A Hyundai car backs up in a supermarket parking lot in Sarasota, Florida. As the driver misjudges the distance behind the car, the Hyundai's bumper cushions the impact with a neighboring vehicle. In a trading office in the City of London, a broker threads her way through a forest of desks and chairs to her own work station where she switches on the monitor of her IBM computer. On hearing his Sabena flight to Brussels called, a businessman at Berlin's Tempelhof Airport stoops to grasp the handle on his suitcase before heading to his gate while still using his handphone.
What all three disparate but everyday instances have in common is that they represent interactions with plastics products whose origins derive from raw material produced in Korea by foreign-invested corporations. "You won't find our name on any consumer item, but the final product will have BASF material in them," said Klaus Kaltenthaler, Vice President and Representative Director of BASF Styrenics Korea, whose acrylonitrile-butadiene-styrene (ABS) finds its way into luggage handles, vacuum cleaner housings and other products which receive rough handling.
"We make resins which we sell to molders which make the product necessary for the end product," he said.
"We make a global product," said Peter Van Damme, president of GE Plastics Korea whose five lines at the company's Chungju plant in central Korea produces engineered plastics, the base material for products as diverse as computer monitor screens, Hyundai bumpers, door handles, handphones and CDs. In particular, he notes the international electronics market represents "top growth potential driven by global accounts." A computer sold under a famous brand may well have been developed in Europe or the USA but manufactured in Korea by a conglomerate or chaebol on a sub-contract basis. "Compaq, Apple, IBM, anybody I know will source in Korea," said Mr. Van Damme. GE Plastics provides technical support at every stage of product development to sub-contractors through the company's CAD/CAE (computer assisted engineering) department where, via simulation, items such as computer monitors are virtually test-injection molded before production begins to ensure the highest level of success. "To produce a global product, it's necessary to meet all the specifications [of the contracting company], not just a few," said Mr. Van Damme.

DOUBLING CAPACITY

Counting GE Plastics Korea among its customers worldwide is fiber glass manufacturer, LGOC, a joint venture between chaebol LG and Owens-Corning. "We supply to clients in Europe, the U.S., and several other countries," says LGOC Assistant Export Manager M.H. Kang. Established in 1993, LGOC operates a plant in Kimchon 250 km to the south of Seoul. The chopped strand product sold to GE is compounded with thermoset or thermoplastics resins and additives used in injection or compression moldings. Other LGOC customers include chaebol Sunkyung (SK) and Kolon, which uses the strand in material for its sporting goods. Overseas marketing and distribution is handled through Owens-Corning.
Additional Owens-Corning technology doubled capacity at the LGOC plant to 54,000 M/T last year. "It's mainly for export to North America and Europe and including all of Asia-Pacific," said Mr. Kang who says efforts are afoot through Owens-Corning to supply GE Plastics plants in the U.S.
BASF Styrenics's ABS is just one of the BASF family of plastics products produced in Korea for world markets. Other Styrenics products from its Ulsan plant, formerly operated as a joint venture with the Hyosung chaebol, include housing insulation material expandable polystyrene (EPS), and polystyrene (PS).
BASF Urethane Korea, previously a joint venture with the Hanwha chaebol produces 80,000 M/T per year of MDI which finds its way into Adidas and Nike sports shoes, dashboards, and other auto industry applications. BASF Korea, which since 1982 has operated as BASF's exclusive import agent to Korea for clients in textiles, plus the chemical, leather and synthetic fiber industries, is now in the process of completing a plant of its own to produce 20,000 M/T annually of PolyTHF (Polytetrahydrofuran).
PolyTHF is used to produce elastomeric fibers used in beach- and sportswear. Through a licensing arrangement with Mitsubishi Chemical, BASF Korea is also planning a plant to produce Tetrahydrofuren (THF) and Buntanediol (BDO). Although not related to plastics, but nevertheless indicative of the company's global approach to investment in Korea, BASF Korea bought out the lysine business of the Daesang company in March. Having the capability to produce lysine, an animal nutrient, is calculated to strengthen BASF's position in this area.

A PIVOTAL POSITION

Its joint venture buyouts and investments have made BASF the largest German investor in Korea, and have positioned the company to advance into markets worldwide. "Korea for us is a pivotal country," said Mr. Kaltenthaler, "and we consider our business and products and activities part of global BASF and not with a special responsibility to supply regionally."
Highlighting the level of interconnection in the foreign-invested plastics industry, Mr. Kaltenthaler notes BASF too is a supplier to GE Plastics. "We supply them with chemical specialties" said Mr. Kaltenthaler. "It doesn't make sense for GE to bring them in from the U.S." He notes also GE and BASF are "more competitors than cooperators, but in the global world you're often competitors and cooperators." GE's increasing ability and preference to source locally underlines the driving force behind the industry's investment in Korea: the rising strength of local and regional markets.
Dr. Tucker J. Kokjohn, Country Manager for Du Pont (Korea), said his company's investment in Korea 10 years ago was prompted by the rapid growth of the auto industry. "Both our sites were built specifically to service the auto industry," he said. The company produces engineering compounds at its Ulsan plant, and produces various resins, primarily nylon, compounded with additives and filler. Du Pont also produces Butecite in Ulsan, the material which goes between layers of a car windshields. Dr. Kokjohn stressed Du Pont's market is the auto makers with whom the company's engineers work, redesigning vehicle construction to replace metal with plastics. They then work with the direct consumers of its compounded resins, the injection molders, to produce what will be the end-products for the auto industry: dashboards, air-intake manifolds, carburetor parts, and increasingly, engine components.
Although Du Pont's focus is the Korean auto industry, the downturn is constraining the company to adopt a global view. "We'll source to other regions, in other words, don't look to Korea and Japan," said Dr. Kokjohn. "We'll be looking to other markets to feed globally."
Mr. Van Damme explained the origins of GE Plastic's switch from a trading to a manufacturing company 10 years ago originated in the difficulty of serving so variegated a group of customers as the company has in Korea. "We supply over 500 product combinations," he said. "We have to be able to supply at short notice which means one week. If we manufacture in the U.S. or Europe, it might mean delivery in five or six weeks."

