EMERGING MARKETS: A MIXED BAG OF PROMISE AND PITFALLS

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"Colombia is a country of extremes," said Alberto Villar-Borda, president of McCann-Erickson, Bogota. A nation where 30,000 were murdered last year, economic growth is accelerating in recent years after 1990's apertura, an economic policy of opening the economy. Last year gross national product grew by 5.7%, and income per capita grew to $1,633 in 1994.

Ad expenditures more than doubled between 1992 and 1994, to $1.5 billion from $611 million.

TV was privatized last year and the apertura lifted several restrictions: the repeal of a ban on foreign-made commercials and a law requiring narrators with specialized voice-over training. Strict rules on health advertising may be repealed by Congress.

The market forbids TV tobacco and alcohol ads, and requires proof of claims in comparative advertising. Advertisers are subject to taxation-$26 per spot for local companies, $52 for companies with local and foreign ownership and $78 for foreign marketers. One proposal, now scrutinized by Congress, would introduce a 14% value-added tax on commercials.

Indonesia enjoyed a 65% increase in ad spending between 1993 and last year, thanks to a boom in TV advertising, which was up 73.2%, the Indonesian Association of Advertising Agencies said.

Agency Cabe Rawit, Jakarta, after doubling its billings in 1994, is hoping for a 1995 increase of only 15%. "We're deliberately slowing our pace to meet the demand of our existing clients," said Narga Habib, the agency's managing director.

Foreign investment in Indonesia tripled in 1994 to $24 billion as the economy grew 7%.

A localization trend strains Indonesia's ad industry, and some local shops have broken with global networks to build their profits, including former affiliates of Grey and Leo Burnett.

Ad spending in Malaysia in 1994 came to an estimated $635 million-a 16.2% increase in above-the-line expenditures, compared with only 7% the previous year. The gross national product growth of 8.4% indicates that clients are spending more on advertising.

But as new product lines boost agency billings, overstretched new companies run a high risk of going bust, said Percy Tegjeu, managing director of Platinum Advertising Agency, Kuala Lumpur. "Some clients have big ambitions but no financial resilience."

This year's elections will create a rise in ad spending, analysts speculate, as Malaysia's political parties vie to outspend each other on campaigns.

South Korea this year anticipates the emergence of many foreign advertisers, with the opening of its retail market. Forty international electronics, apparel, camera, watch, toy, cosmetic and other manufacturers recently tried to invest or to set up joint ventures here, a recent Korea Chamber of Commerce study showed.

South Korea-based advertisers are anticipated to build their presence in foreign markets. Samsung Group set up new offices in Tokyo, Singapore, London, New York and Beijing and is scheduled this year to establish production sites in Mexico and China. Daewoo Group anticipates sales abroad by the year 2001 at $700 million.

Last year's $550 million in advertising billings fell 15% from 1993 following a drop in consumer spending of 30%, according to the Advertisers Association of Turkey. But the industy is pinning its '95 hopes on a customs union which will tear down all trade barriers, including import taxes, against products from the EU.

"European and Asian companies will have to promote their goods in Turkey," said Ayseg?l Dora, president of Penajans D'Arcy Masius Benton & Bowles Ticaret, Istanbul. "This will mean increased advertising revenues."

The government this year plans to sell scores of state companies, including Turkish Airlines, swelling ad spending; Prime Minister Tansu Ciller hopes to raise $5 billion from the sell-off of state companies this year.

Although private broadcasting was allowed only six years ago, since then the country has lined up an impressive number of outlets including seven private national TV networks; three state channels; 350 regional TV channels and 1,500 private and state radio stations.

Coca-Cola, PepsiCo, Johnson & Johnson, Unilever, Procter & Gamble and Mars Inc. were among the foreign advertisers pouring official products into Vietnam last year and setting up Ho Chi Minh City offices.

Tobacco marketers Dunhill, Philip Morris and B.A.T set up local cigarette production in the fall, just before Vietnam banned tobacco and hard liquor ads. Still, the marketers now are concerned more with establishing offices than with ad bans.

Multinational agencies joining the market last year, scoping for local partners for joint ventures, included Acorn Research; BBDO; J. Walter Thompson; Lintas; Leo Burnett; McCann-Erickson; Ogilvy & Mather; Prakit/FCB; and SRG Vietnam.

Agencies are challenged by Vietnam's multiple prices for foreign and local advertisers, its changing systems of distribution, media and ad legislation, and its lack of research.

Research is very imprecise: Bates Media Monitor charts Vietnam's 1994 ad spending at $30 million, while McCann-Erickson Thailand's figure came to $70 million.

Written by Todd Pruzan from reports by Mary Matheson, Anne Andrei, William Dennis, Metin Demirsar, Yoo-Lim Lee and Ad Marshall.

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