Looking ahead: risks aplenty, but there may be opportunity too
SOME will sing in this season about peace and goodwill to all men. Yet, more than ever, business bottom lines are affected by conflicts and political contestation – global and also within some countries. Looking at the year ahead, here are two outsized political risks and, in the spirit of hope, one potential opportunity.
Unending, expanding conflicts
The first geopolitical risk that most think about is the wars in Europe and the Middle East. Fighting continues with shocks and outrage but these are no longer fresh wounds. The Russian invasion of Ukraine will be two years old in February. The conflict between Israel and Hamas is entering its second quarter, much longer than most campaigns fought by Israel. Wider impacts must be watched.
For the conflict in Europe, some regard inflation and sanctions against Russia now as normal considerations.
Yet, unending war is hard to contemplate, given the human, financial and other costs on combatants as well as supporters. As weariness sets in, the urge may be to end things. This could be waged in ways contrary to the laws of humanitarian protection of civilians or by Russia again threatening a nuclear option. These must be contained.
The same applies to the Israel-Hamas conflict. The present focus is on humanitarian concerns and Israel’s heavy bombing campaigns. But concerns are already mounting about shipping through that region, with rerouting and delays.
Depending on how the Hizbollah acts, and if Israel should try to permanently occupy and sanitise Gaza, more countries could be drawn in. Even if this is not what Saudi Arabia and Qatar wish, such a scenario could hit oil supply and spike prices again.
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Within our region, the post-coup conflict in Myanmar approaches its third year. It is an ongoing tragedy but its impacts on business elsewhere have been limited so far. This however could change in the months ahead, and not for the better.
The military junta is struggling against armed ethnic organisations and, while some may applaud the development, there are also concerns if it weakens further. For rather than the pro-democracy forces winning, the risk is of collapse and implosion that would create instability beyond the woes suffered thus far.
In all three conflicts, at some point, ways must be found to discuss what comes next. That will require not only the reconsideration of the warring parties but also the focus of the United States as the unavoidable global power. China should also be part of such processes, as a rising power with interests and influence.
Those elements of American attention and Sino-American cooperation unfortunately are not guaranteed.
Domestic elections and Sino-American conflict
The year ahead will see electioneering in America for the next US president, with most observers predicting that incumbent Joe Biden will contest former president Donald Trump. The next term for the president, whoever he is, begins in only February 2025, but the campaign season itself can generate risks. The first is the relative lack of attention to the rest of the world and the conflicts discussed
Additionally, a Biden versus Trump rematch would be especially hard-fought, and that phrase may not be merely a metaphor. Remember the Jan 6 US Capitol attack, and note that more than a few Americans take it as an article of faith that Biden’s victory was rigged. Elements exist such that incendiary campaigning could spark protests, riots and even violent conflict within the US.
A third risk is for Sino-American relations. Much of the US presidential contest is usually about domestic issues and personalities but China could come into focus – with candidates challenging one another to be tougher on Beijing, whether about the South China Sea or TikTok.
Taiwan will complicate things with its own presidential elections due to be held in January 2024. Most surveys show the current Vice-President William Lai of the Democratic Progressive Party leading the race. Beijing openly regards Lai as a pro-secessionist and therefore a threat to its “core interest” of eventual reunification.
Campaign rhetoric therefore will be watched, and the ongoing military manoeuvres and tensions across the Taiwan Strait could escalate further. Should Lai win, there is no existing avenue for dialogue with Beijing. This could spill over to the US.
Similarly, tensions between the Philippines and China over their claims in the South China Sea would be watched.
Both Biden and Trump, when in office, have reassured Taiwan and the Philippines. What the US does – or does not – could then feedback dangerously into US politics and being tough on China.
This does not mean that US-China relations will inevitably come into conflict. Considerable effort has been made to restart high-level discussions as “guard rails” against misunderstanding and miscalculation.
Yet, irrationality and accidents cannot be ruled out, and increased strains must be expected between the world’s two largest economies.
Consolations and cheers
There are more risks that may arise. But is there any cheer? Perhaps.
Following the end of the pandemic, the US Federal Reserve and most central banks raised rates to battle inflation. The broadest range of businesses and investors have felt the effects – not only emerging markets and technology-sector startups but also bonds and plain-vanilla bank business loans.
Now, in contrast, the Fed has indicated that at least three rate cuts are likely in 2024. That should prompt capital to return from the sidelines and, in anticipation, a number of markets are already doing better. Our region too could see an uptick of interest.
Notwithstanding the situation in Myanmar, Asean continues to outperform the global average. Politics swirl, especially with the upcoming presidential elections in Indonesia. But, comparatively, the risks appear containable and the prospects for our region are good.
One might wish for more cheer than this. But given all that is happening globally, perhaps we should be content to accept these consolations and look ahead.
The writer is chairman of the Singapore Institute of International Affairs
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