Treading carefully amid uncertainties in the year ahead
DESPITE contributing two-thirds of total global growth as the world's main growth engine, Asia is starting to sputter due to the impact of major economic, political and social developments unfolding across the region. Asian countries are grappling with a myriad of factors, including economic disruption, geopolitical risk and even social change, that are driving a cycle of uncertainty.
Ask any C-suite executive what will keep him or her up at night in 2020, and the reply will likely be uncertainty arising from factors such as growing indications of trade protectionism like the US-China trade war and Brexit. Even if both superpowers deliver the recently negotiated "Phase One" deal signed and sealed, or even if the United Kingdom and Brussels agree on a win-win proposition, significant damage has been done.
In spite of the recent US-China deal, nearly two-thirds of Chinese goods imported by the US will be subject to an average tariff of 19.3 per cent, versus just 3 per cent previously. With negotiations starting only on March 29, the picture for Brexit is even murkier. The fallout from these two world-changing developments, and from global economic decline, slowing domestic consumption and foreign investment, will ripple through Chinese companies, and the hordes of Asian firms comprising their massive supply chains.
Any number of factors could exacerbate this impact - the worsening of Sino-US trade relations, North Korea ratcheting up its war rhetoric, and the elevation of the threat of armed conflict breaking out across the Korean Peninsula. South Korea is already grappling with rising social inequality and apathy, which are stymying efforts to reform its failing economy a mere three-and-a-half months ahead of the country's legislative elections. The country is a prime example of how political, economic and social issues are no longer distinct nor able to be resolved separately, just like the massive protests that have transformed Hong Kong, and are beginning to change India.
GUARDED OPTIMISM
That said, there are reasons for some guarded optimism. The successful conclusion of negotiations for the Regional Comprehensive Economic Pact (RCEP) with all but one of the 16 signatory nations represents a huge step for creating global economic growth. The RCEP (including India) would account for 45 per cent of the world's population (3.4 billion) and a third of global gross domestic product (GDP) (around US$20 trillion). Furthermore, the group of 16 would account for total trade of US$10 trillion and 26 per cent of foreign direct investment flows. Then there is also Thailand and other signatory nations holding out the hope of persuading India to eventually join the pact, which would result in the full implementation of the original plan for the RCEP.
Asean centrality continues to be a driving force for growth within Asia and on the global stage. With this year being the first major milestone on the road to full Asean integration by 2025, member-states are expected to increase joint efforts to integrate their economies. This spells good news for local and foreign companies eyeing the enormous potential of the bloc of 10 South-east Asian nations, which is expected to be among the world's top five digital economies by the year 2030.
Finally, the hosting of the 2020 Olympic Games in Tokyo this August presents a key opportunity to boost global awareness and recognition of Asia's tech edge. But whether the Games will deliver positive benefits or result in negative consequences remains, like everything else that governments and businesses must deal with this year, shrouded in uncertainty.
