Navigating Political Uncertainty in Asia: The Crucial Role of Geopolitical Expertise for CA Leaders

Hyper-localisation identified as the top challenge 

The pressure on corporations from Asian governments to support the domestic economy —  hyper-localisation — was a key topic at the Singapore roundtable. “We must be seen as a global company,” said one regional CA leader from a multinational FMCG company, “but we need to actively contribute locally as well, so partnering with the government becomes more deliberate.”

Others agreed that localisation pressure is mounting as governments across Asia grow more confident in pushing their economic agendas globally. This has manifested in measures such as trade barriers to protect local economies.

Asian governments grow in confidence on the global stage

Many APAC leaders who attended the regional session spoke of a growing confidence from SEA governments when positioning trade agreements at a global level — more so than ever before. The impact on the CA function rests with leaders stretching their geopolitical advisory skills and influence to an unprecedented degree, to help corporations balance global and local priorities.

With our region having experienced the deterioration of US relations with China and ensuing trade restrictions, the spotlight of opportunity for SEA has been shining bright for some time. For CA leaders, this underscores the lasting need for strong geopolitical strategic expertise, a skill that will require continuous focus and refinement within our industry.

Building an adaptable strategy (Building a  resilient and agile strategy)

A CA leader from a global agricultural business emphasised the need to balance globalisation with localisation while driving growth. “Our strategy is to invest locally and be adaptable,” he said. An attendee from financial services agreed that government engagement in particular differs significantly from country to country. Attracting and retaining CA professionals with relevant and diverse skill sets when it comes to government relations will be vital to implementing a resilient and agile strategy during these changing times.

Some CA leaders acknowledged that their organisations are prioritising investment in countries where there is recognised stability and are partnering with governments to build scale, particularly in China. In the wake of COVID-19, local manufacturing of critical goods such as medicines has become essential. CA leaders in the pharmaceuticals industry acknowledged that geopolitical tensions in Asia are a significant concern, as they could hinder growth due to the importance of cross-border supply chains for medicines.

Spotlight on Indonesia

Indonesia is ushering in a new leader this year, with defence minister and former General Prabowo Subianto, set to become president in October. Indonesia has experienced economic prosperity in recent years too, with significant growth over the past decade and the country is set to become the sixth-largest global economy by 2027.

Corporate Affairs leaders at the Andrews Partnership roundtable in Jakarta are closely monitoring the political transition. “Prabowo is different from Jokowi [the current president] and we need to start building the relationship from now while maintaining a good relationship with the current government,” said a CA leader in financial services. “Typically in a new administration the true colours will show in about two years.”

Another CA leader predicted that initial government plans would likely be more focused on appealing to the public than making a direct impact: “All ministers will have a 100-day programme, but usually it will be populist.”

Areas of uncertainty — from sugar to subsidies

Uncertainty around the new government’s agenda is likely to continue for some time and one area being watched particularly closely by CA leaders in the food and beverage industry is Indonesia’s sugar tax, initially proposed in 2020. “Government regulation is not harmonised at the high level, with mixed signals [on the sugar tax] from the ministry of finance and ministry of health,” said one attendee. CA leaders are preparing for the potential impact of the tax by working with think tanks such as universities to establish a clear fact-based narrative.

Pressure to create and invest locally — described by a roundtable attendee as “domestification” — has also been felt in Indonesia. “In the past 8 years, we have seen a lot of domestification of capabilities,” said a CA leader in the financial services industry. “However, when regulations are rigid, including how much investment can be made, it can be destructive. Investment competition is huge in Indonesia but domestification has halted some foreign investment and we need to see more room for discussion.”

Leaders from banking and consulting firms also raised questions around the new president’s stance on foreign investment, predicting he could be more “friendly” towards the West, as well as looking for clarity on his positions on tobacco, net zero and energy subsidies.

Prabowo’s inauguration isn’t until 20th October but it’s a date that will be on the calendar for many CA leaders in Indonesia and across Asia as they look to predict and prepare for a new era.