Aggressive growth strategies have sparked rapid economic recovery across Asia-Pacific. Finance executives from this region fair most positively in self-evaluation measures, according to a recent survey by CFO Research of Industry Dive and Globalization Partners.
At a time when only 26 percent of CFOs in North America described their businesses as being “in a state of accelerated growth,” 46 percent of Asia-Pacific CFOs stated the same. Companies in the Asia-Pacific region emerged from a Covid-19-imposed world recession and actually began growing, months ahead of North America. Other regions have much to learn from Asia-Pacific’s rapid recovery.
What is behind the Asia-Pacific economy recovering so quickly?
Governmental actions contributed enormously to resiliency early in the pandemic. As the medical threat diminished, different countries also benefited economically from these anticipant decisions.
Anti-trade disruption plan
The Hanoi Plan of Action was implemented by the Association of Southeast Asian Nations (ASEAN) in a month when many countries in Europe, Africa, the Middle East, and the Americas were barely entering lockdown. This initiative was designed to identify and resolve any disruptions to trade of essential goods throughout Southeast Asia.
The Hanoi plan’s impact was two-fold: short and long term. It minimized Covid-19’s regional economic impact, and established supply chains in a way that would make them more resilient to future recessions.
Free trade agreement
A brand-new free trade agreement was born of Covid-19: 15 countries joined the Regional Comprehensive Economic Partnership (RCEP). Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam signed the agreement in late 2020.
The participating nations account for approximately 30 percent of global GDP, and the trade deal allows these countries to drop 90 percent of import tariffs. Logically, this greatly facilitates international business and inter-Asia-Pacific trade.
Which countries should international businesses learn from?
As a whole, Asia-Pacific is a role model to other regions. But some countries responded in a way that other nations, and even business leaders, can mimic. Here are the top six recession responses:
1. China sidestepped recession with three measures.
The first country to succumb to Covid-19 and the first to emerge, China is expected to account for 27 percent of global economic growth in 2021, more than twice as much as the U.S. Being the model economy has little to do with being first in line for the virus, however. Three measures are worth highlighting:
- Strict virus curbs included the decision to start mass testing and lockdowns as early as January 2020.
- Covid-19 recovery grants from the People’s Bank of China began in February 2020 to maintain the banking system’s liquidity, while special “re-loans” were issued to enterprises for pandemic prevention and control.
- Chinese manufacturers stepped up production of goods to export to countries that were grossly impacted by the pandemic.
2. Singapore became a tech mecca.
Already a notable business hub, Singapore flexed its innovative reputation and put measures in place to support the 4,000 startups located there.
At a time when many countries were closing borders again, Singapore launched Tech.Pass. This visa would facilitate the entrance of tech entrepreneurs, leaders, or technical experts hoping to travel to Singapore and perform disruptive innovations from November 2020 onwards.
[bctt tweet=”At a time when many countries were closing borders again, Singapore launched Tech.Pass.” username=”globalpeo”]
Employers in Singapore were given tax-exempt Covid-19 recovery grants in cash to cover salaries of local employees for several months. The government also set up a scheme to co-pay employees for their first year of work.
3. South Korea leveraged past experience.
South Korea’s quick recovering was arguable due in large part to pandemic management. What exactly did the nation do so well?
- South Korea’s response to Covid-19 was, sadly, shaped by lessons learned from the MERS (Middle East respiratory syndrome) and SARS (severe acute respiratory syndrome) outbreaks in 2015 and 2003, respectively. By 2020, South Korea was versed in the three branches of effective response: virus detection, containment, and treatment.
- Hundreds of epidemiological intelligence officers were dispatched to trace the spread of the virus, and high-capacity screening facilities equipped the country with an extensive testing framework soon after the discovery of Covid-19.
4. Thailand diversified industry.
You might think that a pandemic is a good time to fall back on what works best. But Thailand took this time to promise major technological advances in different industries.
