When the Asian flu hit Korea in December 1997 sending the won down to the 1,800 to the dollar level, the country to the International Monetary Fund for assistance and newly-elected president Kim Dae-jung to declare an economic disaster, Hong Kong-based John Cheh took notice.

As the Vice President, Asia, for Bell Canada International Inc., (BCI) the international investment of Bell Canada Enterprises Inc., Canada's largest communications company, Mr. Cheh is responsible for exploring investment prospects in Asia for his company. Its focus - identifying strategic investment opportunities for in overseas telecom projects.

"When everything was breaking apart, we felt that Korea among all the Asian countries, given its history, culture, and the fact the Korean people were very much united in their determination to overcome their difficulties, would pull out faster than any other country," said Mr. Cheh. "So to pick a place in Asia, Korea came very much at the top of the list."

A former commercial counselor at the Canadian embassy in Seoul in the mid-1980s, Mr. Cheh was not without personal knowledge of his chosen investment target. "My recommendation to our chairman, Derek Burney, was, 'Let's take a look.'" Some nine months later, that recommendation led to BCI investing 210 billion won ($153.75 million) in wireless telephone provider Hansol PCS Co. Ltd, then experiencing financial difficulties. In addition, United States-based insurer and BCI investment partner American International Group Inc. (AIG), a co-investor with BCI in telecom projects in Mexico, Colombia and China, invested a further 140 billion won ($102.49 million) in Hansol. The investments were a mixture of common and convertible preferred stock, and convertible debentures, which gave BCI and AIG stakes of 9.8 percent and 6.5 percent, respectively. On conversion, these vehicles would allow the two investors to enlarge their stakes to 23.6 percent and 15.8 percent, respectively. BCI also got to place several executives on the board of Hansol PCS, including the deputy chief executive officer and chief financial officer.

The decision would be just the latest of a series of strategic investment partnerships BCI had been forming around the world. In March 1994 BCI joined with Cable & Wireless PLC to form Britain's largest cable-TV company. Three years later, BCI exercised its right to covert debentures in the Brazilian Canabras Communications Corp. to take a 51 percent stake in the group which holds a controling interest in a cable TV company.

In this case, Mr. Cheh's recommendation struck a particular resonance with the BCI chairman. Mr. Burney had served as Canada's ambassador to Seoul in the late 1970s. " There was a personal angle, but eventually it was a corporate decision," said Mr. Cheh who prior to the Asian contagion had checked out projects in South East Asia but decided not to proceed because of the absence of necessary corporate value. Crisis in Asia prompted Mr. Cheh to look anew at the region, and Korea stood out as presenting the best medium- to long-term possibilities.

Relationship-building

Not too long before the crisis hit Korea and the subsequent election of the government of President Kim, the wireless telephone market had undergone an upheaval. The market had been dominated by cellular providers SK Telecom and Shinsegi Telecom. Prompting later criticism of excess, the previous administration in 1997 auctioned off three licences to provide the newly-emerging Personal Communication System wireless technology in the fall of that year. The licences were awarded to wired service provider Korea Tel, which marketed its service under the name KT Freetel, major conglomerate, or chaebol, subsidiary LG Telecom, and to minor chaebol, Hansol. "In January 1998 I came to Korea and met with all the operators," said Mr. Cheh. "I think in those meetings we very quickly found Hansol as the company we'd like to focus on."

By March 1998 BCI had decided to do a deal Hansol and start due diligence. Both companies launched teams to handle all matters legal, technical and financial pertinent to the deal.

Why Hansol? Much had to do with Hansol's top executives, especially the brothers Dong-Kil Cho, Vice Chairman of Hansol Paper, Henry D. Cho, Vice Chairman of the Hansol Group, and particularly, D. M. Cho, Vice Chairman of Hansol PCS. "Hansol, being a very young company, not having KT's strength, a small chaebol, 14th in size, we found the Cho Brothers very open and very flexible," said Mr. Cheh. "For BCI there's a real importance attached to relationship-building. There has to be a strong relationship and partnership feeling, and we felt our dealings with Hansol had that aspect." He added: "We were also impressed by the technical performance of their network."

