‘There is a theory that all these countries will dump very low-cost products on the market and undermine other manufacturers. It could be devastating.’
Paul Priestman, Priestman Goode
‘There have been a lot of people dipping their toes into the south-east Asian market who have had to get out because they didn’t understand the culture.’
Maurice Acton, MTA
‘Front-end input is where British designers excel.’
Ron Marsh, Export promoter for the Japanese market, DTI
‘Despite the recession, in the long-term the region is as important as ever’
Sam Sampson, chief executive, Enterprise Group
‘It’s challenges like these that make the job most interesting’
Dave Allen, chief executive, Sampson Tyrrell Enterprise
‘Diversification makes contraction bearable – 65 per cent of our business is already overseas.’
David Rivett, Design Bridge
‘The Singapore public wants hi-tech entertainment, not art or contemplative exhibits.’
Neal Potter, exhibition specialist
The fast-evolving, open-to-suggestion nature of the Asian tiger economies has made them a source of growing interest to UK designers for the past ten years. But the responsiveness which has helped make them such successful performers on the international economic stage is proving to be their downfall.
Designers who saw the region as a Klondike will find little opportunity for instant wealth. Practices with long-term connections to the area are preparing to sit out a financial winter of uncertain length.
The picture of south-east Asia’s design business is varied. Lloyd Northover Citigate is working with the Hong Kong postal service where, as vice-chairman Jim Northover says, “people still need post offices”. Similarly, Met Studio’s exhibition design for the Urban Redevelopment Authority in Singapore is stable. The state has not cut its budget yet.
Product designer Paul Priestman of Priestman Goode and Maurice Acton of MTA say small projects are being dropped and that the electronics industry is urgently re-assessing its design and production values. No one experience holds true for everyone, and designers should watch the region closely. Newspapers will give more explicit information than clients, and those looking for signs of an economic spring should watch the financial indexes, advises Brian Sturgess, developing markets expert at investment bank ING Baring.
Thailand has been most dramatically affected by currency destabilisation and bad debt. The currencies of Taiwan, Malaysia, Indonesia, The Philippines and, lately, South Korea have devalued between 30-60 per cent in the last six months. Japan and Hong Kong, despite strong base-line economies, now look vulnerable.
Depending whether the client is based in one of the south-east Asian countries or the West, and whether the product is for domestic or export markets, designers will find their working relationships affected in different ways.
Architecture and construction projects are being put on hold across the region as the value of property plummets: in Hong Kong 20 per cent of market value has been lost. However, the scale of most development in the area means live schemes will reach completion. BDG McColl has six people working on the design detailing at Kuala Lumpur airport; Foster and Partners has on-going work at Hong Kong airport, and Nicholas Grimshaw & Partners is active on the high-speed rail link at Pusan in South Korea. A finished project recoups costs better than one abandoned mid-way, even in the eye of a recession.
As the Hong Kong dollar follows the deflationary trend set last July by the Thai baht, jobs are cut across the board. Hong Kong-based product designer Charles Medd says failing confidence in the economy is having an impact on advertising and design. After eight years of boom, south-east Asian businesses have encountered their first major obstacle, and they don’t know what to do about it. Client companies are going bust, leaving some design fees unpaid.
Medd, whose group has just won a local Chartered Society of Designers award for a Hampster House design, tells of turning down work because he cannot break even for the fee. Some clients have started to question the importance of design, he says.
Despite the problems, Medd is optimistic that the speed with which the region’s economies evolve will generate new profits and employment within the next two years. “If I was pessimistic about the situation, I wouldn’t be here,” he says. There is little immediate cause to abandon ship, and, like other designers working in the region, the time and energy put into building relationships with clients makes him loathe to quit. Brand-conscious Japanese clients particularly value designers with a reputation. Reputations are built by being visible on the ground. “Part of my advantage is that I’m a European in Asia,” says Medd. “I have a well-established track record. Clients assume I offer a stable relationship.”
Richard Seymour of Seymour Powell has been working in Japan, China, Korea and Hong Kong for nearly a decade. Though the group has one project in Hong Kong now on hold, Seymour says: “Overall, at this point I’m surprised by how little overt effect this has had on our client base. I don’t expect the situation to melt down.” This view is echoed by the Department of Trade and Industry and the British Council.
Seymour Powell has a solid track record and is trusted by its clients. Seymour observes that Japanese clients work on longer term strategies than their Western counterparts. Maxine Horn of the British Design Initiative agrees. “In the UK, the average design job lasts for 18 months. In Asia, there is a job-for-life culture. Once you’ve built a relationship it tends to endure,” she says. It can take years to persuade a firm that design should form part of its plan, but once committed, it is in the designer’s interest to help the client to modify a design programme to suit changing fiscal circumstances.
