As global brands shun Russia, Asian firms sit out controversy | Business and Economy News

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Taipei, Taiwan – As companies exit Russia en masse following the invasion of Ukraine, Asian brands have been conspicuously absent from the corporate exodus.

Of the more than 370 global companies that have withdrawn, suspended or scaled back operations in Russia, the vast majority are headquartered in Europe or North America, including iconic brands such as McDonald’s, Shell, Nike and Apple. With the exception of a handful of corporate giants from Japan, South Korea and Taiwan, Asian brands have largely opted to either cautiously remain in Russia or keep quiet about their plans.

Those who have quit the market have communicated their decision in a tepid, understated way.

While some Western policy analysts have justified Russia’s isolation with comparisons to the ostracisation of apartheid South Africa, corporate Asia’s muted response has raised questions about the universality of reputational and ostensible ethical considerations influencing North American and European firms.

Key differences in conceptions of corporate social responsibility (CSR), government policy and public perceptions of the war in Ukraine are all affecting the calculus in boardrooms across the region, marketing experts say.

“There is more caution over the potential repercussions about ‘taking a stand’ and as a result managers tend to be more circumspect,” Joseph Baladi, an Australia-based academic and author of The Brutal Truth about Asian Branding, told Al Jazeera, describing Asian brands as generally more pragmatic about CSR issues.

McDonald's sign
McDonald’s is among hundreds of big brands that have cut ties with Russia over its invasion of Ukraine [File: Luke Sharrett/Bloomberg]

When the United States announced sweeping sanctions against Russia last month, it outlined bans on “cutting-edge technology” that includes US-made components used in many products sold by Asian tech firms.

In the following days, dozens of tech firms in South Korea, Taiwan, and Japan got busy poring over the minutiae of the Foreign-Produced Direct Product restrictions to decipher whether they would be compelled to stop selling products to Russia. While some computer makers cancelled shipments of certain items – in some cases complaining about the fluidity of terms like “dual-use” – most did not proactively pull out of the market.

One exception was South Korea’s Samsung, the leading smartphone brand in Russia, which followed major US tech brands in pulling out wholesale on March 5.

Yet unlike Apple, Microsoft, and Intel, which all specifically condemned “Russia’s invasion” when announcing their exit days prior, Samsung simply cited “current geopolitical developments”. Local rival LG announced its exit on Saturday with a similarly non-political statement, expressing concern “for the health and safety of all people” and support for “humanitarian relief efforts”.

Large Japanese firms, from automakers like Toyota to electronics brands such as Panasonic, also cited apolitical factors such as “logistical risks” as the cause for ceasing operations.

“In Asia, it tends to be communicated in a more subtle, and less activistic way,” Martin Roll, a brand strategy consultant who advises Asian family-owned firms and family offices, told Al Jazeera.

Roll said many of the region’s major brands and business families engage in philanthropic activity but tend not to overtly publicise it.

Indeed, several of the prominent brands who refrained from denouncing Russian aggression nonetheless followed their Western counterparts in making pledges to UN agencies and charities working in Ukraine.

Keeping quiet

Other firms have simply kept quiet. Taiwanese tech brands ASUS, MSI and Acer have all declined media inquiries on the issue. In Taiwan’s Economic Daily News, one employee at an unnamed firm was quoted saying that brands fear that a very public withdrawal would offend Moscow, making it difficult to operate there in the future.

But as the conflict in Ukraine rages on, neutrality is getting harder to maintain. Earlier this month, ASUS, one of Taiwan’s best known international brands, was warned by several high profile political figures not to tarnish Taiwan tech’s image by remaining in Russia after Ukraine’s leaders publically requested it to quit the market. The company soon confirmed shipments were at an “effective standstill”, in a tacit acknowledgement it was no longer supplying the Russian market.

There have been surprise reversals, too. Japanese clothing brand Uniqlo initially vowed to stay in Russia, describing clothing as “a necessity of life”, before changing course and following Zara and H&M to the exits.

“Most people – including Asian consumers – would have interpreted Uniqlo’s rationale as disingenuous,” Baladi said.

Even if their primary market is in Asia, brands like Uniqlo have to be cautious of the reputational risk of inaction, according to Abishur Prakash, a Canada-based geopolitical advisor and author of The World is Vertical.

“Because the Ukraine conflict is fluid, if the situation worsens, Western consumers might start targeting companies that haven’t cut ties with Russia – putting Asian brands in an awkward position,” Prakash told Al Jazeera.

Roll said the advantage once enjoyed by brands that led on environmental, social, and governance matters is fading as consumers expect all corporations to take a stand and even be proactive on issues.

“Some Asian brands are still learning to navigate the global landscape and interact with a diverse group of global consumers,” Roll said. “The nearly instantaneous feedback of social media can make this more challenging.”

Hua Chunying
Chinese Foreign Ministry Spokeswoman Hua Chunying has accused the United States of “raising tensions” and “creating panic” in Ukraine [File: Thomas Suen/Reuters]

The relatively muted response from Asian brands may also reflect the differing priorities of governments in the region.

Although crucial US allies such as Japan and South Korea have followed Washington in imposing sanctions, most countries in the region have declined to join the pressure campaign against Moscow. Some, including China and Myanmar, have taken the crisis as an opportunity to accuse the US and its allies of stirring up tensions and conflict.

“The West has wanted to decouple from Russia for a long time … with Ukraine, that opportunity has emerged, and Western companies are following suit,” Prakash said.

“But, Asian companies don’t have the same incentive. Nor are they being pressured by their governments or customers. Why should they sacrifice revenue unless they’re required to?”

Gabriele Suder and Sumati Varma, co-authors of Doing Business in Asia, said China is another factor influencing the calculus of firms across the region.

“The response of Asian firms is also determined by their need to face and respond to competition from China, in which Russia has been their partner in many ways,” Suder and Varma told Al Jazeera in an email, highlighting Indonesia, Malaysia, Myanmar, Vietnam, and India as economies that have benefited from ties with both Russia and China.

Lack of proximity to the conflict may also explain the relative lack of public pressure on companies to distance themselves from Russia.

“It’s possible that the Asian consumer doesn’t empathise with the Ukraine conflict the same way the European or American consumer does,” Prakash said. “That ‘geographical’ or ‘cultural’ connection doesn’t exist. And this means Asian consumers are less likely to pressure or punish Asian brands over their Russian footprint.”

Conflict over Taiwan

That raises questions about the likely corporate reaction to a conflict over Taiwan, where officials have been closely watching the war in Ukraine for lessons on responding to any future military offensive by Beijing, which considers the self-ruled island its territory.

“Asian companies and governments would be more vocal and jolted than everyone else,” Prakash said.

Taiwan’s leaders have acknowledged the pragmatic side to their recent sanctioning of Russia and public diplomacy efforts supporting Ukraine.

“Taiwan had no choice,” Vice President William Lai told local media earlier this month. “If Taiwan had not joined democratic nations in imposing sanctions on Russia, who could we turn to if China attacked us?”

It remains an open question whether Western brands would willingly exit China in the event of an attack on Taiwan – not least because they are invested much more deeply in China’s market than most Asian firms have in Russia’s.

Yet Baladi believes brands’ experience of the Ukraine-Russia war has made it easier for them to potentially pull out of China too.

“The war has revealed just how united Western liberal democracies are in the face of aggression…” he said. “The Chinese leadership is likely realising that talk of an invasion of Taiwan will not only result in pushback by world governments, but also one of the more important drivers of their economy – global consumers.”

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