Barter

Barter used to mean swapping rice for a chicken, chickens for car repair. But with cash flow tight for many businesses in this economic climate, exchanging goods and services might be a trading method to be considered as part of normal operations. "In times like these, cash is king, but barter is smarter," says Brian Hodgson, director of Hong Kong's Pacific Barter Company. Companies want to get rid of excess inventory and save cash. "Barter allows them to do this," reckons Hodgson. "It gives them a chance to try new goods and services at lower actual cost while meeting potential cash-paying clients."

Hodgson used to work in media advertising sales, where barter deals—ad space for air tickets, for example—are an accepted part of the business. He found that while there were dozens of barter brokers in the world, none were based in Asia. Yet the practice was gaining acceptance elsewhere. Even multinationals, mainly American companies such as Coca Cola, Xerox and Ford, do a small percentage of sales this way. PepsiCo has traded soft-drink syrup and beverage-making technology for Russian vodka. In Sri Lanka, car maker General Motors has swapped locomotives for tea, selling the leaves in turn to English dealers for cash. The International Reciprocal Trade Association estimates that in the U.S. last year there were $11 billion worth of swaps among 800 000 out fits.

In Australia and the U.S., barter has flourished in economic slowdowns when corporate budgets get slashed and customers are more careful about spending their cash. Brokers have made arranging deals much easier. Hodgson started its company in April 1997, just months before the crisis hit East Asia. "When we introduced the concept into the marketplace, people said: 'We don't want to barter; we have lots of money.' Now with the slump, they are telling us: 'We have warehouses full of things. Let's talk.'"