- There is no immediate impact from the Russia-Ukraine conflict on the enterprise ICT sector in ASEAN, but there could be several indirect influences such as an increase in cyberattacks, rising energy prices, and more shortages in the global supply chain.
- ASEAN businesses should strengthen their cybersecurity framework, expand the use of renewable energy, and accelerate updates and rollout of critical infrastructure.
It has been a week since Russia launched a large-scale military attack on Ukraine, and there have been various economic and supply-chain impacts across industries such as energy, manufacturing, automotive, and transportation, especially in Europe. While there is no direct impact on the ASEAN ICT sector so far, there could be several potential indirect influences on the industry in the longer term.
Cybersecurity: There is an ongoing cyberwar among state-assisted actors. This is manifesting itself through an increase of cyberattacks on banks, government agencies, and many other organizations, although neither country has taken any responsibility for any of the breaches (for more, please see “Cyberwarfare in the Digital Age: Ukraine vs. Russia,” February 28, 2022). These cyberattacks could also extend to Russia and Ukraine allies. Hence, depending on the government’s stance on the conflict, the attacks could also reach businesses in ASEAN.
Energy Shortage: Russia is among the largest liquefied natural gas (LNG) suppliers to European countries and reported to supply about a third of the region’s demand, while Ukraine is the main transit route for natural gas to Europe. Several EU countries are also highly dependent on the Ukraine transit gas. Many countries are also planning to stop (or at least diversify) energy sourcing from Russia. The current conflict, combined with responses from many countries around the world to cut ties in so many areas, will disrupt the global energy market, among other things. The EU will be at the forefront. This will affect manufacturing sectors across the board, including the major European-based tech vendors and shipments of ICT equipment such as 5G hardware, thus potentially delaying some deployments in ASEAN. This will also impact global hyperscalers trying to expand their ASEAN footprint. While markets such as Malaysia have had energy in abundance, global events will impact local regions.
Equipment and Chipset Supply: Ukraine is a major global exporter of noble gases (e.g., xenon, neon, krypton), which are key raw materials used in chipset manufacturing. The current crisis will impact Ukraine’s export of noble gases and exacerbate existing global chipset shortage issues. ASEAN businesses should plan for some delays in their ICT deployments due to the shortage of equipment (e.g., devices, servers, motherboards, and routers). The chipset shortage will also postpone the development of some of the cutting-edge use cases from areas such as autonomous vehicles, smart cities, and robotics. The longer the conflict continues, more uncertainty becomes certain and ASEAN businesses should realign their ICT roadmap accordingly.
Crude Oil and Palm Oil: As Russia is one of the top global oil exporters, the conflict has disrupted the oil supply worldwide and driven the crude oil price by around 15% in the last seven days. Apart from the crude oil used for energy, there are other types of oil such as sunflower oil (largely used for cooking) being impacted. Both Russia and Ukraine are major global sunflower oil exporters, and the supply disruption has driven the demand for alternatives such as palm oil (CPO). This has caused a hike in CPO price by about 15% for the same period. While this has become a major global issue, it somewhat benefits the ASEAN region because crude oil and CPO are major economic sectors for some countries like Indonesia and Malaysia. The increases in prices would drive the economies of these countries and strengthen their local currencies and purchasing power. This could lower the relative cost of ICT products and services offered by global providers. However, this could also drive local inflation and hence increase the cost of internal operation as well as IT services offered by external providers.
What’s Next: While these are not immediate impacts on the ICT industry in ASEAN and there are no revisions to our current forecasts, businesses, service providers, regulators, and industry players should be on a high alert as some of these scenarios play out in the region. Some measures that ASEAN businesses should consider include strengthening their cybersecurity framework to minimize external threats and accelerating the deployments of crucial services such as IoT and smart city due to the potential equipment and chipset shortage. Besides, as sustainability has become one of the most important boardroom topics in this decade, ASEAN businesses should also see this as an opportunity to accelerate their ESG agenda and meet net-zero carbon goals. GlobalData’s Thematic Sentiment Analysis Q3 2021 shows that only a third of 351 businesses globally have changed their behavior to meet ESG goals, and this number is relatively lower in ASEAN. ASEAN businesses could consider expanding the use of renewable energy for internal operations to lower their dependencies on traditional power supplies (e.g., oil, gas, coal). This would also enable them to lower their GHG Scope 1 and 2 emissions. Geopolitics and sustainability also appear to be key themes influencing the ASEAN requirements for business continuity planning and resiliency.