Western and Japanese companies will look increasingly to Asean markets as we enter 2016 in order to capture higher returns in the face of sluggish growth in the West.
The attraction of these emerging markets is bolstered by weak and falling currencies, making targets for mergers and acquisitions even more attractive to investors backed by the US dollar or the yen.
There are also opportunities for additional Thailand companies to follow in the footsteps of others that have already become major regional players through mergers, acquisitions and partnerships in emerging Cambodia, Laos and Myanmar.
But with potential reward comes risk, and entering these markets is not all plain sailing. Opportunities to tap the region for its higher growth potential are offset by the challenge of increasingly aggressive enforcement of anti-corruption legislation, particularly from US regulators through that country's Foreign Corrupt Practices Act (FCPA).
Anti-corruption actions bring not just direct financial damage but potentially long-term reputational harm and loss of markets and can affect employee morale.
Managers and chief executives alike can even face criminal prosecution under the FCPA.
The FCPA does not just affect US companies. Any firm that has any of its operations in that country, either independently or through its partners, can be vulnerable -- for example, if a Thai company forms a joint venture with a Japanese company that has US operations, the Japanese company could face prosecution if its local partner is found to be bribing government officials.
Although the FCPA was enacted in 1977, partly in response to the Watergate scandal, it remained an obscure and little-used law until around 2007, when authorities caught a number of Western companies paying large-scale bribes in the developing world.
The number of out-of-court settlements, prosecutions and fines is growing, with a record US$1.7 billion in the last two years. And we expect settlements and prosecutions will increase exponentially in the coming years due to new incentives for executives and employees to turn whistleblower.
Under new laws, whistleblowers can earn a cut of any FCPA fines, creating a mini industry of law firms representing whistleblowers in anti-corruption cases. In settlements running into the tens of millions of dollars, whistleblowers have a tremendous financial incentive to come forward.
What does this mean for companies that want to keep US and other countries' regulators onside? It's critical that companies doing business in emerging markets where corruption is endemic do proper due diligence and screening of partners, vendors and suppliers to protect themselves.
A prospective local partner in Myanmar, for example, may look promising on the surface, but investors need to investigate and understand the background and track record of that partner and any political associations it might have. Close government relationships can help a company to get business done, but if relations are too close it can at best cast the new relationship in a negative light and at worst bring it to the attention of regulators.
Companies must ask if deals earned through the partner's government contracts and political connections were secured in a fair, transparent manner.
Political exposure is also a growing concern for investors in other ways, especially in emerging markets facing political instability. Will a change in government affect the local partner's fortunes? Could a new government decide to "punish" allies of the old administration through anti-corruption investigations?
Due diligence is not a perfect science. But any company that has done its best to avoid getting into bed with politically compromised partners should have good protection against changing political fortunes and a strong case if US FCPA investigators come calling.
This article was prepared by George McLeod, a manager at PwC Consulting (Thailand). We welcome your comments at leadingtheway@th.pwc.com