New Business Opportunities for Russia in Southeast Asia: What the COVID-19 Pandemic Has Brought

  Although the Association of Southeast Asian Nation (ASEAN) is among Russia’s key partners in the Asia-Pacific region, to date, the Russian economic and business positions in Southeast Asia have not been competitive. This outcome is predetermined by apparent reasons. 
  First, the USSR and later the Russian Federation (RF) have not been part of the regional supply-production chains of technologically advanced machinery collectively known as “Factory Asia”. As the East Asian powerhouse, Japan developed its supply-production chains in Southeast Asia. Simultaneously, as economic reforms in China gained traction, the Chinese enterprises started to develop their own production chains. In both cases, the Soviet and the Russian presence was missing. 
  Second, both Soviet Union and the Russian Federation have been outside the institutions of multilateral cooperation that stimulate business ties in the Asia-Pacific region. Those institutions, mainly the Pacific Basin Economic Council (PBEC) and the Pacific Economic Cooperation Council (PECC), emphasized the non-political dimension of their activity that focused primarily on fostering cooperation between companies and informing the governments of the Asia-Pacific economies on the priorities of the private sector. Those multilateral venues paved the way for the eventual establishment of APEC as the key region-wide official multilateral dialogue platform that coordinates its prospective planning with ASEAN. Tellingly, Russia is not a member of PECC and joined PBEC only in 1994. 
  Third, until very recently, Russian companies completely lacked the practical experience of running business under the conditions of free trade regimes. Having joined the WTO only in 2012, Russia is a novice in terms of cooperating in FTA formats. In contrast, as the ASEAN member states participate in many FTAs with different regimes, their companies perfectly know how to implement effective strategies and eventually achieve good results. 
  In light of those factors, it is hardly surprising that trade between ASEAN and Russia is insignificant, if compared with trade figures between ASEAN its other partners. As of 2020, ASEAN-Russia trade in goods accounted for 14.07 billion dollars, which pales in comparison with ASEAN-China, ASEAN-US and ASEAN-Japan figures that were 516.78, 308.33 and 204.03 billion dollars respectively. Year after year, the structure of Russia-ASEAN trade remains mostly unchanged. Regarding the Russian export, a high share of raw materials is worthy of note, while in the Russian import, a high share of technologically advanced production is a key feature.
 As the factors presented above demonstrate, Russia has meager resources to advance its economic and commercial interests in Southeast Asia. Nevertheless, new possibilities created by the digitalization are increasingly coming to prominence. 
  ASEAN is devoting special attention to the digitalization and its potential implications. According to the estimates presented by Economic Research Institute for ASEAN and East Asia (ERIA) in July 2020, the annual growth of e-commerce revenue of ASEAN member states will be four times as much as the growth of their GDP between 2018 and 2023. Since the trans-national component strengthens the multiplier effect, ASEAN plans to develop digital connectivity in Southeast Asia. The ERIA experts consider it as consisting of free data flows with trust, logistics, and cash flows. 
  In these circumstances, the cyber-security is markedly increasing in significance in ASEAN’s priorities. For the association as an international actor, this is important for many reasons. 
  First, as the ASEAN member states develop their local e-commerce platforms, the protection of cross-border data flows and money transfer operations becomes an urgent necessity. Otherwise, the confidence of intra-ASEAN and extra-regional companies in doing business in Southeast Asia with the locally provided digital support would be seriously weakened or even, in the worst-case scenario completely disrupted. As a result, the association will further slip into dependence on China, which is noticeably gaining traction as the PRC is developing its Digital Silk Road. 
  Second and even more to the point, a possibility of critical infrastructure disruption looms large for the association. This scenario has both regional and national implications. From the regional perspective, the association would have to shelve its trans-national infrastructure projects, most importantly, the ASEAN Power Grid and the Trans-ASEAN Gas Pipeline. At the national level, the problem is no less serious since none of the ASEAN member states, except Vietnam, has the digital sovereignty. The World Economic Forum interprets this term (although with regard to Europe) as follows: “Digital sovereignty refers to the ability to have control over your own digital destiny – the data, hardware and software that you rely on and create”. Arguably, this interpretation is relevant to other regions of the world, including Southeast Asia. 
