Geopolitical uncertainties are causing significant apprehension among CEOs and corporate boards. Indeed, the impact of political and economic shifts globally and across the region on business complexity cannot be understated. In our survey, respondents noted that such developments were impacting businesses in Asia Pacific in two very specific ways:
  • Creating doubts about the future of key trade deals
  • Causing a shift in economic, and therefore political, influence within Asia Pacific
While ranking fifth as the greatest challenge facing businesses today, multilateral trade deal uncertainty was nonetheless a contentious point respondents felt would have repercussions within Asia Pacific and their industries, either immediately or within the next few years. Specifically, these respondents addressed the future of the Trans-Pacific Partnership (TPP), a multi-government trade agreement whose fate hangs in the balance after the US withdrew from the deal in January. Indeed, 79% of respondents said the potential collapse of the TPP would impact their company’s growth prospects, including a third of businesses predicting significant fallout (Figure 7).

In fact, several respondents have already started rethinking their investment strategies. Others said the impact will increase the cost of doing business with certain trade partners, the result of which could obstruct their growth in those markets, have a negative impact on sales, and possibly even affect M&A deal flows. Another issue that arose frequently in responses related to the future of their procurement programs.

Even without participation from the US, the TPP may have one last breath of life. In one scenario, China could be brought into the trade group. Equally, Australian leaders have discussed the possibility of a 12-minusone agreement. Alternative trade deals, such as the China-led Regional Comprehensive Economic Partnership (RCEP) or Free Trade Area of the Asia Pacific could also be considered to fill the current economic void.

With its exit from the TPP and further promises from the Trump administration to scale back US commitments elsewhere in the region and globally, respondents accordingly believe that US economic influence in Asia Pacific may be in its twilight. Of those surveyed, 48% feel this influence will decline over the next five years, a development that will pave the way for the emergence of key regional economies – led by India and China – to fill this vacuum (Figure 8).
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