As demonstrated during the UK slump of the early 1990s, recession can be good for business: a chance to eliminate competitors. Size, competitiveness, and fleetness of foot are vital assets in staying ahead and surviving. So, in the immediate term, Seymour Powell is working in other areas: “By spreading your business globally, you are protected if one area hits the skids,” says Seymour. He is more concerned by the possibility of global recession taking hold in the near future.
Design Bridge chairman Philip Lawder thinks Western designers have been working in south east Asia long enough to have © demonstrated the strategic importance of design in both domestic and export markets. Local designers across south-east Asia now provide expert skills in terms of execution, but have yet to gain the experience necessary to develop concepts and strategy for penetrating Western markets, he says.
Design Bridge’s work for the Korean arm of Sarah Lee won a DBA Design Effectiveness Award last year, and the branding of She toiletries resulted in a 300 per cent increase in sales, boosting the line from sixth to second place in the market. “Sales are the best business proposition you can put to anyone,” says Lawder.
As deflation makes Western objects of desire increasingly unattainable, it seems likely that a more critical approach to design and manufacture of home-grown brands will replace the culture of “get it nearly right and get it out there” which has sometimes prevailed in the past.
Before the currency crisis, Lawder says, Indonesian businesses were starting to use branding in ways which correspond to European models: a degree of selectivity about price, value for money, emotional value, use and needs was starting to replace uncritical excitement about new products. As Lawder says, “you don’t unlearn that,” and, assuming south-east Asian markets do revive, UK designers with expertise in branding and identity will once again be in demand.
If there is cause for concern in south-east Asia itself – and there is certainly no sense of panic, merely caution – there is also reason for alarm more broadly. As the region’s economies slide against the US dollar they become more competitive. South Korean electronics giant Samsung’s withdrawal from Europe takes place at a moment when labour at home is becoming compellingly budget-efficient. Korea’s micro-chip producers have already forced Intel to drop its prices with a flood of cheaper products on the international market. Conversely, many of the region’s manufacturers are reliant on Western components, materials and skills, all of which are now prohibitively expensive. Destabilisation of Western markets and production could exacerbate the potential for following south-east Asia into recession, already felt on the stock markets.
The spectacular depreciation of the Indonesian rupiah (now 80 per cent below its July 1997 value), means there is likely to be a major re-assessment of where it is cheapest and most desirable to manufacture. China, where economic growth was accelerating sharply, has remained the most stable of the region’s economies.
It may no longer be such an appealing location for production, but China seems likely to emerge as an important commercial player, and should be watched closely by designers interested emerging markets.
Regional breakdown of south-east Asian economies
Bangkok’s booming media industry has been decimated by bad-debt crisis and the weakness of the bhat, which was the first of the region’s currencies to plunge last July. Some ad agencies and television production companies, which were particularly strong, have folded. The forecast for Thailand is least optimistic.
Malaysia and Indonesia
With cheap labour, Malaysia and Indonesia have been popular manufacturing bases, but relatively few design groups have clients in this country. They lag behind other south-east Asian countries – in particular, Japan, Hong Kong, Korea and Singapore – in developing Western-style design for export. The spectacular depreciation of the Indonesian rupiah means cheap labour. Consequently it looks certain that Indonesia will remain popular for production.
A fast-growing manufacturing and economic force in the region, Taiwan’s consumer products base has been badly affected by the slump. Design commissions have started to dry up, and it is uncertain how much work will be available in six months’ time.
Architecture, engineering, identity design, consumer, product, branding, packaging design and advertising have all suffered set-backs. New projects are being put on hold, but long-term strategic design programmes are being kept on track. Japan has the most evolved and best proven relationship with Western designers, and the largest vested interest in maintaining export markets.
Samsung’s retraction from Europe says a lot about the health of Korea’s prodigious electronic goods and auto-manufacturing businesses. Korea’s economic vitality is heavily dependent on exports though, and providing devaluation of the won does not render raw materials and skills bought from overseas prohibitively expensive, there will be on-going demand for UK design talent. However, groups operating in the area as a whole will have to focus on selling front end services, and cut costs by employing local services for artwork and implementation.
News of economic caution, but not disaster, from Singapore. The client base consists extensively of large multinational corporations which are able to absorb the economic body-blows which have so damaged smaller businesses. A recent flurry of mergers and acquisitions in south-east Asia is serving to bolster confidence in the region. Singapore looks set to provide steady design work in corporate identity, branding and consumer goods.
The place to watch in the coming year: China has been making a mark for electronics and, increasingly, optical goods. It has remained relatively unscathed by its neighbours’ precipitous financial decline, and looks set for rapid expansion as both a domestic market and exporter.