Adapting to a new world

THIS WEEK'S TOPIC: What implications, if any, for business are there in ongoing geopolitical developments such as the AUKUS pact?

Dileep Nair Independent Director Thakral Corporation Limited

Political stability is a prerequisite for companies to do business. This promotes economic growth. The balance of power in this region is what has allowed Asean to enjoy its steady growth in the last few decades. AUKUS could reshape this balance of power in the Indo-Pacific.

While AUKUS has been greeted with ambivalence, the addition of an overlapping security arrangement clearly enhances the stability of the region. With such growing multipolarity, nations like ours must be nimble to expand our freedom of action within the interstices of big power rivalry.

Our companies can exploit these opportunities, particularly if their supply chains are not complex, and their products and services do not pose a security threat.

Lawrence Loh Director, Centre for Governance and Sustainability NUS Business School

Geopolitical developments, particularly alliances, furnish the broader setting that undergirds business interactions.

The new AUKUS grouping may have justifiable intentions but some Asian countries have expressed reservations.

This tension may lead to a global or even regional polarisation which is not healthy for businesses. We definitely do not want to see the decoupling of supply chains, disengagement of consumer markets or delinking of critical technologies. And the ultimate consequence of trade protectionism will hurt business.

Geopolitics cannot be advanced in isolation - it has deep ramifications on the business environments which in turn affect human livelihoods. Moderation should be cautiously exercised so as not to upset the strategic equilibrium of good balance.

John Bittleston Founder and Chair Terrific Mentors International Pte Ltd

The AUKUS pact and other geopolitical agreements in the Asia-Pacific are designed to contain China in what is seen as its newly aggressive phase over Taiwan, the South China Sea and, potentially, other countries.

From China's viewpoint, the AUKUS pact and similar groupings are equally aggressive, potentially reneging on what China considers agreements already made, commitments already guaranteed.

If there is a war over Taiwan there will be opportunities for business - as there are in all wars - to supply goods, chattels and comestibles to the scene of fighting and to those displaced by it. Without a war, there are supply opportunities to troops within the agreements.

The biggest need is for skilled diplomats on both sides to prevent a war that, however limited at the start, might be catastrophic in the end.

Victor Mills Chief Executive Singapore International Chamber of Commerce

Businesses should always be concerned about geopolitical developments which have the potential to increase tension. Such events also increase risks which need to be managed and factored into scenario and contingency planning - including the risk of accidents which could result in armed conflict.

There is an eerie and alarming parallel with the arms race of the early 1900s which led to the catastrophic World War I. Then, as now, great powers played a dangerous game of military posturing instead of focussing on their own best, long-term interests. We need more talk, consultation, collaboration and adherence to global rules of engagement and peaceful co-existence.

Leon Perera Chief Executive Officer Spire Research and Consulting

Developments such as the AUKUS pact herald a major geopolitical shift. The US political establishment, across both major parties, has come to see China in the same way as it viewed the Soviet Union in the past, as a serious economic and political competitor.

There are significant implications for the private sector. Companies can expect more legal and regulatory curbs on, and attention via inspections and audits paid to, investment and trade flows from the US into China and vice versa.

Both the US and China will increasingly aim to set their own technological and regulatory standards, particularly in high tech. Companies will also have to expect more red tape when posting expatriate staff from the US or its allies into job roles in China and vice versa.

Above all, companies will need to adapt to a world where the US and Chinese governments use their considerable hard and soft power to promote their own "national champion" firms in key industries.

Ian Chapman-Banks CEO and Co-Founder SQREEM Technologies

Three geopolitical trends that impact businesses today include the increasing rate of deglobalisation due to countries prioritising domestic concerns; increasing government interventions in decision making; and potential medium- to long-term inflation. In a way, AUKUS is a response to the first two trends.

On this different playing field, companies need to be able to pivot quickly. For example, SQREEM now focuses on developing in-country standalone resources, including research and development capabilities, and self-encompassing profit centres in several countries. Although more resource-intensive than consolidating functions, it is an investment to mitigate potential risks and ensure business continuity in an uncertain future.

Kotaro Tamura Adjunct Professor (Executive Education) Lee Kuan Yew School of Public Policy, NUS

Beyond just a pact, the AUKUS and Quad are alliances for the collaborative developments of the most important security-related technologies. This will see the advancements of sectors such as nuclear energy, material sciences, space exploration, quantum computers, cybersecurity, food production and more, while being protected from China's infringement.

As part of what I'll be sharing during my upcoming course on Insights into Regional Politics, Economics and Culture at Lee Kuan Yew School of Policy, countries that support AUKUS and QUAD's Free and Open Indo-Pacific (FOIP) will be given the opportunity to commercialise these co-developed technologies while also benefitting from its digital and physical infrastructure developments, paving the way for its businesses to cater to such demands.

Chia Ngiang Hong President Real Estate Developers' Association of Singapore (REDAS)

Businesses will surely be watching how AUKUS, QUAD and other strategic manoeuvrings by US and China will evolve. The ideal situation is that the US and China are able to rationally and peacefully rebalance and recalibrate their strategic interests to compete and cooperate at the same time, leading to an amicable balance in the Indo-Pacific, thus creating a more stable environment for all.

Singapore has managed to stay neutral so far and hopefully can remain this way. If the relations are not managed well and results in geopolitical instability or smaller nations are pressured to take sides, this will have significant implications for the economy as businesses will be impacted given Singapore's heavy reliance on regional and international trade.

Businesses will need to assess potential pressure points and prioritise scenario planning and adjust their operational, diversification and growth strategies to mitigate these potential risks to ensure survival and sustainability.

