Last year's SARS outbreak was particularly hard on Asia's PR sector. But the lessons learned are helping drive growth in the region.Asia's reputation for resilience is much touted, but the events of last year tested even the hardiest of souls. The PR industry suffered more than most, buffeted by SARS, war, and continuing economic stagnation. China was the one place where, it seems, the growth of the industry could not be stopped. With travel budgets drastically cut, little in the way of decision-making took place at the regional PR hubs of Hong Kong and Singapore. Many agencies responded by taking evasive action, cutting staff while clients downscaled budgets. As David Ketchum, CEO of Upstream Asia, points out, SARS and the Iraq invasion represented body blows for a sector that had begun to experience a mini-revival toward the end of 2002. "Locally, overnight just about any business meeting that required three or more people to be in the same room was canceled," says Ketchum, whose PR and marketing agency has several offices in Asia and Australia. "Trade shows, product launches, seminars, and road shows were all canceled." Lower ad sales shrunk editorial sections, harming media opportunities, he says. A downward spiral soon set in, with PR as a prime casualty of shrinking client budgets. Amid the gloom, however, some light remained, fuelled by the upward drift of strategic relations on the C-suite agenda. Indeed, if the middle of 2003 represented the sector's nadir, the following 12 months witnessed something of a resurgence. Marketers began to spend budgets that had been left untouched for months, deals moved from the icebox to the table, and the end of the year witnessed a flurry of activity. PR demand in China While much of the region's PR industry is still shaking off a protracted slowdown, China has yet to miss a beat. Indeed, the country's stellar economic growth is driving strong demand for PR services from local brands aiming to take their domestic success to the rarefied environs of the international stage. China's rapid ascent to become Asia's key communications market is hardly news for the region's firms. However, as the industry matures in the country, many are finding an increasing level of sophistication in terms of both use and offering. "The PR industry in China is buoyant and fast-changing," says Fiona Cohen, MD for MS&L Greater China, who recently relocated her position from Hong Kong to Shanghai. "The big players ... are now mostly here, plus the second generation of local firms emerging out of the [global] agencies make for an exciting market. [The Chinese market is] no longer just a question of international versus local. ... It's either good firms or bad." The surge in domestic demand for PR services should surprise few. China's IPO market has remained relatively unaffected by the downturn in other regions, with 13 listings in the second half of last year alone - many of which required either PR or IR support. In addition, increasing competition between domestic brands has led to a better appreciation of PR's abilities to break through clutter. "Trends in the PRC that fuelled our growth include mushrooming automotive and property markets, more Chinese brands acting on global ambitions, and a race for brand awareness and differentiation in an increasingly competitive market," explains Lynne Anne Stevenson, regional director of Fleishman-Hillard. While local players drive growth, the attention of multinational corporations is still firmly focused on China's appeal as an investment destination. Cohen says this can place a "huge burden on local client teams to provide everything from travel advice to quick turnaround interviews while working on their own strategic plans." Meanwhile, for Andrew Pirie, regional president of Weber Shandwick, China's SARS troubles might have realigned global attitudes toward the market, which he views as a welcome development. "Following SARS, many global companies are now taking a more balanced view of China versus the rest of Asia," he explains. "Before, the 'China, China, China' focus meant the rest of Asia was in danger of being completely ignored, which had serious implications in terms of marketing budgets. While China will continue to be the main driver of investment and growth in the region, other markets, such as India and Singapore, have come back into vogue also." Growth throughout Asia Indeed, elsewhere in Asia, this year the promise of growth has become more tangible, with healthcare, technology, and corporate leading the way. Many of the larger players are now hiring new talent across the region - and finding recruitment and retention increasingly difficult. But the events of last year have made agencies somewhat cautious about expanding too fast, too soon. Big new-business pitches are still rare, explaining the popularity of the current catch phrase "organic growth." For Matthew Anderson, president of Ogilvy PR Asia-Pacific, this has had the positive effect of forcing agencies to become more savvy at strengthening existing business relationships. "One of the things that was super-important in a year that was a tough business environment was reinforcing mutual understanding with core clients," says Anderson. "I think that was a great lesson for us." "For many PR firms, retainer-based clients and established relationships saved the day in 2003, as the pipeline of project work, new product launches, and IPOs slowed," says Ketchum. Agencies garnering new business from existing clients were aided by a continuing trend toward agency consolidation from the larger clients. "Multinationals operating throughout Asia Pacific see the value of hiring one firm to coordinate communications efforts across several countries, maintaining strategic consistency with local relevance," says Stevenson. While it might not be surprising to find regional networks singing the praises of regional consolidation, evidence of its popularity is becoming more compelling. DHL, IBM, and Maxtor are just three big brands that opted for this model last year, tapping Golin Harris, Text 100, and Fleishman, respectively. "More multinational clients are starting to look more seriously at having a single global or pan-regional agency," Pirie says. "I think the large network agencies ... have done a lot in recent years to improve the quality of such global and regional offerings, meaning that there is now more credibility with clients and a greater understanding of the benefits that can come from such a single-agency approach." Ironically, the events of last year also renewed understanding of PR's power to effectively communicate with key stakeholder groups. Whether it is a health scare or a corporate scandal, few organizations today are untouched by the need for a well planned and executed media and communications plan. "During SARS, and subsequently the bird-flu crisis, many lessons were learned, especially by governments, about the importance of transparency in communications," Pirie says. While health scares have driven the momentum behind more open government communications, the post-Enron landscape also has meant that PR is no longer the preserve of the corporate communications head. Its increasing importance to Asian boardrooms is underscored by a more aggressive media and more activist stakeholders. "Recent events have made decision makers realize that the unimaginable can happen," says Stevenson. "And when it does, well-managed communications will define the moment when the stakes are high and not just reputations, but people are at risk." "Across Asia, there is greater access to more candid and investigative media," adds Anderson. "There are stronger employee groups and stronger backlash against [multinational corporations] and electoral campaigns." Pirie's experience of PR's growing profile in the boardroom is particularly instructive and points to a way in which better corporate governance has aided the industry as a whole. "WS in Singapore was recently appointed by a listed company for an M&A issue before the client appointed an investment bank as financial adviser, says Pirie. "We ended up in the rather unusual position of the investment bankers who were pitching for the business ringing us up, asking us to put a good word in for them. Usually it's the other way round."