Asia is no Lagarde

Christine Lagarde, chairman of Baker & McKenzie''s executive committee, spoke to FinanceAsia while in Hong Kong.

FinanceAsia catches up with top lawyer, Christine Lagarde who has been chairman of Baker & McKenzie's executive committee since 1999. Lagarde was in Hong Kong from Chicago for the firm's annual gathering of its 250 Asian partners.

What is your sense of the mood in Asia now?

Lagarde: I feel that morale is rising again. That's the sense I get from my partners in the region - and it's not the same for every country. Clearly there are elections coming in Thailand, the Philippines and Indonesia and as is usual in any country in the world, elections mean decisions will not be made and privatization could halt.

But still the morale feels a lot better than it was a year ago. And the bird flu does not seem to have affected business decisions and morale as much as SARS did last year. So I'm reasonably optimistic and upbeat about Asia. Indeed, the momentum derived by China and India is spreading to other Asian countries.

How important a component is Asia of your overall business?

Asia is about 25% of our business, which is a significant portion. We are the largest law firm in Asia-Pacific.

Does Asia remain the fastest growth region for you?

It depends how you measure things. If you measure in terms of US dollars, it might grow quite fast depending on the value of the Australian dollar. But assuming the US dollar stays at these levels or depreciates further, Europe will probably be the fastest growing part of the firm, because both sterling and the euro are so strong versus the dollar.

But net of currency effects, Europe and Asia will be on a par in terms of growth for us.

Are your Asian partners bullish on the prospects for regional capital markets issuance this year?

Issuance levels are really coming back. We have just completed the China Life IPO, and that was clearly a very large deal, and there are deals in the pipeline that are creating quite a bit of excitement.

How do you view China and India within the context of your business?

China is a major component of our strategy. We have been in China for quite a long time. We have offices in Hong Kong, Beijing and Shanghai, as well as Taiwan - and we have over 100 lawyers doing nothing but China law related work. It was generally related to inbound investment, but there is now more outbound work. That's a major piece of our Asia strategy. We believe China will continue to grow and attract foreign direct investment - and China's capital will continue to be invested outside too. It's important to speak the language and have the cultural sensitivities, and we have come to know China well.

India is a different story. We are not established there. It's a market that is still heavily protected, and which will have to relax its rules on professional services as a result of WTO, but for the moment it is tricky and complicated. So we service clients - relating to India - out of Singapore. But there is a clear interest in India, and our US corporate clients are now looking at India to source products and supply services.

What's the strategy in Korea?

Korea is also highly regulated and protective of its local players, but again by 2005 under the WTO, professional services will have to be accessible to non-Korean firms. So we are closely watching this and when the time comes we will be ready to jump in. For the moment we support Korea out of non-Korean bases, with support from Korean colleagues who are correspondent.

At the moment, Korea is dominated by local firms such as Shin & Kim, and Kim & Chang. When you say you are going to enter the Korean market, do you mean you will buy local firms, or grow organically?

We will explore both. Our typical growth pattern has been through incremental and organic growth, starting with people who are part of the Baker & McKenzie culture and from there build a base. We have done that quite successfully over the years. We have also created longstanding relationships with various firms.

So we will look at whether to associate with an established firm or take the traditional Baker & McKenzie route.

What's your experience of doing JVs?

We've had a pretty good track record, if we look what has happened in the Singaporean market. When I last met the Minister of Justice there, he told me we were one of the few firms whose joint venture had actually survived. So we must be doing something right.

Are JVs a sustainable business model?

To the extent that joint ventures have something for both parties, they are a fine business model. In some developing countries they are viewed as a good way to train their lawyers.

My take on it, and it is a personal view, is that joint ventures have a value for a period of time. But in the longer term it is not necessarily the best option.

There are a lot of law firms in Asia. Is there too much competition and is that hitting the fee pool?

I am an anti-trust lawyer by background and so I believe in competition. There are many law firms, and as a segment we will see consolidation - either on a regional or national basis.

Will antitrust be a topic that will be more and more relevant for China?

Yes. Antitrust rules and principles will become more and more important, just as securities regulations will too in China. These are two areas - together with international trade rules - which need better structured international rules that respond to the globalization of trade.

Ultimately, a global antitrust body is a dream and a far-fetched project, but I believe that the WTO's ability to settle disputes is the beginning of what should in the future take place to create an overall antitrust authority.