Will ASEAN emerge on top as companies diversify?

As COVID-19 accelerates the need for businesses to diversify, ASEAN’s strong economic fundamentals make it an attractive market

It’s been a challenging few years for companies operating internationally. Trade barriers have increased due to disruptions such as the US-China trade dispute and the UK withdrawal from the European Union. Now the COVID-19 outbreak is putting pressure on global supply chains and consumer confidence, with serious consequences for economic growth.

For 2020, Standard Chartered economists forecast the ASEAN-6 economies (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) will contract 1.7 per cent, due to the heavy impact of the pandemic on key sectors including manufacturing, transport, and tourism-related industries.

These disruptions demonstrate that for companies of all sizes, planning and implementing a diversification strategy is more relevant than ever.

Diversification could mean expanding into an overseas market that you have long considered but are yet to enter. The economic recovery from COVID-19 will take time and the pace of recovery will differ, so it's important for companies to invest in diverse markets to leverage the available resources and opportunities.

For companies considering their strategies in the wake of the COVID-19 virus outbreak, ASEAN stands out as an investment destination especially as governments in the region have announced various economic stimulus plans to support growth. For instance, the Singapore government has unveiled stimulus packages totalling more than SGD90 billion (USD65 billion), equivalent to almost 20 per cent of GDP. The efforts are focused on helping workers keep their jobs and supporting corporates in getting access to credit, as well as targeted relief for hard-hit sectors like aviation and tourism.

Intra-ASEAN mergers and acquisitions activities in sectors from manufacturing to real estate rose for the second consecutive year in 2018, with the number of deals more than doubling to 95 (worth a total of USD992 million) from 2016.

As the world works together to combat COVID-19 and governments unveil stimulus packages to jumpstart economies, adapting business models to changing environments is critical to growth and employment. To succeed, companies large and small need to ensure diversification is a key pillar in the strategy of the future. Only by capturing the opportunities from enhanced diversification can companies remain resilient and continue to take advantage of ASEAN’s growth potential.