EASTERN

In the first of a fortnightly column, I will try to let you know exactly what is going in the Far East, giving you the latest news and developments of all the significant players in the industry.

Let me take this opportunity to fill you in on a few things here in Thailand and the rest of the ASEAN (Association of South East Asian Nations - similar to the EU, but with far less muscle) region. Most international IT companies have offices but choose to sell the majority of their products through resellers. This has created a mini-market of resellers, dealers and partners, which in turn has had led to fierce competition in the market. With the economy in the shape it is, more and more are going to the wall. In fact, recently released government figures show that some 600 IT workers are being laid off on a weekly basis.

IBM, Seagate and Canon have all moved some of their production units from Thailand, China and Penang (Malaysia) to Singapore, where they have similar production plants. Thailand still has an IT production base, but, this is relatively small when compared with Singapore.

There are several large PC markets here which sell very cheap locally made PCs and bootlegged software - hard disk loading is also carried out on every PC bought at such places. This is causing a problem between the 'big boys' and the local players. Needless to say, these places are constantly being raided by the Thai police, the Business Software Alliance (BSA) and the Intellectual Property Court. It all makes for very interesting news, with judges and BSA officials getting bloody noses during the frequent raids.

For the past year, several of the once mighty 'tiger' economies of Asia have been battered as their currencies, released from an unrealistic pegging system with the US dollar, continue their downward spiral. This has had a knock-on effect, with IT markets across the region reporting sharp drops in revenues on previous years. Many of the hardest hit countries are actually large manufacturers of computer-related products and it is their currency depreciation, coupled with a serious lack of liquidity, that has left many of the once powerhouses of Asian computer companies on the brink of bankruptcy.

Damage limitation exercise

From Thailand to Korea, stock markets have crashed as investors look to minimise the damage. The International Monetary Fund (IMF) and the World Bank have both been regular visitors to many Asian countries, but only a few countries have accepted the stringent rules attached to the financial bail-out. Thailand decided a loan was required to help kick-start an economy shaken by the closure of 58 financial institutions by the government and as local banks reported massive fault repayments on loans acquired when the economy was booming.

The Sahaviriya OA Group (SVOA) of Thailand is a classic example of quick expansion and large overseas borrowing to finance growth. In 1997, the Group reported revenues of 5.3 billionThai baht, but today, with the economy in tatters and the baht stabilising, the Group has announced debts of 4 billion baht.

One of its most successful operations was a joint venture with Taiwanese giant Acer Computers, with the offshoot inspirationally called SV-Acer.

However, SVOA recently decided to drop its name from the joint venture and go with the more recognised Taiwanese name. Jack Min Intanate, executive chairman of SVOA, said the move was merely part of the Group's worldwide marketing strategy and that nothing would change in the overall running of the company, which handles products from Acer, Apple, Adobe, Epson, Hewlett Packard and Siemens Nixdorf among others. Acer was the leading PC vendor in Thailand last year and also favoured well in the notebook market, beating off rivals such as Compaq and Digital.

Thailand's PC market has also suffered from the decline in spending power by companies and home users. In 1997, the market's value stood at $542.6 million with Compaq/Digital topping the list, followed by Acer, IBM and Atec - the lone local Thai company. Forecasts for 1998 predicted a market drop to $213.4 million, with the Compaq/Digital line-up leading the way.

Many of the leading international companies are predicting lean times ahead in the Thai market, but Acer is confident it can continue to increase its market share. The company is putting a different emphasis on the local scene and has appointed a local country manager to lead the charge. Last year, Acer promised $10 million in sponsorship for this year's 13th Asian Games, scheduled to be held in Bangkok in December. It has supplied more than 100 Pentium II PCs and scores of servers to the organising committee and is currently setting up the system.

Light at the end of the tunnel?

Toshiba has maintained the number one spot in the portable PC market, with Compaq/Digital, Acer, Atec and Dell all featuring strongly. This market is not a prominent sector in Thailand, with only 4,000 units being shipped in the second quarter of 1998. Meanwhile, the PC server market, a strong indicator of company spending, is still very small with only 1,184 units being shipped in the same period.

Research company IDC projected that the overall Thai IT market would drop by 42.5 per cent this year, in dollar terms, but in the local currency, the market would be slightly up.

Dennis Philbin, vice president and managing director of IDC Asia-Pacific, said in a recent interview that the country would ship one million fewer PC units than it did last year. But one ray of light remained at the end of the tunnel, with Philbin saying important projects, such as Malaysia's Multimedia Super Corridor and Singapore's Singapore One, will help drive the markets. The majority of Thailand's IT development projects have been put on ice for the time being.

Porntep Techapaibul, deputy minister of the Science, Technology and Environment Ministry, said the government was serious in its endeavours to attract foreign investment. It been toying with the idea of setting up a software development centre for many years to offset the millions of dollars spent per annum in purchasing software from overseas. 'Right now, we're spending millions on software. What we want to do is locate independent software vendors in one place so they can develop applications for our market,' Techapaibul said.

The government plans to purchase 50,000 square metres of land to build the centre. But with neighbours Malaysia and Singapore already close to completing their projects, the chances of luring any larger fish looks slim. Malaysia has commitment from Microsoft, Intel and IBM, as well as many others, to invest substantial amounts in the area. Similarly, Singapore has attracted many of the leading e-commerce companies into its project, which sees every business and home having a connection to the island-wide, high-speed network.

Thailand's leading computer outlet is Pantip Plaza, which specialises in locally produced computers and pirated operating systems and applications. Operators at the plaza face regular crackdowns by the police and officials from the BSA for selling the fake products. Nevertheless, real bargains can be found, with prices as low as 25,000 baht for a Pentium II system, with locally made disk drives and monitors.

It is normal for these shops to hard-load disks with virtually any software buyers wish to have.

This has led to many conflicts between software makers and the companies representing their operations here.

The year ahead will be one of the hardest for computer companies, with many of the local dealers and vendors going out of business.

Only time will tell if the markets can reach the giddy heights once achieved in a country of 60 million citizens with a real thirst for knowledge.