GLOBAL BRIEF: South Korea crisis hits adland - Korea’s economic demise has shocked the industry. Richard Cook investigates

’When I left South Korea six months ago everything seemed fine,’ Jeff Fergus, chairman of Leo Burnett in London and the former head of the agency’s South East Asia operations, points out. And the bewildering speed of the economic collapse in South Korea has taken observers by surprise.

’When I left South Korea six months ago everything seemed fine,’

Jeff Fergus, chairman of Leo Burnett in London and the former head of

the agency’s South East Asia operations, points out. And the bewildering

speed of the economic collapse in South Korea has taken observers by

surprise.



President Kim Young Sam’s TV appearance to apologise for his country’s

economic misfortunes the week before December’s general election was his

second such broadcast. Like its predecessor, it didn’t work. The

currency continued to fall, shares crashed and the country’s debt was

passed from pillar to more expensive post.



The cause of the problem was straightforward. For years Korean banks had

advanced loans to the chaebol - the conglomerates that dominate Korean

business life - with more than a free hand.



’These chaebol, like Samsung and Daewoo, have interests in everything

from electronics and manufacturing to their own ad agencies,’ Fergus

says. ’And the future of these agencies could be interesting in the

months ahead. One possible scenario is that the chaebol might try to

divest themselves of these non-essential parts of their business to

raise funds.’



Agencies like the Samsung-owned Cheil are among the biggest and most

prestigious in Korea. But the bad news doesn’t end there. The offices of

multinational networks like McCann-Erickson, J. Walter Thompson and

Burnetts itself could come under increasing pressure as the economic

backlash makes itself felt.



McCanns, for example, was set up seven years ago to service Coca-Cola,

Johnson & Johnson and General Motors and, importantly, to help these

manufacturers get a toehold in the potentially lucrative Korean

market.



However, agencies with Korean accounts outside the country could be in

an enviable position. ’The terrible economic conditions in Korea mean

that foreign currency earnings are all the more valuable,’ Fergus

explains. ’That should help safeguard Korean investments around the

world.’



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