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Was the South East Asian economy already in a downward trend before Covid-19?


The fears around the economic impact of covid-19 are dramatically increasing each day, particular in Southeast Asia which was one of the first regions to be hit by the pandemic. Combine this with the tensions across the region, the US- China trade war and the unrest in Hong Kong, it leaves us with the question, how will South East Asia restructure? And was the South East Asian economy already in a downward trend before Covid-19 or is it solely to blame?    

As a legal recruitment consultant focused on Asia Pacific, I am regularly in contact with restructuring professionals in the region and I have seen an increase in demand for restructuring lawyers. As you can imagine, this is unsurprising given the current situation and rise in bankruptcy fillings over the last year. In fact, Singapore have seen the highest rates of bankruptcy since 2004. (Report by Bloomberg)

To gain a better understanding of the change within the market, I contacted the director of a leading Singaporean Restructuring firm and a Managing Associate at a Magic Circle firm based in Hong Kong to discuss their thoughts on what will happen across the region.

Shipping in Southeast Asia

The partner mentioned a weakened shipping sector which was apparent long before the Covid-19 outbreak. Stock exchange values for Pan Ocean Co for example dropped in summer 2019 and have continued to fall since. (sginvestors) Considering the tariffs imposed on crude oil under the US-China trade war around this time, this weakening may well be linked to the downturn in the oil and gas market. Covid-19 and border closures impacting transport routes will cause knock on effects which we may see continue into the future. However, it appears that for this sector, global interdependence and a trade war with wide consequences have played a big part in steering the economy of financial hubs like Singapore as effects were seen pre Covid-19.

The changes in tourism across Southeast Asia

The shipping industry will likely pick up and return to previously seen levels once demand and supplies return to normal. Another sector we agreed would remain relevant is the hotel and hospitality industry. Regardless of how hard tourist confidence in the region was knocked by Hong Kong anti-government protests, which began in March 2019, the financial hubs of Singapore and Hong Kong in particular will always attract visitors. Singapore and Hong Kong reported c.19 million and c.56 million tourists respectively in 2019 (Statista) and whilst travel bans will hit struggling businesses hard, it will no doubt remain a key sector and one that buyers waiting on the side lines will find demand for across the global economy. My Hong Kong based contact mentioned that airlines in particular will likely weather the storm of Covid-19, perhaps due to the prestige for countries to run a national flag carrying airline, however those running credit note schemes which will potentially push issues several months down the line.

Retail in South East Asia

Demand based recovery is important when considering another key industry which has been badly affected by lockdown measures and a lack of supply from China, arguably the largest exporting country in the region. Prior to Covid-19, online shopping was a grave threat to the physical retail sector and as many industry professionals have commented, companies that are unable to cope with ongoing economic difficulties in the region will at least need to restructure to remain relevant and present. Embracing modernisation and having an online presence could help with future downturns and encourage the funding needed to survive and restructure effectively whilst enhancing the all important relevancy factor.


Will the demand in South East Asia be affected?

Demand and relevancy were mentioned throughout our discussion and the partner was keen to express that modernisation is key to surviving disruption and helping recovery. Businesses will need to understand the needs of the global economy in order to survive this period and ensure they’re able to weather future global uncertainties. Technology will go a long way in helping businesses maintain relevancy and adapting to technology disruption, another topic touched on during our conversation, which has been a driving factor for many businesses to consider restructuring as a means of survival. In regards to Covid-19, the harsh effects of on-going issues felt by many businesses will likely mean the recent updates to Singapore’s restructuring laws and implementation of a US style Chapter 11 will come in useful. 


In summary, the downward turn across the region appears to have been evident before Covid-19 hit; however, the added pressures of the pandemic will truly be a test of resilience. Market demand will be a key factor in determining the business landscape of the future which will almost certainly remain globally intertwined and potentially susceptible to future economic downturns regardless of cause. Developing economies may wish to consider historic growth patterns seen across the region to ensure their expansion is not met with the need to restructure immediately. We are likely to see the fallout of recent events for many years to come.

My thanks go to the referenced participants for taking time out of their busy days to speak with me.

Feel free to let me know your thoughts on this topic and what the future may hold. My contact details are Lucy Kennerley lkennerley@leap29.com and +44 (0) 1625 537 555 ext 115


Posted by Lucy Kennerley