Business and cultural differences

keep many Asian companies

from becoming fully transparent

by Michael Netzley, Ph.D.

special report: asia/pacific

Peering through I

s transparency an inherent good? Like othercourses of action, such as maintaining an open-door policy or trusting markets to make theright decision, transparency can often be heldup as an ideal. Resisting a call for transparencycan at best seem odd and at worst evoke suspi-

cion. While nobody expects companies to reveal tradesecrets, the communication profession is generallypremised on the idea that openness and informationexchange are good for business.

In Asia, the call for transparency was loud following

MA

STER

FILE

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the wallsthe 1997 financial crisis. Investors wanted to knowwhat management was doing and what happened to themoney. This crisis brought about increased diversity infinancial portfolios and improved corporate gover-nance, but many now argue that transparency has notbeen adopted as readily. A February 2008 article in theSingapore business magazine The Edge put the spot-light directly on what it described as “the tendency oflocal and regional companies to place little value onbuilding intangibles and goodwill.” In other words,companies in Asia are not very transparent and spend

Many Asian companies

maintain close relationships

with banks and government; thus

there is little market pressure

to be more transparent.

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32 Communication World • November–December 2008 www.iabc.com/cw

special report: asia/pacific

relatively little time communicating with stake-holders when compared with corporations head-quartered in the West.

Others have made the same argument. In hisbest-selling book Asian Eclipse, MichaelBackman describes how conglomerates inmany Asian countries maintain close relation-ships with banks (or own their own) and gov-ernment. Consequently, there is little marketpressure to be more transparent. A significantbody of academic research, especially inaccounting and finance, has found differencesbetween corporate disclosure practices inemerging markets and those of more maturemarkets. Differences in cultural expectations,legal traditions (for example, French orBritish), and disclosure requirements tended toaccount for these differences.

Corporate Asia often does not view trans-parency as an inherent good. To illustrate, con-sider one of the hottest issues of 2008: theemergence of sovereign wealth funds. Quitesimply, SWFs are investment vehicles created by countries such as Singapore, China, Brunei,South Korea, Malaysia, Kuwait, United ArabEmirates, Russia, Australia, Canada andNorway. These funds invest the country’s for-eign exchange reserves and other assets for thebenefit of the nation. For example, the invest-ments are a reserve in case of a global economicdownturn. In a country such as Singapore, saving for a rainy day is especially importantbecause the country has no natural resourcesand is surrounded by nations such as China andIndonesia that offer a less expensive manufac-turing base. In total, estimates suggest that the18 largest SWFs actively invest more than US$2 trillion.

The problem is that few people understandthese government-owned funds, which areinvesting in some of the corporate world’s mostrespected companies. The lack of SWF trans-parency fuels suspicions that one day the funds will manage their investments with apolitical, rather than purely financial, eye. Areport from the Peterson Institute of Inter-national Economics states that management of such funds “has become a major focus ofnational and international economic and finan-cial policy because of their size, their lack of

transparency…and the risk that political objec-tives might influence their management.”

The lack of information invites suspicion andgovernmental regulation, and this begs the ques-tion of why SWFs (along with corporate Asia)do not simply open up and put stakeholders atease. This is not an easy question to answer.

Asia is differentExactly how is Asia different from other regions?There are several key factors:● Placing suspicion before trust. One challengeis to understand the general tendency to be initially suspicious before being trusting. Toillustrate, consider the following quote fromSingapore’s first prime minister, Lee Kuan Yew,who continues to play a leading role at GIC, oneof Singapore’s wealth funds: “There have alwaysbeen these calls for transparency, and we [GIC]have been careful about it. There are reasonswhy we do not think we should be too trans-parent. One, people will anticipate our moves.No company likes to have its moves anticipated.If you make your moves very clear, people canpredict what you will do next, and forestall youor preempt you.”

In essence, organizations are concerned aboutwhat others will do with the information.● Partnering with government and banks.Corporate Asia has a long tradition of strongrelationships with governments and banks.Governments have the power to maintain afavorable operating environment, offer taxincentives and award business opportunities.Asian companies have traditionally been verygood at promoting their interests through stronggovernment ties.