Mr. Cheh ascribed perseverance of both sides in reaching a deal to BCI chairman Mr. Burney. "You could say, that in BCI under his leadership, we looked beyond when everything looked gloomy because of his firm belief in the Korean economy and people."

Things did indeed look gloomy as negotiations continued. The credit crunch bit deeper, the demands of creditors mounted and the competition raged ever-fiercer. On top of this, the company was suddenly the subject of a money-for-PCS licences bribery investigation which proved not to be a "deal-breaker," according to Mr. Cheh. "The allegations were certainly exaggerated," said Len J. van der Heyden, former BCI Vice President for Human Resources and Corporate Services and now Hansol PCS Deputy CEO and Chief Corporate Officer. "If there had have been any grounds, we would've walked."

A memorandum of understanding was finally signed in Seoul in April 1998 with Mr. Burney acting for the BCI side, during which visit the BCI chair met with President Kim and his senior advisors who reaffirmed their commitment to foreign investment and restructuring. In fact, Mr. Cheh credits key officials from the Ministry of Foreign Affairs and Trade, the Ministry of Commerce, Industry and Energy, and the Ministry of Finance and Economy for their support in helping realize the deal.

Two-way Street

However, while the MOU established a target of June or July for closure, negotiations on financing carried on through the summer largely because the industry practice of subsidizing subscribers meant the proposed investment requirement by BCI was getting larger by the day. A contract was finally signed in August 1998 which led to the injection of capital and the dispatch of a BCI senior management team to Hansol which included Mr. van der Heyden, Jim Wilkinson as Chief Financial Officer, and a number of network-dedicated technical personnel.

The BCI/AIG stake is presently under the 33 percent ceiling permitted foreign ownership, and will not exceed that limit until after July 1st. when such strictures are removed and the investors begin to convert their holdings into additional equity. "Even after the changes our stake will be over 33 percent but we still won't take control. It's very Canadian," said Mr. Cheh who is also a BCI board member of Hansol PCS. "It shows how sensitive we are to local practices."

Mr. van der Heyden said the key elements for BCI in the deal were "obtaining a good, strong partner who understood the local culture and having three to five key people occupy key positions," while from the Korean side the benefits were financial oversight and corporate governance. BCI envisioned its association with Hansol as more than a straight financing-for-market access arrangement. Mr. van der Heyden said from the beginning BCI looked on the as a two-way street. "Where it's a one way street is in the area of finance and accounting reporting; where it becomes a two-way street is in the area of technology," pointing to Hansol's leading edge network and management and billing systems. "We felt we could utilize the know-how of Hansol's outstanding technical team, in terms of engineering, operation, and maintenance for our operations in North and South America and in Europe. Korea is on the leading edge of CDMA (Code Digit Multiple Access) which we believe is the technology of the future."

So what shape was Hansol at the time its new partnership was formed? "The company would have gone bankrupt if not for the capital injection," said Mr. van der Heyden. "The Hansol Group didn't have the resources." In July 1998, the cash-strapped group's pulp and paper division sold its Chonju newsprint mill plus its 53 percent stake in a Chinese newsprint operation for $1 billion to a joint venture comprising another Canadian investor, Abitibi-Consolidated, in league with Norwegian company Norske Skog. Hansol PCS's financial situation had continued to worsen through the due diligence period and the word on the street was the company was in trouble.

