Clients, Non-Payments and Slow Growth – Is it time for the Middle East’s PR Industry to work together?

A couple of stories broke over the past couple of weeks in the Middle East’s PR industry. This wouldn’t be unusual if it weren’t summer, when little happens. The first piece was the news of additional job losses at Edelman Middle East. The second was the restructuring of FleishmanHillard in Saudi Arabia due to final losses. And the third, which didn’t register in the media, was the closure of a one-person PR agency in Dubai.

There are two issues at play here. The first is management. Edelman’s layoffs aren’t a one-off; the company has made repeated redundancies over the past couple of years, and I feel for all those who joined what is the world’s largest independent PR agency, only for this to happen. Edelman has struggled in the UAE and the wider region, even after the purchase of one of the country’s largest privately-owned agencies, Dabo & Co, in 2015.

The second issue is payment, or a lack of. To quote from the Gulf News piece on FleishmanHillard:

The non-payment of fees, apparently due to a lack of invoicing clients, has impacted their operations forcing the company to reduce their headcount in Riyadh.

The issue also caught the eye of the head of one of the largest agencies in the region. Writing on his LinkedIn feed, Sunil John shared his view on the need for cross-industry action to address non-payment, particularly by governments.

SunilJohn

Slow to No Growth

Let’s give a little context to the PR industry across the Middle East. Over the past two years economies in the Gulf have struggled. Saudi has been in recession for a number of quarters. The UAE’s economy is growing slowly. The fastest growing economy over 2017 was Qatar, with a GDP growth of just over 2 percent. While this may not look particularly bad for those in Europe, many of us in the region can remember a time a decade back when economies were growing double-digit. Slow to no growth is the new norm in the region, and we (and management outside of the region) have got to get used to this, and budget accordingly.

Government Spending Grows

Ironically given lower government spending over the past two years on the back of falling oil prices, the driver of PR spending has been government. Saudi in particular has been spending heavily to transform its reputation globally. I’ve seen a host of medium and large agencies flock to Riyadh to work on Saudi’s Vision 2030, as well as other projects. Political circumstances have resulted in significant sums being spent in both London and Washington. For agencies starved of growth from business, government spending has been a boon.

Payment Terms and Governments

The challenge with government accounts is payment – both payment terms and collection. Government accounts are rarely small, and I’ve heard of terms that can be as long as six months. That’s a long time to wait for payment. And then, there’s the issue of payments being made on time. In my knowledge, it’s rare for a government to pay a bill on time. And if they don’t, what’s the recourse? There’s no higher authority to appeal to, no court you can go to. You chase and chase and chase. And hope you get paid, sooner rather than later.

Is Industry Action Going to Happen?

Sunil John’s call to action is interesting, but it’s not new. I and others have discussed the idea of having non-payment lists with industry bodies such as the Middle East Public Relations Association several years back. My heart desperately wants the large agency heads to come together to agree on what action to take when it comes to black-listing accounts (the WPP agencies could easily take the lead, given the size of their business here). But, despite the hurt the industry is going through, my head say this won’t happen. For every agency that drops a non-paying account, there are ten lining up to pitch. Everyone thinks they can do better on payment.

Sadly, I think there’s a bigger issue at play which doesn’t just affect the PR industry (to give you an example, Saudi’s construction industry has faced payment delays of up to 18 months). The answer is collective action. And it’ll require true leadership from everyone on the agency side, as well as leaders on the client side calling out this behavior. Is anyone ready to make the first move?

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