Can a Post-COVID-19 APAC Make the Case Again for Globalization?
What impact has COVID-19 had on the APAC region? FTI Consulting spoke with renowned economist Dr. Linda Yueh about the region’s ongoing recovery and a possible silver lining to come out of the pandemic.
Led by China, multiple economies within the Asia-Pacific (APAC) region have risen or even boomed over the past decade. But with the COVID-19 pandemic disrupting business across the world, many are wondering about the region’s recovery and future.
FTI Consulting recently spoke with Dr. Linda Yueh, renowned economist, writer, and broadcaster based in London. Dr. Yueh is one of the most-sought-after speakers on the global economy. Here, she offers her take on which sectors show signs of opportunity amid the pandemic, China’s growing middle class, and how rising nationalistic sentiment may actually strengthen the case for global cooperation.
FTI Consulting: Dr. Yueh, let’s start with your view on how COVID-19 impacted the APAC region, and steps underway toward economic recovery.
Dr. Linda Yueh: We are living in uncertain times and it will likely continue like this for a while. COVID-19 certainly took a toll on the region, which is why economic and fiscal policies will be so important moving forward. These policies will have to align with long-term growth aims as the APAC region supports its economic recovery. That means investing in human capital, digital skills, digital infrastructure — all the areas that have become crucial for remote working. In the midst of the pandemic, there are still opportunities to invest in productivity if the right policies are in place.
FTI Consulting: It's been said that the pandemic may be fueling nationalistic sentiment around the globe. What's your thinking about that?
Dr. Yueh: I do believe the pandemic has put up more barriers between countries. However, this is not the first time that this has happened. We have gone through periods in history in which the consensus on the economic system breaks down. So, the sentiment becomes antiestablishment and that manifests itself in different ways in different countries. Sometimes it's nationalism; sometimes it's not as extreme, but the common denominator is a dissatisfaction with economic systems, and so globalization faces a backlash.
The upside is that this offers an opportunity to see how damaging those nationalistic sentiments can be. Already, there’s been effort by multiple countries to agree that they won't restrict essential equipment such as PPE because they recognize we have to work together to keep the pandemic from spreading. You can’t just control your own country anymore. So, in that way, the pandemic has pointed to the need for greater global cooperation.
“...We have to work together to keep the pandemic from spreading. You can’t just control your own country anymore. So, in that way, the pandemic has pointed to the need for greater global cooperation.”
FTI Consulting: Which sectors do you think offer the most opportunity or are most likely to come out on top of the pandemic?
Dr. Yueh: It comes down to which companies have adapted. Those that are able to deliver the same services that they typically would virtually are going to come out of this pandemic in much better shape. The norms around traveling, the willingness to embrace delivery of services via technology, have accelerated. So those sectors certainly have potential.
Then there are some of the more apparent opportunities with areas like e-commerce, technology and healthcare. Those are a given considering how in demand they are during this time. However, I would also look towards environmental companies or anyone making the shift towards no zero as the ESG agenda has not been dented by the pandemic.
FTI Consulting: How do you see technology helping businesses adapt to this new world?
Dr. Yueh: We need the technology in order to do remote working and to target markets and be nimble. But having the technology isn't enough — businesses have to be smart in the ways they apply that technology. For instance, have they changed their business norms? Have they evolved the ways in which they work to cope with invisible trade services, digital trade and the world economy? Are their people supported and equipped to do remote working? Businesses that get it right now are going to be more productive than others moving forward.
FTI Consulting: Speaking of remote working, how has the response been to it in the APAC region? Is it generally positive?
Dr. Yueh: Economic studies suggest that it's the most skilled and educated workers that have been able to work from home. It's important for organizations to expand this capability throughout their entire enterprise. Fortunately, many Asian countries are well equipped and have the technological infrastructure to do this. We don't have some of the legacy issues that you see in older organizations. That's going to become a significant competitive advantage when it comes to working in a world with COVID-19.
FTI Consulting: Much has been written about the growth of the middle class in APAC. How do you see the pandemic affecting this demographic?
Dr. Yueh: The pandemic has only worsened the hollowing out of the middle class and middle-skilled sector. This is a trend that was already happening because of the skill bias that comes with technological change. In reality, it's the middle-skilled workers that have really struggled and been compressed in a number of countries. This is an area where businesses can play a big part in lifting up their talent because they are, in fact, equipped to be upgraded. They have the education, they have the background and they have the skills. By pulling them into a greater part of how the business operates, organizations can be more productive both during and after the pandemic.
FTI Consulting: Even before the pandemic, tensions were rising between China and other nations, like the U.S. and UK. What effect has the pandemic had on relations with China?
Dr. Yueh: The pandemic has worsened U.S.-China tensions. Relations have also been worsened by the U.S. election because rhetoric is always hotter during a presidential election. I'm afraid it is one of the geo-economic risks that I see staying with us for some time. Resolving it is challenging, but steps can be taken. One is agreeing on a level playing field. This is actually very difficult because you have very different institutional systems.
The other thing that can help is to move government-to-government relations out of certain things that there's disagreement over, like standards for 5G technology, for instance. Really, there should be an international standard or a global agreement around technology, whereas now it’s highly nuanced. Take data, for instance. In China, data is owned by the state. In America, it is owned by companies, whereas in Europe, data is owned by people. So, they're very different approaches, but if we approach it from these two technical avenues, we can try and resolve some of these tensions.
© Copyright 2020. The views expressed herein are those of the author and do not necessarily represent the views of FTI Consulting, Inc. or its other professionals.
Senior Managing Director