Asia’s “inward turn” to shake up business and investment

A new report from The Economist Intelligence Unit examines how the coronavirus pandemic and geopolitics are driving changes in economic policy in Asia that will have a lasting impact on business and investment.

Asia’s leading emerging economies and turning inwards. Having once viewed the rest of the world as a source of growth and opportunity, governments in the region increasingly see uncertainty and (in some cases) threat. 

An inward turn in economic policy was already underway in Asia before the arrival of the coronavirus (Covid-19), but the global disruption caused by the pandemic has accelerated this shift. In China, policymakers are discussing a “dual circulation” strategy that aims to foster resilience by emphasising the “internal” circulation of the domestic economy over the “external” circulation of the global economy. 

The Indian government has launched a “self-reliance” movement designed to reduce perceived supply-chain vulnerabilities. Meanwhile, amid the pandemic, Indonesia has unveiled import substitution policies aimed at supporting domestic industry.

So what implications will this shift in policy have on foreign firms and investors with an interest in the region?

The door to global businesses and investors is not being closed in Asia, but they will have a harder time getting through it. Trends towards localisation are set to intensify and for those that want to take advantage of the opportunity in Asia, it will mean more investment in on-the-ground research and development, expansion in local staffing and operations, and the cultivation of deeper regional partnerships and collaborations. Doing this, while managing calls for “reshoring” in home markets, will require significant strategic and political dexterity.

TOM RAFFERTY, REGIONAL DIRECTOR FOR ASIA

Download the full report: Turning inwards: what Asia’s self-sufficiency drive means for business and investors