The Covid-19 pandemic pushed more than 4.7 million people in Southeast Asia to extreme poverty, setting back the numerous efforts which have made Southeast Asia a prime example of successful poverty reduction in the past decades. With the progressive easing of restrictions and opening of borders for travel, Southeast Asia is on a great path to retrieve jobs lost from Covid-19 and bounce back towards robust economic recovery.
The pandemic has led to widespread unemployment, worsening inequality, and rising poverty levels, especially among women, younger workers and the elderly in the region. With a reference scenario of no-Covid, it was estimated by the Asian Development Bank that the region led to 9.3 million fewer jobs being created in 2021.
Today, Southeast Asian economies are recovering slowly, though growth remains volatile and the economic situation remains fragile. We are seeing more intensified efforts across the region to build back greener and better. The region has made great strides to build back a stronger, better economy.
According to a recent poll by the Asia-Pacific Economic Cooperation on digital skills gaps, 75% of employers report major skill mismatches for individuals entering the workforce. To produce a future workforce that is better able to support a contemporary economy, more investment is required. Significant improvements in education systems, programs promoting workplace apprenticeship and training, and incentives for reskilling and upskilling are all part of this strategy.
Countries can improve their competitiveness by removing trade barriers to increase efficiency and productivity, cut red tape, improve logistics, and promote small business modernization through technology adoption and incubation.
In order to finance recovery, policymakers in the area must also strengthen macroeconomic fundamentals and preserve fiscal restraint in debt management. In Asia, huge Covid-19 response packages have significantly increased fiscal deficits and debt levels. As Southeast Asia recovers from the pandemic, governments must address existing economic and financial imbalances while also ensuring sufficient foreign reserves and policy room to cushion future shocks.
Moreover, as countries work to speed up their economic recovery, they should go beyond the idea of pursuing “business as usual”. This crisis provides an opportunity to increase green investments and set the foundation for a more sustainable economy. Rivers and oceans should be protected, and countries should be encouraged to switch to cleaner fuels.
By aggressively recycling and reusing resources, the public and private sectors could collaborate more closely to lessen the industry’s environmental impact. Reductions in carbon emissions should be rewarded through tax policy. Green infrastructure projects should be pushed in recovery plans because they are both excellent for the environment and a key source of growth and jobs. For example, the Asian Development Bank is collaborating with regional and international partners to help economies transition to more sustainable alternatives. This people-centered approach to recovery can help create more productive jobs, especially in hard-hit industries like transportation, hospitality, and tourism. It has the potential to reverse Southeast Asia’s productivity trends, which were reversed due to Covid-19.
With Southeast Asia’s promising growth opportunities, Altios is here to accompany small and mid-cap companies every step of the way on their journey towards international expansion.
In the wake of Russia’s invasion of Ukraine, the 10 member states of the Association of Southeast Asian Nations’ concerns are raising. While Asian companies are less exposed to the two countries than their European counterparts, the crisis might nevertheless have an impact on the region’s enterprises. Here are some implications for businesses in Asia.
#1: Oil and gas
Increasing oil prices will impact both businesses and consumers, while inflation and geopolitical tensions threaten to drag down investment sentiment and demand for travel just when companies are starting to recover from the COVID-19 crisis.
Due to concerns over Russian supply, oil prices are surging, with benchmark WTI crude futures surpassing $100 per barrel for the first time in more than seven years on Thursday. After Saudi Arabia, it is the world’s second-largest oil exporter.
Higher crude and gas costs would have an impact on companies that consume oil. “This may result in even greater inflation around the world and force central banks to tighten monetary policy at a faster pace, weighing on risk assets, notably the rate-sensitive technology sector,” says Margaret Yang, a Singapore-based strategist at DailyFX.