Additionally, using banks (or owning yourown) to finance the business means that com-panies face few demands for transparency com-pared with public financial markets. Together,governmental ties and banking create an envi-ronment that has traditionally made littledemand for transparency.● Avoiding risk and saving face. At one point we have all probably heard the word face usedessentially as an equivalent of good public stand-ing or reputation. In Asia, saving face is impor-tant, but not causing someone else to lose face iseven more important. Corporate Asia can have a

In Asia, saving

face is important,

but not causing

someone else to lose

face is even more

important.

about the authorMichael Netzley, Ph.D.,

teaches on the corporate communication faculty at

Singapore ManagementUniversity. He has resided in

Asia for the past six years, andpreviously lived and taught in

Japan, Argentina, Germany andthe U.S. In addition to teaching

courses on corporate reputationand social media, he is an active

consultant. Netzley blogs atCommunicateAsia and can alsobe heard each week on the For

Immediate Release podcast.

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long memory, and causing one to lose face willprobably never be forgotten.

Transparency is something that, from a cer-tain perspective, can run counter to saving face.By making everything public, you are also mak-ing mistakes public. You would be causingsomeone or some entity to lose face. Prudence,or risk aversion if you prefer, can suggest that weprotect our public standing by revealing onlywhat is necessary. This strategy offers the poten-tial opportunity to help save face rather than seea company or colleague lose standing.● Placing less value on intangibles. Arguably themost discussed aspect of corporate Asia, from a communication perspective, is the relativelylow value placed on intangibles such as brandsand reputations.

Take the case of April Paper. Several yearsback, April came under attack from environ-mental groups that claimed the company hadpoor forestry practices in Indonesia and thatlocal communities were suffering. Aprilresponded by flying its critics to Indonesia andgiving them a firsthand look at its forestry prac-tices and the local communities it had investedin. Critics have since changed their tune (exceptthose who refused the visit), and now April isrecognized as a global leader in sustainableforestry. April is also a member of the UnitedNations Global Compact and has won threeconsecutive U.N. Environmental ProgrammeChampions of the Earth Awards.

Previously, April kept quiet about its corpo-rate practices; now it is a global leader. Whatvalue do good business practices have if nobodyknows about them?

Sharing adviceFor communicators from other parts of theworld who find themselves doing business inAsia, here are a few helpful tips. First, rememberthat relationships are everything. We all knowthat it can take a long time to build a good rela-tionship and seconds to ruin it, but that axiomis exponentially more important in Asia. Once arelationship is damaged, you may never again begiven the same degree of reciprocity or trust.

Second, keep a long-term perspective. Manyof Asia’s most established corporations can pay abit less attention to the quarterly cycles. You

need to be patient, and slowly but consistentlywork on selling both the benefits of increasedtransparency and the risks of remaining closed.Results will probably not come quickly.

Finally, pay special attention to the influ-encers. More than likely they will be the organi-zation’s senior people, since organizations in Asiacan rely more on hierarchy and people displaygreater respect to authority. Be patient, work to earn the respect of these influencers, buildalliances, and eventually you may have a plat-form for making your case.

There are no easy answers, and much evidencesuggests that many Asian organizations will notadopt wholesale the transparency norms ofWestern corporations. Instead, they will likelybe patient, see what is most promising, and takethe best ideas from the West while forgetting therest. Fighting this pattern will almost certainlylead to disappointment, but patience and a bitof understanding can be a great starting pointfor anyone doing business in Asia. ●

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The term Asian Century refers to a signifi-cant economic, political and demographicshift from North America and WesternEurope to Asia. Following World War II, the20th century was often referred to as theAmerican Century, while the 19th wasknown to some as the British Century.

The shift currently under way has signifi-cant implications for professional commu-nicators. First, we might look at the AsianCentury and ask, How do audiences differ?

Demographically, Asia’s population isbooming—now more than 4 billion peo-ple. It has become the world’s economicengine and includes some of the largesteconomies, such as Japan and China. Manymature economies such as Singapore,South Korea and Hong Kong offer globalknowledge, education and financial hubs.Emerging economies such as Vietnam,Thailand, India and Indonesia offer sizable-to-large markets and growth potential. As

you might expect, political power is growing as well.

Interestingly, technology adoption is impressive regionwide. The Philippinesand Singapore have stunning levels ofmobile phone adoption, and China’smobile market has topped 600 millionpeople, according to the Ministry ofIndustry and Information Technology of China. In 2008, the China InternetNetwork Information Center reportedthat China had become the world’s largest Internet market, with more than253 million netizens. Japanese still holdson as the world’s most popular languagefor blog posts. Finally, companies such as Tencent in China and Cyworld in South Korea have shown an impressiveability to innovate.

Indeed, Asia has much to offer, and thecentury is only beginning.

—M.N.

Welcome to the Asian Century

We all know that

it can take a long time

to build a relationship

and seconds to ruin it,

but that axiom is

exponentially more

significant in Asia.

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