvent this by registering as a local company via partnership with another local company, which takes half the time and costs $9,000.
Another difficulty is competing with Chinese start-ups, as teams often work 72 hours a week with barely any time off for holidays, while international start-ups operate with standard Western-style working hours.
“The local competition is so fierce and the international people don’t understand the local market,” he said.
Foreign start-ups may also find it difficult to navigate the different user expectations for mobile applications in China, as Chinese apps tend to have more functionalities than Western apps.
Languages: Mandarin, Cantonese
Costs to incorporate: Setting up takes six weeks and costs $10,000; most circumvent this by registering as a local company via partnership with another local company, which takes three weeks and costs $9,000.
Visa: 100,000 yuan provides visas for five to six foreign employees, and companies must bring in 1 million yuan worth of foreign capital over the next 20 years. Foreigners do not require a visa to set up the business, and can later obtain a work visa through their own company.
Companies with global aspirations that want to start out in Asia should try out Singapore, said Maria Kuvshinova, cofounder of Clubvivre, an on-demand chef platform.
“Singapore also holds language advantages, as all media is in English,” Kushinova added.
Low taxes, transparency and a preexisting entrepreneurship culture have earned Singapore the reputation as the No. 1 place for foreign start-ups in Asia.
Singapore is also multicultural with a 39 percent foreign population, which is advantageous as an entrepreneur. “You don’t have to travel anywhere ― everybody is here already,” she said.
Processing applications for start-ups is quick and easy, and everything can be done online.
However, the cost of living in Singapore is higher than that of most other places in Asia, and foreign employers also need a local partner to register for a business.
There is also a quota for hiring foreign talent, which differs by industry. Companies must also pay a “foreign worker levy” for every foreign employee they have, the cost of which also depends on their number and skill level ― putting smaller start-ups at a disadvantage.
The government also provides subsidies, but most of them only apply to local companies.
Additionally, competition in Singapore is severe for all businesses. “The sunny island really isn’t made for lazy people,” she said.
Languages: English, Tamil, Malay, Mandarin
Costs to incorporate: Registration fee of S$300 ($220) to the Singapore Registrar of Companies, Minimum paid-up capital for registration is S$1. Paid-up capital (also known as share capital) can be increased after incorporation. Foreigners who don’t reside in Singapore need a local resident director. EntrePass one-year visa is for eligible foreign entrepreneurs with $50,000 in paid-up capital in a local bank and at least 30 percent of company shares.
Hiring foreigners: Quota varies by industry. Companies must also pay a monthly levy for each foreign worker.
Start-ups are uncommon in Taiwan and its prevailing culture does not produce many assertive and risk-taking workers, said Rui Ma, partner of 500 Startups, a seed accelerator program that invests in tech start-ups.
However, Ma said that Taiwan has a stable and well-educated engineering workforce, and some of the most active users on social media and high penetration of e-commerce: The Taiwanese Institute for Information Industry predicted in May that Taiwan’s e-commerce market would reach around $32.57 billion this year.
“It is on par with Korea and Japan in terms of technology infrastructure, but is cheaper to start a business (in),” she said.
Jeffrey Ling, founder of Entrepreneurs Society of Taiwan and Taiwan Country Manager of Korean start-up Toss Lab, Inc, added that the country had a geographical advantage.
“It has strong ties to several countries in Southeast Asia, making Taiwan very centrally positioned as a starting point for expanding into other parts of Asia,” he said.
The Taiwanese government also launched an entrepreneur visa program for foreign entrepreneurs this March.
However, Legislation can also be difficult to navigate as some papers lack an equivalent English version.
“There is still no one-stop shop when it comes to information gathering and completion of official procedures,” Ling said.
Languages: Mandarin, Taiwanese Hokkien, Hakka Chinese
Costs to incorporate: Registration fee: NT$450 ($15) plus 0.025 percent of the company’s authorized capital (minimum T$1,000)
No minimum capital requirements for foreigners, but T$3 million annually for work permit and alien registration card
Visa: Foreign professionals with at least a bachelor’s degree do not need work experience to join qualifying start-ups.
Thailand’s start-up scene has only been active since 2012, but is already affordable and friendly toward foreigners and tourists, said Amarit Charoenphan, cofounder and co-CEO of Hubba, a start-up coworking space in Bangkok.
“Generally, the environment has been hassle-free and welcoming for expats,” he said.
Thailand also provides tax incentives and easier work permit processes for tech start-ups.
