A deep recession - more than 30 months of deflation in Hong Kong's case
- continues to hobble local consumption, and depress agencies' earnings
in the past 12 months. But it's the very large shadow cast by China as
it vacuums up overseas investment that will have a far bigger impact on
the health of Taiwan's agency community.
Until very recently, the republic's red-hot semi-conductor and high-tech
sectors had basically insulated it from China's overpowering
international pull. But the high-tech meltdown has exposed Taiwan's
over-reliance on a key but vulnerable revenue source. Likewise, it has
demonstrated the huge challenge agencies, especially local players, face
now that WTO is set to level China's trading field and make it a more
attractive market for Taiwan's entrepreneurs. Shrewd businessmen that
they are, Taiwanese entrepreneurs have been putting more cash in China.
The possibility that the Taiwan Government may even allow investments in
China's tech ventures will undoubtedly take much shine off its own
technology sector.
Where will this leave Taiwan's agencies, especially local players who
made plenty of hay when the technology sector was on the up and up? One
option is to diversify across the straits - as business peers in other
sectors have done.
On the surface, it appears that the multinational agencies, with the
benefit of network resources that are already established in China, have
an edge over the local shops. While it may be premature to write off
home-grown Taiwan agencies, they will need to get their act together
fast.
The ones that will be around tomorrow are those with a viable China plan
in place.
That though will take deep pockets and commitment. In the current
market, where most local players have seen billings shrink, it's a level
of investment that may be in very short supply just when local players
need it most.
