The Asian economic crisis should turn the corner in the next two to three months, with a little luck, but the economy could still be in recession for some time to come. That will affect New Zealand IT companies with regional headquarters in the troubled countries.
That’s according to Mark Wolfendale, CEO of Systems Union for the Asia-Pacific region. Systems Union, headquartered in the UK, claims a place in the top ten financial management and business software vendors worldwide. Wolfendale was the opening presenter at the Finance Forum 1998, held in Auckland last week. For Wolfendale, the Asian crisis falls cleanly into two categories.
“The first phase, which we’re still in, is the freeze-frame phase.” He sees little decision making in the region since November 1997, and that’s leading to a downward spiral that could be hard to break out of.
The second stage is a “low growth” phase that could be likened to a recession.
“At least people understand what that looks like and they’ll start making buying decisions again.”
Wolfendale believes the crisis began in earnest with a breakdown of the most basic of economic transactions between Singapore and Indonesia.
“Singaporean banks were not honouring Indonesian letters of credit, which are the most basic form of trade.” Wolfendale says Singapore has agreed to guarantee these letters and that should kick-start the economic relationships in the region.
For New Zealand IT businesses, Wolfendale says there are business opportunities in the region. “There are two positive areas they can get involved with. One is acquisitions.” He believes in two to three years Asia will be back at the kind of level seen before the collapse, and that many US companies are treating the problem as a kind of “fire sale”.
“Companies like GM and Coca Cola are being mentioned as buying these assets because everything is half-off.”
The second opportunity lies in providing products the affected countries can include in their products at low cost.
“They’re going to be able to dump an awful lot of cheap merchandise. If you can figure out how to get hold of a piece of that, you’ll be good in the years ahead.”
As for the millennium bug, Wolfendale says Y2K projects must go ahead regardless of the economic downturn.
“If you were going to buy 10 things and now can only afford three, one of those things has got to be Y2K compliance.”
His main concern is companies that wait until the last 12 months to fix their Y2K problems. “Are there going to be people who can fix it for you? There are only X number of software programmers around.” As Wolfendale says, this is one deadline there is no way you can postpone.