On the other hand, certain Asian energy-related industries are expected to prosper. Medco Energi Internasional, an Indonesian oil and gas firm, surged 13 percent on Thursday, Elnusa, an oil and gas equipment and services company, rose 12 percent, and AKR Corporindo, a petroleum trader and distributor, rose 6 percent. PTT Exploration and Production, a Thai oil company, also increased by 3.5 percent.
#2: Transport and tourism
A drop in international travel as a result of the tensions, combined with higher fuel prices, would be a setback for airlines as they try to recover from the coronavirus outbreak. Following omicron variant outbreaks, some Asian nations, including Thailand, were just recently beginning to open their borders to vaccinated tourists for quarantine-free travel. However, geopolitical dangers may deter people from visiting, putting the brakes on a future tourist resurgence in Thailand and elsewhere.
In addition to these operational challenges, Asian airlines face greater risks. The fact that some of their European partners have halted Asia routes is a setback, and if the conflict continues, demand for flights into and out of Europe could suffer. Long-term warfare would also be detrimental to the global economy and destroy travel sentiment.
The current crisis has arisen at a time when Ukraine is establishing itself as a growing tech hub in Eastern Europe. Many multinational corporations have bases or offshore development partners in the country, taking advantage of the educated yet low-cost workforce. These businesses are now increasingly concerned about the local situation.
Ukraine exports wheat, corn, and other commodities in large quantities. While those items are primarily destined for European markets, potential supply chain disruptions might raise grain prices across the board, affecting Asian firms and consumers.
The Food and Agriculture Organization of the United Nations’ Food Price Index reached 135.7 in January, up from 113.5 the previous month. Many Asian food producers have announced price increases in recent weeks, claiming that rising raw material, logistical, and packaging costs were making it impossible to absorb. Further complications from the Ukraine crisis would weigh on Asia’s food producers.
#5: Rare metals & rare gas
According to market researcher TrendForce, Ukraine is a significant supplier of raw material gases for semiconductors, including neon, argon, krypton and xenon. For example, Ukraine accounts for nearly 70% of the world’s neon gas capacity. “If the supply of materials is cut off, there will be an impact on the industry,” TrendForce said.
There will be no impact on chip production in the short term, as there are still supplies from other regions, but the researcher says, “the reduction in gas supply will likely lead to higher prices which may increase the cost of wafer production.”
Russia is also a major exporter of rare gases, also known as noble gases, and palladium, which is used to purify automobile exhaust. Some Asian economies such as Japan — a major car making economy — are heavy importers of Russian palladium. If Moscow limits exports of this material, it could affect Asian businesses if alternative sources cannot be readily found.
The full article, as reported by Nikkei Asia, can be found here.
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The signature of the Pacific Alliance-Singapore Free Trade Agreement (PASFTA) by Singapore’s Minister for Trade and Industry and his counterparts from the Pacific Alliance, consisting of Chile, Colombia, Mexico and Peru, took place on the 16th Pacific Alliance Summit, in Bahía de Málaga, Colombia.
After concluding negotiations that lasted over four years, Singapore becomes the first associate member of the trade bloc with a combined gross domestic product of over $2 trillion. In a pre-recorded speech for the 16th Pacific Alliance Summit, PM Lee states that “PASFTA will strengthen and institutionalize the economic links between our countries”, creating opportunities for people and business. This will allow Singapore and the Pacific Alliance to cooperate in mutually beneficial areas such as the digital economy, logistics and infrastructure, and food trade.
Currently, the Pacific Alliance accounts for one third of Singapore’s total trade and investment with Latin America and the Caribbean.
More than 100 Singapore companies across various sectors, including trade, technology, innovation as well as infrastructure, operate in Pacific Alliance countries. Similarly, large companies from the Pacific Alliance have established a presence in Singapore.
“We hope that more companies from the Pacific Alliance will follow and use Singapore as a gateway to develop markets and seize business opportunities in our region”, PM Lee said.
The countries will now work on their ratification processes to bring the agreement into force, according to MTI. The FTA will go into effect after Singapore and two Pacific Alliance member states ratify the free trade agreement.