Solid Base

"Samsung, our main supplier for handsets and network equipment had turned off the tap so there was no product in the pipeline and with the distributors in particular," said Mr. van der Heyden. "It was a challenge for us to overcome the negativity." As well as promoting its backing by a reputable Canadian telecom group and one of the U.S.'s largest insurers, Hansol PCS launched an advertising campaign. "We matched the competition on subscribers, in October and November gaining an additional 180,000, the highest of all five providers," said Mr. van der Heyden. "At the same time we had to be careful because [through subsidization] we were buying subscribers." In the meantime, BCI corporate practices were introduced to its new partners at their first board meeting Dec. 8th. "The issues which needed to be discussed were the gamut of corporate governance," said Mr. van der Heyden. "They included the division between board of directors' and management authority, ethics and conflict of interest

guidelines, the need to go through competitive bidding, and the segregation of board and shareholders' responsibilities. The organization is no longer accountable just to Hansol but to BCI and AIG as well."

At the end of 1998, the company's debt-to-equity ratio stood at 196 percent, down from its pre-injection level of over 500 percent. Expectations are the ratio will rise slightly by year's end as investment in the Hansol network continues, and depending on the growth in the number of subscribers and the level of subsidies, used to attract them. Sub-sidies are to be reduced by industry agreement this year and phased out altogether, Jan. 1st 2000. The government has ruled mandatory subscriber contract periods will be abolished April 1st. Both moves are welcomed by BCI as are recent government pronouncements it will not seek a "Big Deal" solution to industry consolidation. "We believe there is room in the industry for five players, but any consolidation is a matter for the members to decide," said Mr. van der Heyden.

Almost 50 percent of the 14 million wireless telephone market is taken by SK; KT Freetel has over 2 million subscribers. Hansol PCS remains the smallest of the five providers with 1.5 million. Competitor LG Telecom benefitted Oct. 1st by the sale of a 23.5 percent equity stake in its operation to British Telecom for $397 million. Six months after their deal with Hansol came into effect both Len van der Heyden and John Cheh are confident about BCI's Korean investment. "The organization has every possibility of succeeding and doing well and being very profitable. Both BCI and AIG see Hansol as a good, solid investment," said Mr. van der Heyden.

"Ours was a case of managing investment in a difficult environment and managing difficult challenges in striking a deal. Now we feel we have a very solid base to profit from," said Mr. Cheh. "In the meantime the economy has upturned and Korea's debt has been upgraded. So far, we say, 'hey, our original intention to look at Korea was well-founded.'"

by Charles Duerden

APEC INVESTMENT MART

The world's single-largest investment opportunity will be held in Seoul this June when representatives of each of the Asia-Pacific Economic Cooperation's (APEC) 21 members convene at the World Trade Center Seoul to court investors from every corner of the globe. Said Dr. Kim Eun-Sang, president of organizing body the Korea Trade-Investment Promotion Agency (KOTRA): "The Mart is shaping up to be an event that will forge the region's future."

The Mart was proposed by President Kim, Dae-jung at the November APEC Economic Leaders' Summit Meeting in Kuala Lumpur and was immediately adopted as a way of strengthening regional trade and investment flows.

Essentially, the APEC Investment Mart will be a market in which the 21 APEC economies will operate pavilions showcasing their business environments, investment policies as well as specific investment opportunities, such as SOC projects. Investors will be able to gather information, ask questions, compare tax breaks and incentives, and negotiate deals. During the mornings of June 2nd and 3rd, renowned economists, CEOs of multinational corporations and officials from international financial organizations will present addresses detailing their analyses on the role of investment in the region's future development during the Special Lecture Sessions. In the afternoons of June 3rd and 4th, each participating economy will have the opportunity to make a presentation on its investment policies and opportunities followed by a Q&A session during the Sessions on Individual Economies. All presentations will be made in English, the event's official language.

Phang, Yew Fook, Seoul-based Director of the Malaysian Industrial Development Authority (MIDA) said the Mart "is the first of its kind on such a scale. I think it is both an excellent opportunity to compare the benefits of many investment regimes in one place, and for Malaysia to attract investment from both APEC and non-APEC countries." As the lead Malaysian organizer, MIDA will coordinate participation with local governments and the private sector, including industrial estates and those companies looking for joint venture partners, Mr. Phang said.

