5 minute read 20 May 2020
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Southeast Asian companies that transform now will lead the recovery

By Vikram Chakravarty

EY Global Strategy Connected Capital Solutions Leader; EY Asean Strategy and Transactions Leader

Experienced strategy advisor. Thought leader in Asia business. Wine connoisseur, avid squash player, ardent cricket fan and doting father.

5 minute read 20 May 2020

Southeast Asian executives concerned about the impact of COVID-19 should take the opportunity to plan beyond the crisis.

Facing the challenge of a global pandemic, global and Southeast Asian (SEA) business leaders find themselves trying to manage a crisis that few were prepared for. According to the 22nd edition of the EY Global Capital Confidence Barometer (pdf) which surveyed more than 2,900 C-suite executives globally, respondents anticipate a prolonged and deeper impact on the economy. In the near-term, they are focusing on developing resilience in their supply chains, protecting their revenues and managing their margins and profitability, while reconfiguring capital allocation and M&A plans for the post-crisis world.

Nearly nine-tenths (88%) of SEA respondents (which includes 260 respondents from Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam), expect the COVID-19 pandemic to have a severe impact on the global economy in the form of depressed consumer sentiment, a deep decline in consumption and disrupted supply chain.

Interestingly, although respondents are concerned over the global economy, they are relatively more confident about the local economy, despite the high level of interdependence with the rest of the world. Only a third (32%) of SEA respondents believe that COVID-19 will severely impact the local economy.

Expectations shift from a year ago

Executives’ expectations toward economic growth have changed significantly from the year before. Then, 97% of SEA respondents believed that global economic growth was stable or positive. The sentiment dropped to 73% in early February 2020, and further dipped to 48% when the survey closed in March.

Cross-sector research findings show that organizations no longer expect to experience a quick snapback or a V-shaped recovery that would see a return to normal economic activity in the third quarter of 2020. A few sectors, such as technology and pharmaceuticals, may buck the trend and emerge from the crisis unchanged or even stronger. However, for other sectors, this is a moment of reckoning. Industries such as automotive and transportation, advanced manufacturing and consumer are seen taking the largest hit.

This pandemic will likely lead to the transformation (e.g., diversified industrials) or reshaping (e.g., oil and gas) of industries where demand may return, but a change to operating and business models will be necessary. Among these sectors, we expect to see more digitization and robotics. For some sectors, such as physical retail, this crisis will likely hasten their decline, as we have seen in recent news about the collapse of certain fashion brands.

Given these uncertainties, nearly two-thirds (64%) of SEA respondents say they expect more of a U-shaped recovery, with a longer period of slower economic activity extending into 2021.

Economic outlook


of Southeast Asian respondents anticipate a U-shaped recovery.

Now is a time to regroup and review operating models as profitability declines

In response to the economic impact from the pandemic, global respondents indicate that their organizations are taking a more aggressive posture toward capital allocation. In SEA, with the exception of a few stronger players, respondents say they are using this period as an opportunity to consolidate. With every sector experiencing a direct or indirect impact of COVID-19, almost all SEA respondents (95%) expect that the pandemic will cause a decline in profitability.

In response, executives across the board are reviewing their operating models. At the same time, governments around the world, including SEA, are proactively offering stimulus packages to help enterprises and people weather the impact of COVID-19.

Even as they regroup, SEA executives need to prepare for what comes next

Given the open nature of the SEA economies and the fragmented structure of the industries in this region, this crisis will have a lasting effect. The good news is that many SEA companies (69%) already had major transformation initiatives underway pre-pandemic. The key reasons driving transformation initiatives then were pressure on revenue targets (24%), attracting or retaining customers (14%) and keeping up with competitors’ technology (14%).

Despite the current crisis, executives continue to plan their future beyond the crisis. Companies are already taking steps to change their global supply chains (50%), digital transformation (27%), speed of automation (33%) and management of workforce (48%).

Pandemic response to decision-making


of SEA respondents are re-evaluating or taking steps to change their efforts around digital transformation.

SEA companies can use scenario planning to better understand their demand projections and the implications for strategy and capital reallocation. This will help them to seize opportunities to transform digitally and through active corporate action to shed non-core assets and double down through acquisitions.

The beyond points to M&A

With the majority of companies assuming a recovery in the medium-term, 47% of SEA respondents say they will actively pursue M&A in the next 12 months. Three-quarters (75%) of respondents are expecting to see an increasing competition for assets in the next 12 months and a majority believe the competition will come from private capital.

M&A appetite


of SEA respondents expect to actively pursue M&A in the next 12 months.

Despite the deep impact on profitability in the near-term, the survey shows that the deep-rooted intentions to digitize and automate remain strong in the long-term. This may well be an opportune time for firms to consider M&A to acquire digital firms where valuations have tumbled.

SEA executives can learn from past recessions

Companies have learned from past recessions. The winners were those that took bold actions to avoid the zone of regret. Companies looking to position themselves for recovery and resurgence should aim for an internal transformation as well as active capital allocation. Crises can reshuffle the deck of winners and losers. It is important to look beyond to make critical choices now.


The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article

By Vikram Chakravarty

EY Global Strategy Connected Capital Solutions Leader; EY Asean Strategy and Transactions Leader

Experienced strategy advisor. Thought leader in Asia business. Wine connoisseur, avid squash player, ardent cricket fan and doting father.