  Third, the prospective negative implications may have the political-security dimension. An underdeveloped cyber-security leads to an upsurge of fake news, disinformation campaigns and eventually color revolutions. No less importantly, ASEAN’s positions as the coordinator of the Asia-Pacific multilateral dialogue platforms – the ARF, the ADMM+8 and the EAS – may further weaken.   For the association, which is planning to increase the attractiveness of Southeast Asia as a business-friendly area, even one of those developments is extremely undesirable, while their combination will be a nightmare scenario. 
  The afore-mentioned factors offer Russia’s IT companies welcoming opportunities. Revealingly, according to an opinion poll conducted by Sberbank in March 2021, Southeast Asia was the most promising destination for export strategies of Russia’s companies, while the IT sector could generate the major share of Russia’s foreign trade turnover (21%). The Russian IT companies, both industry powerhouses and startups, are optimistic about the commercial feedback in Southeast Asia. Among the advantages, booming markets that are adaptive to innovations and still have a relatively low technological potential, coupled with anti-Russian sentiments in the Western countries, fierce competition in the Silicon Valley and the overheating startup market in the US, are worthy of note. 

  Russia’s IT companies can respond to ASEAN’s growing demand in complex cyber-security solutions. In light of this, Kaspersky Lab deserves mentioning. The company has offices in several Southeast Asian countries, including Malaysia, Singapore, Indonesia, and the Philippines, with Malaysia and Singapore as bridges to the rest of Southeast Asia. Those offices serve as command centers for developing IT infrastructure in Malaysia, Singapore, Indonesia, Vietnam, Thailand, and the Philippines. The company provides a broad range of solutions to internet users and operations management as back-end services.
  Malaysia is a special case in point. The Malaysian office has a demonstration laboratory that operates as a training center for the IT personnel and its partners. Kaspersky’s clients in Malaysia include both corporate and government sectors. Specifically, the company has teamed up with Malaysian Ministry of Education and Ministry of Defence for a long time. It is a member of the International Multilateral Partnership against Cyber Threats (IMPACT) set up by the Malaysian government.
  The example of Singapore also deserves consideration. As one of the most technologically advanced countries in the world, Singapore is home to the INTERPOL Global Complex for Innovation (IGCI), with which Kaspersky Lab cooperates in identifying and preventing cyber crimes. The Singapore Economic Development Board is Kaspersky Lab’s another partner.
  Other Russian companies operating in Southeast Asia with a focus on cyber security include, but are not limited to, InfoWatch, ABBYY, FreshOffice, CNNVideo, Bookmate, Aviasales, Ivideon, BaseRide, and others. Their expectations about doing business in Southeast Asia that prevailed before the COVID-19 pandemic were mostly optimistic. The challenges ASEAN and its member states are facing amidst the pandemic suggest that in the region the demand in cyber-security will increase, which will offer the Russian IT business good commercial prospects.  
  Nevertheless, serious limitations are also in place. Discouragingly, Russia cannot provide the ASEAN countries with the “hardware” component of the digital resilience understood as the construction of infrastructure objects that will be supplemented with the digital software. More than that, Russia can provide its ASEAN partners with effective solutions in a relatively narrow range of spheres – mostly in the artificial intelligence, cyber security, and data cloud storage. 
  The afore-discussed opportunities that the digitalization opens up to the Russian IT companies should be developed in synergy with Russia’s coherent and well-calculated government policy. Specifically, an intensification of dialogue between companies, government agencies and universities, including student teams, is an available practical option. The foundations for this cooperation, as exemplified by the recent student research paper prepared under the academic supervision of the School of International Regional Studies, HSE University, and presented at the Eastern Economic Forum, are in place already. Hopefully, the synergy of state, business and experts will eventually make the Russia-ASEAN Strategic Partnership exactly what its name suggests.