The Engel Group, an Austrian manufacturer of injection moulding machines, will invest $20 to $25 million in Korea. Dr. Birgitte Engleder and Johannes Kikinger were part of a delegation from Engel visiting Korea in July to sign an agreement to buy land in the City of Pyong Taek's Jang Dang Industrial Complex, Kyonggi province, where the company will build a factory.

What is prompting you to manufacture in Asia, and why Korea?

JK: We are a global company with three factories in North America and three in Austria. We already have sales operations in Asia based in Hong Kong, Singapore and India. Our next step is to manufacture in Asia to become more competitive.
BE: For 20 years we exported to North America before we sold sufficient quantities to warrant manufacturing there. Now it's time for us to manufacture in Asia.
JK: As to why Korea, our decision is based on analyses of the market and the possibilities which are opening up here. However, the decision was also based on the qualities of the Korean people, local product quality and the ability to manufacture hi-tech products here. The infrastructure, workforce and quality of workmanship were all important.

What are your target markets?

JK: Geographically, Korea itself, but we also intend to export to Asia; to China, Thailand, India and Indonesia. In terms of companies, there's a very wide range. Tupperware and Lego, for example, are big customers for us all over the world.
BE: As are Ford and General Motors in Europe and in North and South America. You might say investing in Korea is a strategic move to sell to the same companies.

Could you explain the difficulties you experienced in finding a suitable site for your plant and what assistance KOTRA rendered on your behalf?

JK: KOTRA supported us by researching several locations. When we finally chose this site in Pyong Taek, KOTRA's support was again very important. Many of the difficulties we had arose because the dealings were between two different cultures. From time-to-time it was hard for us to understand the Korean side and it was hard for them to understand us. KOTRA gave us full support in explaining to provincial governments what we wanted. For example, one provincial government wanted an agreement in Korean while we wanted it in English. The outcome was the agreement was in both languages, but with English prevailing.

In your agreement with the Kyonggi provincial government, you pushed to have a "One-Stop Service Clause" built into the project plan. Why was this important to you?

JK: It was extremely important for us in setting up a factory. We have signed the land purchase agreement. What follows now is very hard work and we'll be asking the provincial authorities for further support. We've had full support from KOTRA, the provincial government and the mayor of Pyong Taek. That's what's meant by the clause. Getting a suitable price for the land for your factory was the subject of prolonged negotiations. How critical was land price in your final decision to invest here?
JK: Land prices in Korea are very high. Finally, though, we were offered a quite exceptional price by the provincial government. Land price was important, but more important was the ability to build high-quality products and costs have to fit around that.
BE: Land prices weren't the main question. The main question was: "Is this the right place?"

Is the strength of the domestic market important in this respect?

JK: Naturally. For us there were two considerations. The Korean market is very important. It's worth 2,500 machines per year. As far as we understand, the market is opening up and an increasing number of machines will be imported from other countries. Japanese companies in particular are quite aggressive in this regard.
BE: It's our task to replace those imports. We don't want to fight local manufacturers. We want to try to keep imported machinery out.

Your investment plans, however, seem to have unnerved domestic manufacturers of injection moulding machinery. Did this surprise you?

JK: It didn't surprise us, but we represent no danger to our competitors because what we want to do is bring in another technology.

What do you feel can be done to improve the investment climate in Korea and help companies like Engel invest here?

JK: The same as in America and Europe, that is, reduce bureaucracy. It's not the biggest problem, but one of them. That, plus liberalizing the capital market.
BE: It was also very good the way the Ministry of Trade Industry and Energy reorganized KOTRA. Before it was concerned only with trade, but now its focus includes investment.
JK: One very important thing is for the government to reduce import duties.
BE: That's because if you manufacture in Korea, at first you have to transfer components from the main factory. So, it's quite expensive at the beginning.

What do you see as the future for Engel in Korea?

BE: We hope the Asian market will continue to open up, and in this context, to make Korea the center of our Asian operations.
JK: We have a plan of progressive expansion involving the export of 50 to 60 percent of our production. In production terms, we're looking to be making 300 machines a year in five years' time and employ 300 people. In closing, we'd like to thank KOTRA and the local authorities for their support, and to ask for their support in the future, because it's really important to us.