The region is struggling with drugs and new leaders coming online. What does this mean for EMS?
The late leader of Intel Andy Grove once wrote only the paranoid survive. I’d add that their chances of survival are measurably enhanced when there’s an army at their disposal.
Paranoid is one word to describe the recent actions of Rodrigo Duterte, the Filipino president since May. He assumed office after a long career as a lawyer and then politician, during which time he became known for supporting – if not leading – vigilante militias reportedly responsible for thousands of deaths of drug pushers and users in and around Davao City, where he served as mayor for two decades.
Since taking office, Duterte has shown no signs of toning down his act. The extrajudicial killings continue, and he has made verbal attacks on leaders in Europe, the UN, the US, even the Pope.
If the unpredictable side of Duterte’s personality weren't enough, he then announced a severing of military and economic ties with the US.
This move has sent shivers down the spines of companies doing business in the Philippines. US businesses alone have pumped nearly $5 billion into investments in the country. Once the dust has settled, it’s possible the Philippines will adopt a more neutral global stance. Indeed, immediately after Duterte’s announcement, the Philippine trade minister tried to walk back his statements. But the Philippine leader is pushing ahead by engaging China as a key trading partner.
The situation unfolding in the Philippines, while extraordinary, is not unique to Southeast Asia. Bhumibol Adulyadej, Thailand’s king since 1946, just passed away.
Although the country has been run by a military junta since 2014, the military has recognized the monarchy’s place in its society, and the respect has been returned. A new charter passed by referendum in August and an election scheduled for late next year could return some level of democracy to the country, or it could result in even greater tension between civilians and the military.
India may be an outlier in its approach, as its prime minister, Nehandra Modi, remains US-centric. That said, the Indian leader has hedged his bets by holding recent talks with heads of Brazil, Russia and China, among others.
This turbulence, some of it unintended, some of it calculated, is surprising only in the sense that it all seems to be happening at once. Certainly, leaders can be expected to try to broaden the markets for their respective nations. More shocking has been the approach, which at times has been tactless and, in Duterte’s case, highly personal.
One industry observer noted to me that the situation recalls the rise to power of Lee Kuan Yew, the founding father of Singapore. When Lee took over, he made his mission the scrubbing of antisocial behavior, especially drug use. Drug lords and traffickers were put to death after quick trials. Other lawbreakers were dealt with harshly as well. He also declared Singapore open for business, and the city-state has become the 20th largest exporter in the world. It’s possible, this observer says, the new crop of leaders are taking a page from Lee’s playbook.
Supply chain effects. Every national leader has an obligation to improve the lot of their constituents. It’s not at all obvious, however, that each of these leaders is acting rationally. The political unrest, to say nothing of the violence, can’t be good for business.
Many of these nations, of course, have deep ties to the electronics supply chain. Any country that seeks to become a major player in electronics will end up doing considerable business with the US.
Contacts in the Philippines indicate great discomfort with the positions of Duterte. OEMs that want to move programs from China due to IP or other concerns now suddenly find themselves in the awkward position of not knowing whether their preferred landing spot will be any better. And while there has been no immediate outward impact to the bottom line, given the long lead times in electronics, the better indicator will come 12 to 18 months from now.
To put all this in context, perhaps rather than Singapore, a more timely comparison is with Mexico. Mexico has suffered enormous casualties from the drug wars. Kidnappings and murders have been par for the course, and non-nationals are often advised not to travel outside in certain cities after 5 pm. Talk on returning programs to North America has been noticeably muted of late. Is the safety factor at play? If so, is the heavy-handed approach of these Southeast Asian nations the smart long-term play, even if it means a loss of business in the short run? And despite its blind eye toward IP and ever-changing regulations, will China’s relative stability make that nation the beneficiary?