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OpinionComment
Colleen K. Howe
Colleen K. Howe

The View | Ukraine war, energy crisis and geopolitical tensions mean Asian businesses must prepare for the worst

  • The latest Asia Business Council survey shows firms are worried about politics increasingly encroaching on business and driving potential decoupling
  • Energy is the top concern amid high prices and the continuing fallout from Russia’s invasion of Ukraine

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Children play in the ocean near Wolseong Nuclear Power Plant in Gyeongju, South Korea, on August 21. Energy is the top concern for businesses in Asia, with rising prices driving up costs for firms even as countries such as Japan and South Korea move to embrace nuclear power. Photo: Reuters
Colleen K. Howe
Will the post-pandemic era in Asia herald an economic recovery reminiscent of the “Roaring Twenties” decade that followed the Spanish flu a century ago, or is the region facing stagflation and continued economic pain? Asian CEOs are divided on that question, and the uncertainty could weigh on the growth prospects of the region.
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A recent survey of Asia Business Council members, who head businesses headquartered or with significant operations in Asia, found that 38 per cent expected business conditions to worsen in the coming year. Meanwhile, 37 per cent expected conditions to remain about the same or were uncertain and 25 per cent expected conditions to improve.

Two-thirds of respondents expected inflation to be the biggest economic challenge over the next year. The conflict in Ukraine is expected to drive a rise in food and fuel prices and other input costs while disruptions to global supply chains continue.
While the results are not meant to be statistically significant conclusions, they shed light on the economic outlook as seen by the leaders of some of the region’s largest companies. Key question marks for that outlook are the duration of China’s “zero-Covid” policy and the ramifications of Russia’s invasion of Ukraine. Businesses in the region increasingly worry that profits are subject to the whims of domestic and international politics.

That uncertainty makes it difficult to plan for the future, which explains the increasing cautiousness of some respondents. Only around half of those surveyed plan to increase capital spending in the next year, and fewer than half expect to hire additional employees. A greater share of respondents had expansion plans in both aspects at this time last year, when the pandemic-induced downturn appeared to have turned the corner.

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The survey results illustrate how business leaders are grappling with three new economic and geopolitical realities. First, business and politics used to be seen as separate, but no longer. Asian businesses now have to be well versed in politics as well as finance and even hire additional teams tasked with compiling data on and analysing developments in geopolitics.
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