Adam Meyers Vice President of Intelligence CrowdStrike

Geopolitical developments often serve to create new intelligence requirements for nation-state threat actors. The recent AUKUS agreement creates intelligence gaps for the military, diplomatic corps, and defence industrial base; and political leaders of numerous countries in the Asia-Pacific, the People's Republic of China, and the Democratic People's Republic of Korea are most likely to be most concerned by the AUKUS announcement.

Targets of these nations that have already demonstrated significant cyber espionage capabilities will be the related industries, military units, and maritime facilities most likely to be involved in supporting AUKUS. In addition, given the polarising nature of nuclear power, activist groups in member countries may conduct defacements and other disruptive attacks.

Lim Soon Hock Managing Director PLAN-B ICAG

The Anglo-Saxon trinity has always been there. It was accentuated by the US-China dispute and is now revealing more of its colours. While most sensible businesses would try to stay clear of politics, unfortunately, if they are dependent on cross-trade between China and the members of AUKUS, disruptions or new barriers can be expected going into the future.

Even if Singapore chooses to stay neutral, permitting companies here to supply "Made in Singapore" products, what is there to stop any of these countries from not allowing components from China on one side, and AUKUS members on the other, when buying or importing these products.

This Cold War 2.0 does not augur well for businesses. It has become a complex and tricky minefield for companies to tread. I hope the leadership of these countries stays rational and responsible and does not introduce measures that will disrupt (or worse, destroy) businesses.

Toby Koh Group MD Ademco Security Group

AUKUS is the catalyst that will now trisect the bifurcation between USA and China, such that the European Union will stand independent. The EU cannot but realise that they need to stand united and strong in the face of the American economic and military might.

Commercial interests will be complex, and China will seize this opportunity to lobby the EU when the French wounded pride is still raw. Businesses will have to keep a keen eye on geopolitical developments as this will certainly affect market access and supply chains. Singapore is wise to stay neutral and welcoming to all parties.

Tan Mui Huat President and CEO, Asia International SOS

The changing geopolitical landscape in the Indo-Pacific region is unlikely to have a significant impact on businesses and the safety and security of their workforce.

Nonetheless, potential challenges may arise from nationalist demonstrations, which are usually non-violent and of moderate scale. There may also be increased scrutiny on organisations, depending on their specific profiles vis-a-vis the profiles of their host countries.

In building resilience, businesses must have access to accurate and timely information for situational awareness, and ensure employees are prepped to manage anticipated challenges. Robust communication protocols are also necessary to maintain organisational neutrality and navigate political currents and sensitivities.

Maren Schweizer Chief Executive Officer Schweizer World Group

Since the end of the Cold War, Asean has successfully established a central role in Asia's architecture. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), signed by 11 countries including Australia and Singapore, is a recent example of aligned trade and investment interests. Members' trade flows have mainly been parallel with the rest of the world. E-commerce has grown significantly for members during Covid-19, led by Singapore and Japan.

While AUKUS reshapes the Indo-Pacific strategic landscape, an immediate significant effect on trade and investment in Asean seems to be unlikely. After all, the best moderation to any singular pre-eminence is to have several power clusters, including the EU, engaged rationally and in concert with regional stakeholders, working for the common peace, security, and business prosperity of the Indo-Pacific and its people.

Zaheer K Merchant Director - Corporate Affairs QI Group of Companies

In assessing AUKUS implications on business, a distinction must be made to countries which may have direct and/or indirect impact. Parties to AUKUS will directly have a business capability ramp-up in technology/information technology services at both ends of the supply chain, aside from defence contractors and associated infrastructure developments.

How much of that business spills over or is outsourced may lead to indirect business gearings for other countries, but it may be limited given the sensitivities involved in such dealings, or as China labels it, "obsolete zero sum".

The more interesting facet will be if there is a greater diversion of business interests away from the AUKUS signatories to other countries and how China will deal with such "friendlier" parties (and vice versa) now. This is potentially where significant business opportunity lies; perhaps it's smarter not to throw your lot behind anyone geopolitically at this juncture.

David Leong Managing Director PeopleWorldwide Consulting Pte Ltd

China's categorical and direct response to AUKUS, pointing out that it is undermining regional peace and stability including hurting the non-proliferation efforts. cannot be more true. AUKUS and the Quad are strategic formations by parties aimed to challenge and to ring-fence China.

The multi-parties ring-fencing and fang-installation (including nuclear-powered submarines) are aimed to contain China. Such moves cannot augur well for the regional peace framework because they are targeted to strike on provocation or otherwise.

The military installations are strategically and intentionally positioned by the US-led group. The defence rationale provided by US is not convincing.

So the possibility of a strike situation is high and likely, and it will happen in the region in which Singapore is situated. Singapore will be a party tied to the "fallout" contingency and will be gravely impacted.

The geopolitical tensions definitely do not augur well for businesses as we have to be mindful of the mines and military buildup that is against the grains of non-proliferation.

Henry Tan Group CEO Nexia TS Group

These bilateral, minilateral regional agreement pacts are not new. Individual countries or groups of companies that share common interests or business and trade have come together to work closer together. So, looking from a positive point of view, AUKUS, Quad, CPTPP etc are all positive developments.

However, if the groups come together for a wrong reason then it may raise tensions and is not helpful for the geopolitical climate. Businesses will be affected in a tense political environment.

Most business hope for a decoupling of political arrangements from business arrangements but we know that invariably this will affect one another. The danger is how the temperature of such tensions is raised - and if it goes towards tipping or boiling point it will be dysfunctional.