Only a year ago the Tiger economies of the Pacific Rim were being
hailed as an economic miracle.
Double digit growth rates lured multinational companies to countries
such as Malaysia, Indonesia and Thailand and where big business went,
their PR agencies followed.
Just last week Fleishman-Hillard announced the opening of two new
offices in Tokyo and Shanghai and plans to expand into Thailand,
Malaysia, Indonesia and India within the next year.
But in the past two months the dream has collapsed. In early July the
Thai baht plunged in value and was quickly followed by the Filipino,
Indonesian and Malaysian currencies. Equity markets also took a dive on
the back of the collapse.
So are international PR companies worried about their investment in Asia
or are they confident that they can ride out the storm?
Daniel Edelman, chairman and founder of Edelman Worldwide, believes that
some economies may have overstretched themselves.
’These countries have been too euphoric and have borrowed too much
money. It’s not necessary for Malaysia to have the tallest towers in the
world, but they got carried away.’
Despite his worries, he says that the agency will continue to expand
operations in Asia. There are already nine Edelman offices in the region
and clients include Procter and Gamble, UPS and Bayer. There are plans
to open offices in Thailand, Indonesia and India. But isn’t he worried
about going into Thailand and Indonesia when have been hit so badly?
’No, not at all. We have just had the annual results from our Malaysian
office and it has been a record-setting year for revenues. I am bullish
for the long haul. Asia is going to be a very important place for us. It
already provides ten per cent of our overall volume, only slightly less
than Europe.’
One area of confusion is how much impact the currency and equity
turbulence will have on the real economy. According to economists,
growth in Asia is expected to slow down to around three or four per cent
in 1997 and 1998 - compared to an average of eight per cent or more
during the early 1990s.
A dramatic fall, but it is still a better prospect than the UK which has
a long term average growth rate of 2.25 per cent.
Gavin Anderson, chairman and chief executive of Gavin Anderson and Co,
says he is ’absolutely confident’ about Asia’s future prospects. ’There
may be some economies slowing down, but others like China will grow at
double digit rates. China has a billion people living there, much more
than any other Asian country. If an economy like Singapore, which has
three million citizens, slows down it means nothing.’
Gavin Anderson, which already has offices in four Pacific Rim regions -
Tokyo, Hong Kong, Singapore and Australia - is planning to expand over
the next five years. Its best known clients are Coca-Cola, BZW, and
Mitsubishi.
Paul Philpotts, managing director of Burson-Marsteller UK, is also
upbeat.
’If you talk to people working out there, you get the impression that
this is more of a rapid adjustment than a meltdown. This has not been an
easy year by any means, but we believe it will settle down.’
He adds that the Pacific Rim economies are only doing badly compared to
their previous phenomenal performance.
There are other reasons for B-M to be upbeat. Like many other
international PR agencies, most of their clients are large
multinationals and they have limited exposure to Asian currencies.
Philpotts says: ’A lot of our business is bullet-proof because we are
paid in dollars. Many of our clients have also taken out insurance
against currency movements.’
While Shandwick is also paid in dollars by its multinational clients
such as Mastercard and North West Airlines, some of its Asian clients
pay in local currency. Michael Murphy, regional director of Shandwick in
Asia, insists this is not as great a problem as it would appear. ’Most
of our costs are in local currency, so it balances out.’
He adds that it is foolish to panic over something that may prove to be
short term. ’Stock markets are always cyclical. We have seen better days
and we will see better ones again. You have to remember that we factor
these cycles into our planning. The PR business is so immature in Asia
that there are far more opportunities for growth than in more mature
markets.’
As someone who has first hand experience of Asia - he is based in Hong
Kong - he believes it is a mistake to bunch Asian countries
together.
’They are all at different points in the cycle. The one country that
really sticks out is Thailand. The economic problems there are more
fundamental and long-term. We have a very big interest out there and
have revamped the business to meet the challenge.’
Despite the panic on the currency and stock exchanges, it looks highly
unlikely that any of the multinational PR agencies will be tempted to
pull out of the Pacific Rim. They firmly believe the Asian Tiger will
roar again.
