The three forces shaping Asia in the year ahead

IN today's volatile world, it is difficult to speculate what might happen next week, let alone the course of events over the next year. Shifting attitudes and heightened tensions in society, rising populism and nationalism in politics, and rapid technological change are some considerations.

There is a compelling need to scan for future developments to better understand how and why they will affect business in the coming year, which is what AT Kearney's Global Business Policy Council's Year-Ahead Predictions 2018 report aims to do. Three of the council's predictions could have a significant impact on the business operating environment in Asia and have a near-term effect on many of the region's industries.

INTENSE DEBATE ABOUT INTERNET GIANTS' POWER

The debate around the influence social media and Internet giants have over businesses and consumers will likely reach fever pitch in 2018.

According to a Reuters survey last year, more than half of online users get their news from social media platforms, which is hurting publishers of quality news. Meanwhile, the move to access information via social platforms has been both empowering and threatening for consumers.

In Australia, the government recently announced a probe to examine the effect that search engines, social media and other digital content aggregation platforms are having on media and advertising markets. The inquiry will empower the government to demand information from Google, Facebook and other tech companies.

This is part of wider reforms across the US, Europe and Asia amid rising concerns about the future of the media sector, and consumers being at risk. This is set to reach fever pitch in 2018, with legislative proposals targeting Internet companies in three areas: their ability to influence public opinion through advertisements, their business model of commoditising user data, and their monopolistic power.

The fight on taxes will also gather pace. Encouraged by recent successes such as Indonesia's dispute with Google over unpaid taxes owed since 2015, other Asian governments will gain confidence in tax disputes in bids to rein in the tech giants.

CONTINUED CHINESE FOREIGN INVESTMENT

Beijing's recent pressure on Chinese investors to moderate their foreign activities will likely cause tension in 2018. Issuing new guidelines on overseas investments, the Chinese government has grouped investments into three categories: encouraged, restricted, prohibited. Those projects that align with the country's strategic interests, such as Belt and Road, are encouraged as well as those that boost technological advances.

But governments around the world have become wary of the influx of Chinese investment in areas of strategic interest locally, including overlapping areas such as technology and critical infrastructure. The European Commission, for instance, has advanced a proposal for stricter review of foreign takeovers of EU-based companies on national security grounds.

In 2018, this tension will come to a head. Chinese companies will continue to pursue foreign acquisitions targets to bolster their technological acumen and provide growth opportunities.

But governments around the world - particularly in developed markets with more attractive technology companies such as in Japan and Korea - will find themselves in direct conflict with the new Chinese outbound investment guidelines as they seek to guard key domestic industries.

A lack of reciprocity in accessing the Chinese market will also be cited by many of these governments as a reason to block Chinese investments, especially in such areas as advanced technology, AI, robotics and augmented reality. As a consequence, the number of "blocked" outward Chinese investment deals will grow in 2018.

For most parts of developing Asia which have been eager for Chinese investment, there is likely to be greater scrutiny of such investments to ensure they are truly beneficial for the receiving country.

All of this is likely to introduce a stronger element of uncertainty when it comes to Chinese investment in 2018.

OMNIPRESENCE OF FACIAL RECOGNITION

Facial recognition software is already used more than we think, with a notable uptick last year. It is used, for example, extensively in China to verify ride-hailing app drivers' identities, for e-payments and now subway use, as announced recently by Alibaba. China's Airbnb, Xiaozhu, will also be using it in the Chinese New Year peak travel season to begin scanning tenants' faces, and hopes to find common ground with authorities amid unclear regulation.

The awareness and use of this technology will grow dramatically in 2018. This will raise privacy and security concerns, which will lead governments and civil liberty advocates to clash over the extent to which facial recognition can be used for surveillance and national security purposes.

This debate may be brought more squarely in front of policymakers and the public in the event of a terrorist attack - or the threat of one - for which facial recognition technology could be invaluable for finding suspects.

Fighting crime is a clear positive for facial recognition technology that governments are now exploring. In Singapore, there's the recent collaboration between NEC, a Japanese tech firm, and the Ministry of Home Affairs, with work underway to tap Singapore's wide network of closed-circuit surveillance cameras and drones in a bid to fight crime more efficiently and effectively.

As technology advancements such as facial recognition technology continue to penetrate all aspects of personal and professional lives throughout the year ahead, eyes will be turned to the regulators to ensure fairness in business and the rights of consumers are upheld.

So what have we learnt by all of this? Perhaps that business can, and will, be affected by a multitude of external pressures that cannot always be foreseen or controlled. But by taking a wider perspective on the most significant developments happening across the world - whether it's geopolitical, economic, environmental or otherwise - we can make informed business decisions at a time of heightened volatility and complexity.