In the current climate, as a provider of talent services, we are often asked for a prognosis based on our experience and observations. There are numerous high profile events in ‘big tech’ leading to mass redundancies, on a global scale, such as Meta laying off 13% and Twitter up to 50% globally of its staff. At a more local level, Shoppe has infamously laid off 3% of its workforce across Singapore, China and Indonesia, leading to structural concerns about the economic landscape here too.

This is clearly sending chills and shockwaves through the market, which is so perception led. Clearly, an immediate ramification is the impact on investor confidence. There is evidence to suggest the usual torrent of VC and PE funding has reduced significantly and we are seeing this impact the ‘early stage’ entities, especially at angel, series A and B stage. As a business that has direct visibility of digital hiring trends, we see this very directly based on engagement with digital brands and it’s definitely such companies that have had to shore up hiring levels, as this is inevitably the first thing to become impacted as funding becomes more conservative.

That said, the prognosis really is a mixed bag, with conflicting outlooks in the market. There are certainly both sources for concern and optimism for the Southeast Asia market. There are global factors at play, that all corners of the globe are impacted by, though this region is insulated to some extent and has unique local dynamics, in areas such as cost efficiency and socio-economic factors that are driving unparalleled growth in digital adoption. As such, it’s possible the extent to which any investment slow-down is based more on perception versus any structural factors, which would be more concerning. For instance, VC firm Sequoia is said to be ‘still quite optimistic’ about long term prospects. Looking specifically at Malaysia, MDEC specifically has attracted RM7.2 billion in investments into the local Digital ecosystem in the first half of 2022, versus RM10.9 billion in the whole of last year. In other words, there are still very positive indicators out there and companies ‘putting the brake on’ seems more to be down to a more cautious mindset than anything that runs deeper.

It’s also worth pointing out that in the current post COVID setting, we are now seeing some level of correction to some overzealous hiring over the last 2 years. This was based on over-speculation regarding the growth in digital adoption and shift to on-line channels. This certainly characterized much of Meta’s recent hiring and was referenced in Zuckerberg’s address to his workforce as a primary factor. This was definitely a trend in the market that we saw here in Southeast Asia as the market seemed to become ‘white hot’ in its demand for software engineers, which seemed to be creating a hiring bubble and a disproportionate impact on salary growth in the sector. As such, the recent, slight cooling in the market is quite welcome, as the demand for key talent has settled and rationalized. In summary on this point, it seems ‘big tech’ companies led the trail in its bet on Digital, post COVID and some have been caught out at the tail end. However, this has only proven to be a structural issue to those firms that genuinely overheated during this period, which perhaps accounts for those firms that have announced recent redundancies, which seems to be an exception rather than a trend for now.

Based on prevailing narratives, it sometimes seems the prospects for Southeast Asia growth are leveraged entirely on investment from external sources, such as international VC and PE funding. There is, however, a whole other paradigm that needs addressing and becomes more significant as a stabilizing factor during more volatile times. If we take Malaysia as a case in point, a country rich in economic history and resources, there is, of course, the benefit of its treasure trove of funds accumulated via its portfolio of oil & gas, banking, insurance and telco brands, which includes a host of ‘cast iron’, government linked entities. As such, one of the highly sustainable sources of growth in digital innovation and new entity formation is from this particular community of very established brands, as they seek to diversify their interests and move from ‘sunset’ to ‘sunrise’ sectors, to future-proof themselves. You only have to look at the latest BNM (Bank of Negara Malaysia) licenses that were granted to see the extent of interest from some of these more traditional brands to metamorphosize. This trend in itself, the shifting from traditional to digital paradigms, is perhaps one of the most impactful and sustaining influences for digital growth and job creation we are seeking in the wake of current conditions.

Add to this the fact that there are more niche digital talent sources available, based on layoffs happening internationally, then this perhaps presents a massive opportunity for the region. It may be the perfect opportunity for local companies that do have the budget and are not directly impacted by the same factors, to promote Southeast Asia opportunities and attract game changing global talent to move the needle. Whilst we’ve seen international hiring reduce dramatically over the last 2 years, perhaps this is the best timing to look further afield and to capitalize.

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