Zafrullah G. Masahud, Commercial Attache at the Philippine embassy in Seoul said the advantage of participation in the Mart is its status as a major investment fair. "It will give us the chance to disseminate a lot of documentary information about the Philippines as an investment destination," said Mr. Masahud. "All of Southeast Asia promotes inbound investment and we are a global investment promoter." Mr. Masahud said his government is looking to exhibit with as many private sector partners as possible. "Were looking for the participation of major industrial estates such as the former Clark and Subic Bay American Forces bases.

The APEC Investment Mart will be unique in two respects. Firstly, it will be the first time so much of the world will gather in one place to court investment. APEC's 21 economies include the most developed: the United States, Japan and Canada; and the fastest growing: China, Korea, and Taiwan. The region combines the most populous with the richest markets and accounts for over 40 percent of world trade.

At the same time, the region is also where change has occured most rapidly. Malaysia, Thailand, Korea and Taiwan posted the world's highest growth rates year after year, creating the impression of a region without limits. Following the financial crisis that erupted in the summer of 1997, a reevaluation occurred. Capital fled the emerging markets of Asia in search of safer havens.

However, in the past year dramatic policy changes have begun remaking the region, governments have been tossed out and markets have opened. "The importance of global integration and openness to foreign investment became undeniable," said Dr. Kim. "Not only politicians, but unions, store owners and voters understand that to survive in the global economy you have to join it."

Which leads to the second feature about the APEC Investment Mart which makes it unique: its focus. "This is an investor-friendly, investor-centered event," said Dr. Kim. The Mart is perhaps the single best example of the region's speedy, long-range response to the crisis. Rather than regulating foreign investment, governments are going all out to facilitate it. Instead of waiting for investors to come to them, APEC members will be uniting to bring their collective and individual opportunities to investors directly. Already, several APEC members battered by the crisis have dramatically liberalized their markets. This emphasises a point the APEC leders came to absolute agreement on at the November Summit. "In order for the region to fully recover from the crisis," read the Kuala Lumpur Declaration, "we must be able to attract growth-enhancing, stable capital flows into the region."

APEC has always been concerned with investment. Since its establishment in 1989, the organization has focused on economic growth through trade and cooperation. At the APEC Economic Leaders meeting in Bogor, Indonesia in 1994, a commitment was made to free and open trade and investment in the region by 2010 for developed member economies and 2020 for those in development. With the adoption of the Osaka Action Agenda in 1995, the leaders determined future APEC activities would rest on three pillars: trade and investment liberalization, business facilitation and economic-technical cooperation. Moreover, a collective action plan produced by the APEC Investment Expert Group stressed the importance of transparency in investment regimes and dialogue among APEC business communities. The APEC Investment Mart will provide the first occasion for the region to introduce its new policies to the international investment community. "We're confident that accurate information will enhance confidence in the region," explained Dr. Kim. "That's why we're providing investors with the opportunity to learn first-hand what the region has to offer and what to expect in the future. This will be the place where they can question, investigate and double-check."

The APEC Investment Mart will be the first region-wide demonstration of how APEC members are in competion with each other to attract global investment.

Increased transparency, liberalization and willingness to make investment convenient for investors will define the Asia-Pacific region in the next century.

In Seoul from June 2nd to 5th, the world's investors will have an opportunity to see witness APEC's future in the making.

by Charles Duerden

FDI REPORT

At a time of year when foreign direct investment (FDI) usually flags, the flow of inbound capital to Korea amounted to $967 million over 130 committed cases in January, the highest-ever total for this month. In comparison to January 1998, when recorded FDI amounted to only $130 million over 86 cases, this represents a 643.5 percent increase in terms of value, and a 51.2 percent increase in the number of cases.

January's figures are even more remarkable compared to the totals for the whole of 1994 and 1995, when FDI stood at $1.137 billion and $1.194 billion, respectively.

