The Top 5 Countries for Outsourcing in Southeast Asia

January 23, 2018

What’s the best country for outsourcing in southeast Asia?

As it turns out, that’s a complicated question.  Not only is it difficult to compare one entire country to another—across broad swaths of sectors, skill sets, and more—but there are so many variables that go into outsourcing that it’s hard to pinpoint one exact measure that’s conclusive about any particular choice.

The good news? Southeast Asia is rich with human capital of all types, which means that there’s more than one country that merits consideration on our list. With that in mind, let’s explore the top five countries for outsourcing in southeast Asia—and why they belong on the list:

#1: Indonesia

The world’s largest island country—featuring more than 13,000 islands—might also be your best bet for outsourcing to southeast Asia. There are a number of reasons that make Indonesia a great outsourcing labor market —a large population base, for example, means that there are plenty of choices in the talent pool.

Indonesia is the top overall rated country for outsourcing in southeast Asia, according to StatisticBrain, and ranks 2nd best in the world. Indonesia is also the fourth-most populous country in the world, according to Census.gov, behind only the United States, India, and China. While that alone wouldn’t make Indonesia a top selection on our list, the cost index does compare favorably to other popular outsourcing countries like India.

According to Ranker.com, “Indonesia is now restructuring its strategy toward economic growth. Their main proponent is the IT segment, which include systems integration, training, support, internet, and global professional services.”

#2: Malaysia

When Consultancy.uk put together its list of the top countries for outsourcing, it ranked Malaysia as third. Not third on southeast Asia, but third in the entire world, competing with the likes of major population centers like India and China. According to Census.gov, the population—some 31,000,000—finds itself dwarfed by other population-dense areas in Asia, including mainland China and Indonesia.

But this is not a population list. Consultancy.uk ranked Malaysia’s “business environment” as favorable when compared to larger population centers. Though Malaysia did not rank so well when it came to the availability of advanced “skills,” that doesn’t mean that there aren’t plenty of qualified candidates to be found.

Ranker noted that Malaysia is a “key contender” for BPO—or business process outsourcing—which is a popular function to outsource overseas. That makes Malaysia one of the highest on our list when it comes to outsourcing—and a key contender in southeast Asia.

#3: Philippines

StatisticBrain lists the Philippines as the fifth-rated outsourcing country in the entire world, which only serves to highlight how competitive this area is. The key here? The cost index. The Philippines features low labor costs for outsourcing while hosting a capable population. Featuring one of the highest scores on the “financial attractiveness” rating from Consultancy.uk, the Philippines can be highly effective for those companies looking to save money on outsourcing without losing out on the quality of their talent.

The Philippines also has a population of more than 100,000,000—which places it lower than China and Indonesia but higher than rivals like Malaysia and Vietnam. A large labor force with plentiful talent combined with low costs makes Indonesia a frequent target for U.S. companies.

#4: Vietnam

Vietnam features a competitive labor market combined with very favorable financial ratings to make it attractive to companies looking for outsourced labor. In fact, Statistic Brain rated the resources/skills of the Vietnamese as higher than those of the Thai, which is one reason it ranks higher here.

Successful international outsourcing strategies require more than targeting countries with large populations or affordable labor. It’s also about finding the right talent mix that fits your company. The quality of talent available in Vietnam helped it edge out Thailand for inclusion on this list—and it’s why it’s important to understand that the world of outsourcing is much more complex than many companies might expect.

#5: Thailand

With a workforce of some 39 million, according to StatisticBrain, Thailand has plenty to like as it relates to outsourcing. Perhaps the most attractive of its features is the cost index, which rivals those on the top of the list overall—including Indonesia and India. Ranker, too, sees a “low cost basis” for the country. An unstable political situation has posed problems in the past, however, which has led to lower confidence when outsourcing to Thailand. That makes Thailand a mixed bag—though it ranks high on some sites, others note that outsourced work in countries like Thailand is a relatively unpopular way to make a living by locals.

Have you experienced roadblocks when trying to hire overseas? If so, Clearfront HR can help. We can manage the complexities of international HR for you. Get in touch and let us know more about your international hiring needs.