Leo Burnett looks to buy Indonesian agency

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JAKARTA -- Leo Burnett looks set to buy Kreasindo, a Jakarta-based agency with which it is affiliated, in a move that's part of a flurry of Asian acquisitions and start-ups by international agencies.

A spokesman at the Indonesian agency confirmed Burnett was discussing equity in Kreasindo. "We've had a relationship with Kreasindo for about five years," says Steve Gatfield, regional director in Hong Kong for Burnett's Asia-Pacific office. "We've been discussing this for the last 18 months. We're planning to invest substantially in media systems, training and research. We're not buying the business this year because it happens to be cheap."

Also in the past month, Burnett has become the first foreign agency allowed to do business directly in Vietnam, rather than through a representative office, and has opened its Starcom media specialist in Thailand.

In addition, the Bangkok Post has reported that J. Walter Thompson has been scouting for new affiliates throughout the Southeast Asian region. Allan Fairnington, president of J.W.T. Asia-Pacific, declined to elaborate by phone, saying only that he was "looking at all Asian markets."

This is the worst imaginable time to open shop in Indonesia, following its paralyzing economic downturn, but agencies are betting it will pay off when the economy recovers in a few years.

TBWA has also recently linked with a local Indonesian shop. It shook hands with PT Tata Binar Warna Arti, Jakarta, last summer and formally affiliated in December 1997 to become TBWA/ PT Tata Binar Warna Arti. Publicis, too, has partnered an Indonesian agency and Zenith Media opened its first office in Thailand May 1.

Most affiliations in Indonesia have been announced since the country's currency, the rupiah, began accelerating its downward slide last November. The rupiah has lost 70 percent of its value since last July.

By some accounts, foreign companies are capitalizing on bargain prices to gain a toehold in a lucrative future market. "It's a heck of a lot cheaper if you're buying in dollars," says one expatriate executive. Currently, overseas companies are not allowed to own shares in Indonesian companies. "Right now everyone does it, but if the government so chose a company could be in serious trouble," he explains.

RTS Masli, chair of the Jakarta region of the Indonesian Association of Advertising Agencies, estimates 10% to 15% of the 110 ad agencies in Jakarta will collapse by the end of the year.

Copyright May 1998, Crain Communications Inc.

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