“We even hold these meetings in a windowless room – makes it feel more like a wartime bunker.” 

I think this particular regional head of government relations was joking about the meeting space for her company’s risk committee, but after a 2022 of actual conflict in central Europe having real implications for corporate strategy, and much (off the mark) talk of possible clashes in the Taiwan Strait blowing up regional supply chains, it’s unsurprising that some executives in their darker moments feel like they are on a war footing. After all, they can no longer just fret about a possible truck driver strike in Bangkok or an off-piste regulator in Jakarta; boards, CEOs, risk committees, strategy teams all now must take in the “big stuff”. 

You know what that is: the global economic slowdown that’s going to define our 2023; the US-China decoupling that will motor on for years to come; the inevitable North Korean nuclear test just when you’ve got over your Taiwan Strait angst; and yes, sadly, fighting in central Europe that has yet to reach its high-water mark. 

But my advice for managers in ASEAN is to go light on the bunker mentality in 2023. This so-called “polycrisis”, an interlocking hellscape of disparate but inextricable geopolitical risks, is rather overrated for those of us trying to do business in Southeast Asia. 

“Interesting, frightening, certainly worth monitoring, but not really feeling it directly” was the overall sense at a recent roundtable of Singapore-based CEOs, legal counsel, and production managers to the geopolitical risks outlined above. Indeed, the view from Singapore, KL, Jakarta, Manila, Bangkok and Hanoi is rather bright. In these capitals, current account deficits are under control, inflation is lower than it was in the wake of the 2008 global meltdown, levels of corporate debt remain manageable and much of it is locally denominated. The momentum and quality of ASEAN’s surge out of COVID-19 will carry it some way forward next year even as demand tanks elsewhere. Relatively speaking, as China staggers towards the COVID off-ramp, as Europe fights and freezes, as the US inflates itself into an induced recession, consumption and GDP growth in much of Southeast Asia is going to remain robust.  

The region’s politics won’t exactly add to this relative-good news story in 2023, but they won’t particularly detract from it either. If a “clique” might be defined as the machinations of sub-party groupings, 2023 will be its year. Cliques within Malaysia’s UMNO will be kingmakers in the new normal of that country’s highly fractured politics – Prime Minister Anwar Ibrahim’s twenty plus-year dream of power might be short-lived. But business will roll on – just don’t try and book an appointment with a minister. 

Cliques around Prayut Chan-o-cha’s junta-backed government in Thailand will have the deciding vote rather than the general public in polls scheduled for next year. And yet “Teflon Thailand” will be one of the few economies to grow year-on-year, perhaps a respectable 3.6% as it reclaims its role as a tourism and agriculture superpower. 

In the Philippines, Bong Bong Marcos is busy reminding us that there, “clique” is a synonym for “family”. He’s formed an unholy trifecta between his clan and those of preceding presidents Duterte and Macapagal Arroyo, but again, in the context of relatively light-touch government. 

Cliques in Indonesia’s most powerful political party, the PDI-P, may put a brake on the emergence of any meaningful candidate to challenge Prabowo Subianto in the 2024 presidential contest that is already well underway. He shares a love of Mussolini with Italy’s Prime Minister Giorgia Meloni, but unlike the election that produced her, Indonesia’s poll will be a relative paragon of decorum and continuity. “Never easy, but still attractive” will be the mantra that continues to guide investors in Indonesia. 

But perhaps the prize for cliquishness goes to the Vietnamese Communist Party, where members of various interest groups vie for senior politburo posts using exposés and corruption probes to undermine each other. This will pick up pace next year until a successor for party General Secretary Nguyễn Phú Trọng emerges, but regardless, Vietnam – darling of the foreign investment community in 2022 – will claim that position again in 2023 not because it is “Little China” but because it actually puts together the red carpet for foreign investors really rather well.  

But before we relax, in Southeast Asia there are parts of the polycrisis where we won’t merely be spectators, but active and successful participants if we prepare, or just victims if we don’t. 

Let’s take cyberspace. Companies in Southeast Asia are acclimatising to the discomfort caused by the mishmash of cyber security and data privacy regulation that has emerged around the region in the last few years. All of it annoyingly different, all of it annoyingly similar in its desire to assert “digital sovereignty”. Indonesia wants you to bring Indonesian data home. Thailand wants you to police what you host a lot more carefully. Vietnam wants you to think you are in Chinese cyberspace but Hanoi doesn’t quite have the gall or domestic champions to pull it off – so it’s a fudge. 

The resulting difficulty in doing digital business across these regimes and between them and major markets elsewhere will be the cause of legal and reputational headaches for years to come. That’s the good news. The bad news is, as companies in Asia harvest vast amounts of data and then store it locally, it is going to undermine the very digital sovereignty that these governments crave, because that data will – not may – get hacked, held to ransom and published. The blame for this will be placed on the firm. In 2023, there will be stories of governments commandeering the systems of firms who fail to respond effectively to a cyber breach. There will be high-profile punitive enforcement as governments give up on the carrot and start to use the stick, especially in the realm of “data minimisation”. Businesses should devote a lot of time and resources to defending their data and pre-emptively assessing the reputational and legal risks of holding so much of it. 

This year saw the public lexicon shift from “climate emergency” to “climate disaster” (just have a look at Twitter). The next year will see the corporate phrase “climate change commitment” morph into “climate change compliance”. That one-word revision is profound: it represents the shift from companies seeing decarbonising as a nice-to-have to a must-have, an obligation to fulfil – otherwise go out of business and/or go to jail. 

Take the freshly finalised EU Carbon Border Adjustment Mechanism (CBAM). When this comes into force in 2026 you will have to add up and then pay for the carbon you produce on your exports into Europe. This will start in dirty industries, but I guarantee you it won’t stay there. The misleadingly named US Inflation Reduction Act (IRA) is in effect a massive subsidy to the US green economy and will amount to a similar wall to carbon-intensive competitors over time. The need for US and EU firms to demand decarbonisation from their suppliers in Southeast Asia is going to become a legal requirement, not just a moral option. Unlike the machinations of Kim Jong-un or Vladimir Putin, this challenge is highly predictable and is one that can be used to create value if responded to decisively.

And so, it should be comforting to know that the most important “uber risks” that could smash into the sides of Southeast Asian businesses in 2023/4/5 are ones that, mitigated properly, will add to the sum total of global good corporate governance. Not a bad place to be, and certainly better than a wartime bunker.  
Happy New Year. 

This article was originally published in The Business Times on 30 December 2022.