For the last three years, the Association of Southeast Asian Nations (ASEAN) has endured what can only be described as “unprecedented times“. Like the rest of the world, the region plunged into chaos as the COVID-19 pandemic swept across the globe, taking innocent lives, overwhelming the healthcare system, and destroying economies.
At the start, startups in Southeast Asia had to tackle multiple challenges, including coping with lockdowns, movement restrictions, limited trade across borders, and possible business shutdowns. By the end of 2022, global concerns remained, as the pandemic still existed, inflation and high-interest rates were prevalent, and an impending recession loomed in the background. Furthermore, supply chain disruptions, the Ukraine-Russia war, geopolitical issues, and an uncertain talent landscape continued to hamper economies worldwide.
Southeast Asian startups in 2023 will be operating in this challenging economic environment. Valuations are decreasing, with companies like SEA dropping by over USD 150 billion to a new value of USD 30 billion.
Is the golden era for the Southeast Asia tech scene coming to an end?
Deal volumes dropped last year, and the expectation for this year was that the downward trend could continue due to economic pressures. Venture capital (VC) firms were cautious and held back from investing as much as they wanted to. Instead, VC funds raised lots of money but did not deploy the capital to businesses.
Thus, startups and small and medium-sized enterprises (SMEs) must change how they operate to stay ahead and survive the economic downturn. First, they must streamline their operations to run smoothly and reduce unnecessary expenses. Second, they need to work on their corporate governance and focus on delivering solutions to the market. Third, they must find a way to resolve the mess in ASEAN’s talent scene.
Employee welfare in ASEAN’s talent scene
Last year, there were many reports of mass layoffs despite the talent crunch plaguing Southeast Asia. CNBC reported that at least six tech companies had fired their workers due to economic uncertainty and rising operational costs. Attempts to scale teams decreased as the cost of larger groups would put pressure on cash flow. Businesses had to contend with upskilling their workers and the possible risk that those employees would search for better opportunities elsewhere.
In addition, there was the challenge of the Great Resignation — a trend whereby employees resigned in search of work-life balance, purpose, happiness, and other personal reasons. Workers wanted more time off, paid leave, remote work, and work that positively impacted society and the environment.
An employee survey in Asia-Pacific (APAC) reported that workers were prioritizing jobs that offered mental health support. Many employees have gone through turmoil in previous years, from the pandemic, lockdowns, remote and hybrid work, losing loved ones, and the pressures of adapting to new-age technologies.
Therefore, the conclusion is that caring for employees would boost productivity and loyalty in ASEAN companies. Offering work-life balance and healthcare benefits would attract new workers, which would be crucial because of the competition for talent in the recruitment market.
Some companies offered virtual medical care and counselling, insurance policies, yoga and wellness programmes, and access to self-help apps. Others collaborated with startups in the human resources (HR) sector to create workplace environments conducive to their talents’ well-being.
Looking ahead
The Asian Development Bank’s (ADB) growth forecast for Southeast Asia in 2022 was above 5% but is likely to be revised down to 4.7% in 2023. COVID-19 remains a problem, but countries have begun opening up more, boosting the travel and hospitality sectors. Inflation remains an issue as the global economy seems geared toward a recession, and startups in Southeast Asia may have to contend with reduced funding.
Recurrent lockdowns in China and the subsequent slowdown in trade and exports continue to drag down the APAC and ASEAN economies. China’s regulatory onslaught against tech companies did not help the situation, as many companies could not invest in startups in ASEAN.
The Ukraine-Russia war is still ongoing, with UNCTAD having predicted that the conflict would lower global economic growth projections. Supply chains have faced disruption, food and energy costs have risen, and trade has suffered due to sanctions on Russia. Southeast Asian countries were affected by the reduction in tourists from Russia, with places like Phuket in Thailand experiencing an 80% drop in visitors. Moreover, ASEAN countries that rely on Russia for cheaper military weapons have had to look for alternatives elsewhere as sanctions prevent those purchases.
Southeast Asian startups in 2023 may struggle for some time as VC firms become stricter with their fund distributions. Geopolitical tensions in APAC affect the regional stability that creates a business-friendly environment. Concerns about climate change are also redirecting funds to the environmental sectors.
Nevertheless, there is optimism that the sooner the world gets through these unprecedented times, the more likely the economies will rebound and usher in a better future. Continued innovation, startup growth, investment, and support from the ASEAN governments will be critical.