By type of investment, acquisition of newly-issued stock (some 111 cases worth $678 million), including the establishment of a factory or an increase in capital, accounted for 70.1 percent of January's total. Acquisition of outstanding stock accounted for the remainder.

By region, investment from the European Union accounted for the lion's share at $505 million, or 52.2 percent of the total. FDI from the United States in second place amounted to $340 million, or 35.2 percent of the total, while that from Japan stood at $57 million, or 5.9 percent of January's capital inflow.

While investment from the E.U. and the U.S. in January dwarfed that of a year earlier, when it stood at $7 million and $32 million, respectively, inbound capital from Japan increased by only $2 million, or 3.6 percent, over the same period.

Foreign investment in the non-manufacturing sector came to $524 million, or 54.2 percent of the total, out-ranking that in the manufacturing sector, which amounted to $443 million, or 45.8 percent of the total.

In order to meet the government's set goal of $15 billion for 1999, a number of policy initiatives will be implemented over the next few months.

The one-stop service function of the Korea Investment Service Center (KISC) will be strengthened by the augmentation of its immediate settlement system for civil affairs. In February, the central government's criteria for the designation of Foreign Investment Zones (FIZs) will be determined, and to provide the utmost support for foreign investment, the central government will further empower the Commission on Foreign Direct Investment Policy (CFDIP) which is chaired by the Minister of Finance and Economy.

Meanwhile, the Acting Commission Foreign Direct Investment Policy, chaired by the Vice Minister of Finance and Economy, will move swiftly to settle any difficulties in relation to foreign investment which are beyond the abilities of local governments or KISC.

Q.

What is the purpose of foreign-invested company registration ?

A. The purpose is to distinguish foreign-invested companies from their domestic counterparts to better enable the Korean government to assist foreign investors in such matters as dividend remittance overseas and visa extension.

Q.

When should an initial notification be modified?

A. -In the case where a foreign investor has acquired stocks and the like through M&A or other business activities (the Promotion Act, Section 7).

-In the case where a foreign investor has assigned the stocks of a foreign invested company to others (the Promotion Act, Sections 23-1).

-In the case where the name of a foreign-invested company has been altered, or the name or nationality of the foreign investor who owns stocks or equities of the company concerned has been altered.

-In the case where the contents of the notification made under Section 6 of the Enforcement Ordinance in the Act, concerning the amount or rate of foreign investment and the like, has been altered.

Q.

What are the main items of documentation required for notification concerning modifications made after the initial notification of the investment ?

A. The documents required include an Application for Foreign Invested Company Registration (Registration of Modification) and any and all document(s) that will serve to verify the modifications.

Q.

What procedure is involved in registering modifications?

A. Submit the documents detailed above to the post-management institution (i.e., the institution that received the foreign investment notification, or the one that notified the permission) within 30 days from the day of modification.

Q.

When a foreign investor introduces cash through a foreign bank, is it possible to use the name of his agent or that of a third person in place of his own name ?

A. It is possible to transmit money to Korea using the name of an agent or a third person in place of the real investor. However, it must be clear that the money is subject to being invested, and must be paid through an overseas account.

Q.

What is the difference between the Foreign Investment Promotion Act and the previous law ?

A. The existing foreign investment system is structured in such a way that it is more focused on attracting foreign investors than their regulation. Furthermore, the new Act creates a competitive environment where local governments may contend with each other in inducing foreign capital.

Q.

How are local governments empowered in this regard ?

A. Local governments are now given a freer hand in attracting foreign investors with such measures as reduction or exemption of local taxes or land leases, as well as the selection, development and management of Foreign Investment Zones. The central government gives financial support to local governments to this end in accordance with their efforts and achievements in attracting foreign capital.

Q.

In what ways does the new Act represent a switch from the "regulation and control" of foreign investment to its "promotion and support ?"