The unexpected announcement that Thailand intends to become Asia Pacific’s electric vehicle hub came in March 2020. Government incentives followed in November 2020 to encourage local manufacturing of electric cars, buses, trucks, motorcycles, and ships. Thailand’s plans to produce 250,000 electrically powered vehicles by 2025 provides an alternative focal point to a global pandemic.
The Bangkok Post wrote that five major mobile and telecom enterprises, “bid a combined 100 billion baht at the auction for the spectrum required to set up 5G infrastructure,” in February 2020. As one of the first ASEAN countries to adopt 5G tech, Thailand’s 5G-enabled smart healthcare was used to combat the pandemic nation-wide.
5. Japan committed to the largest stimulus package as a percentage of GDP.
Money talks, and just when Japan was due a fiscal reform, the agenda switched to economic stimuli. This nation put its pre-Covid plan to deal with the world’s largest public debt on the backburner, and injected much needed capital into businesses.
The Japanese government’s US$708 billion economic stimulus package made headlines in December 2020. Interestingly, this will be spread across initiatives targeted at reducing carbon emissions while increasing technology adoption, as well as direct fiscal spending.
6. Malaysia was tight on controls but not spending.
Periodic government spending has been successful in many countries around the world, alleviating some of the burden on businesses that were shut down during lockdown. How did Malaysia specifically manage stimuli?
The first Covid-19 recovery grant in Malaysia was introduced early, in February 2020. A second came in June and another in November 2020. These three packages totaled 280 billion ringgit and included financial support for businesses and wage subsidies.
Strict lockdown measures kept contagion to a minimum from the beginning of the pandemic. The authorities mandated major economic activities, except for essential services, to close in January 2020. Thanks to early controls, subsequent lockdowns were more lenient on economic activity.
What can business leaders learn from Asia-Pacific?
As reported by Globalization Partners and CFO Research of Industry Dive, Asia-Pacific CFOs’ top priority in 2021 was building a strategy for global expansion and presence, according to 53 percent of survey respondents. Meanwhile, North America is still working to either optimize margins and costs of goods or update the supply chain, while CFOs in Europe, the Middle East, and Africa are simply focusing on maintaining working capital.
[bctt tweet=”As reported by Globalization Partners and CFO Research of Industry Dive, Asia-Pacific CFOs’ top priority in 2021 was building a strategy for global expansion and presence, according to 53 percent of survey respondents” username=”globalpeo”]
What business leaders can take away from the recovery in Asia-Pacific can be boiled down to three lessons:
- Careful controls can minimize the impact of crisis.
- There’s never a bad time for assertive investment in growth.
- International collaboration strengthens individual economies.
The regional initiatives of RCEP and the Hanoi Plan of Action set the stage for stronger links across borders, while governments implemented the best controls available. Then, individual countries took confident steps toward economic growth. When many countries were being cautious about expansion and finding their footing with remote work, Asia-Pacific was more ambitious. It turns out, this is the right way to recover from a global recession.
What can we expect next in the Asia-Pacific economy and the world market?
As a result of measures taken and their positive results, we may see an increase in Asia-Pacific companies employing across borders. The free trade deals are likely to encourage companies to test new markets within the region, or even those of different continents.
Asia-Pacific companies might take advantage of the increase of job hunting professionals in other countries, to source the best talent at a time when other regions, like the Euro zone, are at 8 percent unemployment. To hire remotely, without the expense or hassle of setting up branch offices or contracting multiple payroll, legal, and HR experts, companies can rely on a global Employer of Record.
Conversely, expanding into Asia-Pacific would be wise for companies hoping to bounce back through market entry. If you’d like to safely test new markets, explore other countries for lower-cost professionals, or simply recruit the best person for the job, get in touch with Globalization Partners to discover the fastest route to global growth.
Most importantly, keep an eye on the Asia-Pacific economies. We can all learn from their recovery process, wherever our company is based.