GOING WORLD-SCALE

BASF made the transition from being a trading company, importing chemical specialities through a network of agencies as early as 1948, to manufacturing company, as "business grew tremendously over the years along with Korea," said Mr. Kaltenthaler. He explained the imperatives of industry competitiveness as determined by its technology lend the business to being globally-based. "In chemicals, you have to have world-class technology, the most modern possible, and that's evident by BASF taking a licence from Mitsubishi," he said. "The other thing is that you have then to create a world-scale plant. The alternative is to have a plant in every country but then you'd be out of business very quickly." The result, he said, is that with the exception of China, every plant built today is built for the export as well as the home market.
In the meantime, despite the country's economic difficulties, industry players are assessing the possibilities presented by cheap prices and a vastly deregulated investment environment to consolidate their position through further investment.
"It's the right time for merger and acquisition (M&A)," said Mr. Van Damme. "If [our current negotiations] work out it will change our investment significantly and provide us with a Pacific base from which to export from heavily, but it's a question of, 'Can we make a profit?'"
"We have quite a few potential M&As in various stages of discussion," said Du Pont's Dr. Kokjohn. "We have a great deal of confidence in the ability of Korea to survive this crisis. It's just a matter of time before Korea emerges much stronger and we expect to be here and help. A key to Korea's recovery is foreign investment and we have earmarked significant funds for Korea if we can find fair value. We want to be part of the recovery."
While harboring concerns about the labor situation and the need to restructure, particularly in the banking sector, Mr. Kaltenthaler feels the investment climate is good. "We have put our money where our mouth is. The country is opening up and the [national] mindset too," Mr. Kaltenthaler said.

by Charles Duerden


T he 9th floor of Seoul's Korea World Trade Center, home to the Korea Trade-Investment Promotion Agency (KOTRA), was the scene of much fanfare April 30th as the Korea Investment Service Center (KISC) was formally opened. An arm of the agency sanctioned by government to mitigate bureaucratic obstacles to the inflow of much-needed foreign investment, the center will provide a one-stop service window function long-called for by foreign investors to Korea. The center will undertake an array of administrative procedures on investors' behalf and provide close assistance on corporate matters as well as those related to the settlement of foreign personnel and their dependents.
In particular, the pending Foreign Investment Promotion Law will allow foreign investors seeking to establish a factory need only contact the center to make their applications by submitting a single package of documents. The present system requires investors make individual applications on everything from construction standards to environmental procedures.
Don-young Cho, KISC Director of Project Support Teams, said: "We certainly do provide a one-stop service for foreign investors, but we also offer them a one-on-one customized service." KISC does this by embodying its core activities in three teams. An investment consulting team will provide consultation on investment, legal matters, accounting, and address grievances raised by foreign investors. An administrative support team will handle procedures such as investment notification, and the granting of approval for factory establishment. Lastly, the business development team will be responsible for continued service to, and management of, foreign investment projects. From within this team will be appointed a project manager to oversee each investment case in order to help foreign corporate personnel and their families settle down in Korea. "Once potential foreign investors visit my office, they are received by the consulting team and they get basic data on the sector of the Korean market which interests them," said Mr. Cho. " We provide consultations on the market and arrange meetings between them and potential joint venture partners." He said Project Managers will provide an all-encompassing service. "When foreign personnel arrive with their families, they want to know what schools are available, what hospitals are available, how do you get a driver's licence, and how do you buy medical insurance," he said.
A prime feature of KISC is the fact it is well-staffed with personnel seconded from government and other related bodies including the Ministries of Finance, Justice, and Commerce, Industry & Energy. "If you want something out of KOTRA's jurisdiction we can get someone to help you," said Mr. Cho. "If a visa needs to be extended, a staffer from the justice ministry can help you."
Meanwhile, the efforts of the Seoul-based KISC will be complimented by those of the newly-appointed Invest in Korea Services installed in 40 of KOTRA's Korea Trade Centers throughout the developed world. They will work closely with some 2,000 corporations and are empowered to handle investment-related applications by proxy.
In his address to the assemble guests at the opening ceremony, KOTRA Executive Vice President and acting KISC chief Kui-Lae Chung explained the origins of the center grew out of a need expressed by the Minister of Commerce, Industry & Energy during the first ministerial meeting on trade-investment promotion in March to alleviate bottlenecks to foreign investment presented by administrative procedures. At a ministerial meeting in April, it was decided KOTRA should act as the premier investment promotion agency and be vested with a one-stop service function. " The opening of this center marks the beginning of a concentrated effort on [KOTRA's] part to attract foreign capital to stabilize and enhance the Korean business environment for the betterment of the Korean people and our foreign investment partners," Mr. Chung said.