A. Firstly, the terms and conditions pertaining to foreign investment are reduced to a minimum. For example, the procedure of authorization and/or permission has been as simplified as it can be, ensuring processing of all investment applications will be as speedy as possible.

In addition, the Korea Investment Service Center (KISC), established within KOTRA, offers one-stop services for foreign investors. Furthermore, a variety of incentives are to be extended to foreign investors, such as a broadened range of various tax privileges, generous subsidies and the like. To attract large-scale investments, the Foreign Investment Promotion Act encourages local governments to establish foreign investments districts.

Q.

What has been simplified in the investment procedure under the Foreign Investment Promotion Act ?

A.The procedure to register a notification has been greatly simplified. A simple all-in-one notification (registration) has taken the place of the time-consuming, cumbersome, notification-and-acceptance process required in the past. The requirement to make notification of the arrival of foreign capital, and the agent notification has been abolished. Overall, the principle of the new Act is the deregulation of foreign investment except where such investment would have impact negatively on national security, public health, or the natural environment.

Q.

Does this simplification involve a quicker service in handling the paperwork involved in foreign investment ?

A. The new Act has ushered in the "Single Undertaking System" whereby the settlement of a major agenda automatically settles other related applications concerning, for example, permissions and approvals required for the establishment of a factory or a smaller business, construction or use of a building or an artificial structure, or other environmentally-related matters. The act has also introduced the "Automatic Approval System" which ensures speedy decisions regarding authorization for foreign-invested enterprises. Any authorization which is not stated in the Foreign Investment Promotion Act is not applicable to foreign investors.

Q.

What is the Single Undertaking System ?

A. The notion of the Single Undertaking System has been conceived as an effort to deal with the authorization process involved in foreign investment in a simple but effective way. For this, all the required processes are classified into several large groups according to their subject matter and settling period, and then, if the central subject of each group is settled, the rest of its related issues are also considered to be settled.

Q.

What types of application are dealt with under the Single Undertaking System ?

A. Once permission is granted for an application to establish a factory, 26 other related applications involved involving 16 different laws will be regarded as approved without any separate procedure undertaken, among them, permission for farmland diversion.

Once permission is granted for an application to establish a smaller business, 27 other related applications involving 14 different laws, including applications for the amendment in a city planning code, are also regarded as approved.

Once permission is granted for an application for a building permit, 30 other related applications involving 18 different laws are also approved, including the application for sewerage facility construction.

Once permission is given to an application for the construction of a waste water disposal facility, seven other related applications involving six different laws concerning environmental protection will also be approved without further procedure, among them, that for the waste disposal facility.

Once permission is given to an application for the use of a building or other artificial structures, 12 other related applications which involve 10 different laws will also be approved without further procedure, including the inspection of the required firefighting facilities.

The Single Undertaking System is operated by the Korea Investment Service Center, which acts as a foreign investor's proxy in dealing with the paperwork required in cooperation with the competent authorities.

Q.

What is the Automatic Approval System ?

A. - The Automatic Approval System was conceived as another effort to simplify the procedure involving foreign investment into Korea, thus helping to create a welcoming environment in which foreign investors may establish businesses. Under this system, each application submitted for authorization must be dealt with a period of seven to 90 days, specified according to the nature of each process. Following the lapse of each period, an applicant is automatically granted the approval he or she has applied for, should no response be forthcoming from the competent authority.

- Once an approval is granted automatically, the competent authority is obliged to issue a written form of permission or certificate for the applicant.

If the authority has any reason to refuse the authorization, it must reveal the reason for such decision in a clear, specific way.

Q.

Suppose that a foreign investor wishes to import used machinery and equipment, rather than cash, with a view to establishing a corporation in Korea. What kind of procedure should the investor follow concerning the import of such machinery and the establishment of a corporation ?

A. - Capital goods can also be the subject of contribution, and an investor should receive a confirmation on the Specifications on Introduced Capital Goods from the bank he has made an investment notification to before shipping.

