1. “Go local” to support domestic economies
The first policy shift is increased government intervention to boost domestic growth and national competitiveness. Several Asian governments are crafting ambitious economic development goals, intervening heavily to foster domestic industries. China, for example, is investing in digital technology such as 5G, big data, and artificial intelligence. And governments across Southeast Asia are supporting emerging FinTech industries. Yet sustained government intervention also creates greater potential regulatory risks – particularly if a slow economic recovery induces policymakers to protect domestic industries at the expense of foreign companies.
Our advice for mitigating the risks associated with such policies? “Go local” to help governments support domestic growth and national competitiveness by collaborating with local entities, often through joint ventures. It requires deep immersion and the slow-and-steady accumulation of political capital to unlock additional opportunities in the future. Companies that will be most successful in Asian markets will demonstrate to policymakers their long term commitment to the local economy.
2. Diversify supply chains
Government policy-driven incentives for supply chain reorientation are the second key shift. The COVID-19 pandemic has triggered a reassessment of supply chains globally and within Asia, where companies source everything from palm oil to cell phones and medical supplies. Established supply chains are often “sticky” due to strong manufacturing ecosystems for certain products in key markets, and Asian governments are offering tax and other economic incentives for companies to relocate production and supply chains to enhance resilience in the COVID-19 era.