However, a new start-up environment means consumers still have very simple demands despite seeing a boom in social media, as well as a lack of sustainable talent.
“There’s not enough available talent pool versus the amount of companies that are out there,” Charoenphan said.
Additionally, issues such as payment and logistics are problematic. “They’re building a company based on creaky infrastructure, poor governance (and) law.”
Several restrictions for foreigners also exist, such as not being able to hold over a 51 percent stake in a company, as well as having to hire one Thai employee for every foreign one.
The Thai government also struggles with a centralized agency to assist start-ups, as tech falls under four different ministries. “You can imagine how messy that is. It’s not easy to consolidate using different agencies,” he said.
Costs to incorporate: 0.55 percent of capital for private limited companies.
Hiring foreigners: One foreigner for every 2 million baht ($320) of fully paid-up registered capital (up to 10 foreigners). Many sectors are reserved for Thai nationals, with foreigners restricted in the types of business they can run. Permits issued for specific hours and types of work; entire process must be renewed annually. Applications must be in Thai.
Visa: Foreigners working in Thailand must have a work permit and the applicant must hold a valid “non-Immigrant” visa at the time.
Hong Kong is an optimal place to start a business due to its proximity to mainland China with fewer market and information restrictions, said Simon Galpin, director-general of Invest Hong Kong.
Hong Kong has been seeing growth in start-ups from around the world across various industries, particularly in e-commerce, financial technology and hardware.
Low taxes, minimal government interference and simple incorporation processes are also an advantage. Setting up a business takes an hour to complete, with only HK$1 ($0.13) required for minimal capital and a director who doesn’t have to reside in Hong Kong.
English is also well-spoken in the area. “Hong Kong is a city where East meets West. Local people get along well with expatriates.”
Galphin said Hong Kong does not have any foreign employee quotas or any other restrictions, and that set-up costs and procedures are the same for every applicant.
“Hong Kong’s free market mechanism means that everybody is treated the same in the market,” he said.
The only drawback, Galphin said, may be the competitive atmosphere which foreigners may not be used to. “Businesses need to have very effective marketing plans and cost models in order to survive,” he said.
Languages: Cantonese, English
Costs to incorporate: About $1,200. Must have at least one director, one local corporate secretary and a physical location in HK, no capital share required. Founding a local company (via partnership) costs $200-$300.
Visa: Employment visas for skilled professionals such as software engineers, doctors and research and development specialists. Supplementary Labor Scheme for semiskilled professionals such as technicians.
“The best thing about Indonesia is that anything is possible. The worst thing about Indonesia is that anything is possible,” said Peter Wall, cofounder of Hubud, a coworking space in Bali, Indonesia.
Indonesia, especially in cities like Jakarta and Bali, has become a booming start-up market in the last few years for both foreigners and locals.
The Indonesian tech scene also has high levels of English proficiency and people are generally welcoming to foreigners.
Current start-up trends for both locals and foreigners are payments solutions, e-commerce and mobile.
“The foreign start-ups in Bali tend to work on a global scale and global idea rather than an Indonesian idea,” Wall said.
Unfortunately, there is a lot of red tape for foreigners in Indonesia. Firstly, start-up companies are not yet categorized as to whether foreigners can own them completely. “It’s a new industry so we’re not even on the category,” Wall said.
Additionally, the incorporation process is difficult, costs much more for foreign companies compared to locals and, according to Indonesian market entry services Indosight, takes around 10 weeks.
The Indonesian government mostly views foreign workers as temporary workers to be replaced by local Indonesians in the long run.
The government also constantly changes its labor laws, which makes running a start-up difficult.
“The work permit situation has constantly been in flux over the last few years, so that’s made it difficult for Indonesian-based foreign companies,” Wall said.
Although the Indonesian foreign work permit is for one year, Wall said the government has only been issuing six-month permits recently.
“It seems like the rules change frequently and it’s hard to keep track of exactly what’s happening,” he said.
Costs to incorporate: $1 million over one to three years, with 25 percent in paid-up capital.
Hiring foreigners: Only foreigners deemed “experts” in their field can work in Indonesia. Companies employing foreigners must pay $100 per month through the Manpower Ministry.
Visa: Need physical office and proof of investment, and must submit investment reports every three months until receiving an “IUT” permanent business license.
By Sang Youn-joo, Elaine Ramirez (email@example.com)(firstname.lastname@example.org)(email@example.com">firstname.lastname@example.org)
This is the sixth article in a series on foreigners working in Korea’s technology start-up ecosystem. ― Ed.
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