Then, the investor may go to the competent tax office with the confirmed Specifications on Introduced Capital Goods attached to a filled-in import notification. With this notification completed, he can now import the goods in question.

- Despite Article 299 of the Commercial Law, a member of the Department of General Support for Foreign Investment, dispatched by the Customs Administration Office, will examine (on behalf of the Administrator) the "Completed Spot Contribution Confirmation" which confirms the execution of the spot contribution together with the type, quantity, price and the like, of the said contribution. Because the confirmation is to be regarded as an "Inspector's Report" issued under the Voluntary Matters Proceedings Act, the investor can attach it to the documents required for the establishment of a corporation.

Foreign enterprises presently invested in Korea are generally satisfied with their business performance and are thinking positively about expanding their activities in the near future, putting the onus on government to make more efforts to attract further investment from them. The findings are contained in a recent survey by the Korea Trade-Investment Promotion Agency (KOTRA) of 405 foreign corporations invested in Korea.

Some 44 percent of the firms surveyed noted they would make further investment while only 11 percent said they would make fewer. A further 44 percent said they would maintain their investment at its current level. Fifty-nine percent expressed satisfaction with their business performance while 48 percent and 43 percent said they were satisfied in terms of relations with joint-venture partners and expected profits, respectively.

Investment by multinational corporations already invested in Korea has increased steadily, and has become more significant than capital from new entrants to the market. Accordingly, government must now turn its attention to attracting investment from those companies presently invested.

Investments by Korean-based foreign corporations from 1962 to the end of October 1998 amounted to $14.13 billion, equivalent to 48 percent of all such investment, according to the Ministry of Finance and Economy (MOFE). In fact, investment by Korean-based foreign firms has remained stable despite the onset of the financial crisis and the strictures of the Inter-national Monetary Fund's (IMF) restructuring program. Investment from this quarter reached $2,466 million in the January-October period of 1998, compared with $2,886 million over the entire period of 1997.

However, investment by newly-arrived foreign companies drastically contracted to $2,732 million in the same period, from $4,021 million in 1997. This indicates that foreign-invested corporations with business networks already in place perceived themselves less vulnerable to the impact of the crisis and the IMF financial program. In addition, existing investors generally have greater access to information than newcomers about investment prospects, and are in a better position to weigh options more precisely with respect to anticipated risk and profits.

The KOTRA survey indicated that an increasing number foreign corporations are looking to investment in Korea on account of its improved economic prospects and its potential as a bridgehead to penetrate other Asian markets, China in particular.

By way of example, Volvo's stated purpose in taking over the heavy equipment division of Samsung Heavy Industries last year is to develop the Korean operation as key base for the supply of excavators to the global market. To this end, the Swedish company has decided to move its related production facilities from Sweden and Germany to Korea. Dow Chemical of the United States in conjunction with the LG Group is now constructing what will be the world's largest polycarbonate plant in Yonchon, Cholla-namdo, which when completed will have an annual production capacity of 130,000 tons.

Also, DuPont of the United States has recently taken over the spandex division of Dongkuk Synthetic Textile and is planning to upgrade the plant to serve as its production center for Asian market. Allied Signal, third-largest chemical textile manufacturer in the United States, is poised to acquire production facilities from leading domestic makers Samyang, SK Chemical and Kohap. Following the anticipated acquisitions, the American company plans to expand the total capacity of the facilities which currently stands at 44,000 tons per annum.

KOTRA also surveyed the investment policy makers of 21 banking institutes through 11 of its overseas branches and found most of the respondents believe foreign investment into Korea will increase substantially during the latter half of this year. Their optimism was based on the fact that among all of the affected Asian nations, foreign investors judge Korea has shown the most rapid recovery from the economic crisis and further believe the country will achieve full-scale recovery within the following three years.

by Sung-hoon Lim Ph.D.,

Senior Researcher,

Investment Research Team, KOTRA