and Tim Johnston in Bangkok
Financial Times
Published: March 1 2011
It is no surprise there are already 30 Korean restaurants in the northern Cambodian town of Siem Reap, given the crowds of camera-toting South Korean tourists snapping photos of the ornate stonework of the nearby Angkor Wat temple complex.
EDITOR’S CHOICE
But the South Korean influence in Siem Reap stretches further than tourist dollars. It reflects the serious challenge that South Korean prowess in heavy industry and services is mounting to Chinese and western commercial influence across south-east Asia, in sectors ranging from Vietnamese retail to Burmese offshore gas.
“The Koreans come and they keep coming. Other countries are a little slow,” says Takreth Samrach, secretary to Cambodia’s council of ministers.
South Korean companies are famed for rapid decision-making, often due to hierarchical managerial systems where a chairman’s decision is not debated internally.
Only months after Collective Brands, the US shoe company, moved production to Indonesia, South Korean footwear maker Chang Shin launched a rival plant in West Java.
Cambodia’s prime minister, Hun Sen, has wooed South Korean civil engineers to invest $500m in the Angkor International Airport company at Siem Reap, which will be the first airport in the country to accommodate direct long-haul flights from Europe and the US. He has also picked South Korea’s Intercity Group as the developer of $400m worth of luxury leisure facilities in Siem Reap, hoping to entice visitors to linger in Cambodia rather than simply making 24-hour flying visits from Bangkok.
South Korea’s $1bn worth of approved projects in Cambodia last year surpassed the $700m-worth from China but are just the latest front in Seoul’s offensive across south-east Asia.
Commercial ties are far deeper with Vietnam, where South Koreans have sought production bases since the establishment of diplomatic ties in 1992. With $23bn of invested capital, South Korea is already neck-and-neck with Taiwan as the biggest investor in Vietnam.
Steel-maker Posco is building a $6bn steel mill – its first overseas integrated plant – in Indonesia, and Hankook Tire is planning a factory there at an estimated cost of $500m. South Koreans are the biggest expatriate community in Indonesia.
Chang Shin’s investment in West Java is typical of and mirrors Korea’s approach across the region, with small and medium-sized investors leading the charge before major conglomerates set up production bases. Although big electronics groups such as Samsung and LG have factories in Vietnam, there are also more than 2,500 smaller companies doing business there.
South Korean retailer Lotte, a rising rival to Tesco and Carrefour across Asia, is targeting Vietnam and Indonesia to help boost overseas revenues to 30 per cent by 2018 from 5 per cent now. Last year, Lotte’s sales in Vietnam rose 32 per cent to 10,101bn dong ($483m) from the year before, while Indonesian sales rose 6 per cent to 64,475bn rupiah ($7.3bn). In the absence of McDonald’s in communist Vietnam, Lotte’s chain of Lotteria burger joints has proved a hit.
While South Korean investment in Vietnam remains robust, many South Korean companies say they prefer to direct new investment to Indonesia. Small and medium-sized companies tend to be very sensitive to rising labour costs – one factor driving their earlier desertion from China to Vietnam. They are now shifting to Indonesia and the added allure of its huge domestic market.
Much of South Korea’s determination to secure investments in south-east Asia comes from its hunger for natural resources. Korea Electric Power Corporation is taking a 20 per cent stake in Bayan Resources, an Indonesia coal company, for $515m. The scramble for thermal coal in the world’s top exporter puts the Koreans in open competition with Shenhua, China’s largest coal producer, and British-born financier Nat Rothschild, both of whom are also exploiting Indonesian seams.
More controversially, South Korea is developing energy fields in Burma, looking past ethical concerns about the military junta to compete with rivals such as France’s Total and China National Offshore Oil Corporation. Daewoo International, which has the operating contract for the Shwe offshore gas field, is developing the field under a $1.4bn deal signed last year with Hyundai Heavy Industries. In financial services, South Korea is leading the development of stock exchanges in Laos and Cambodia.
Explaining how South Korea is forging such rapport with south-east Asian countries, Lee Tae-hwan, chairman of Angkor International Airport, says South Koreans have historical experience of investment as part of their own nation-building enterprise.
This chimes with Cambodia’s priorities, particularly in terms of sharing technology and training Cambodians as engineers. “We built our economy from nothing after a civil war and the Cambodians are in the same position now,” says Mr Lee. “We have gained experience through national development and have knowhow in overcoming difficulties that the Cambodians think will now be valuable for them.”
Symbolically, Cambodian government officials say the new Korean airport, due for completion in 2015, will replace a smaller airport run by the Societe Concessionaire des Aeroports, a private company from France, the old colonial power.
Additional reporting by Anthony Deutsch in Jakarta.
“The Koreans come and they keep coming. Other countries are a little slow,” says Takreth Samrach, secretary to Cambodia’s council of ministers.
South Korean companies are famed for rapid decision-making, often due to hierarchical managerial systems where a chairman’s decision is not debated internally.
Only months after Collective Brands, the US shoe company, moved production to Indonesia, South Korean footwear maker Chang Shin launched a rival plant in West Java.
Cambodia’s prime minister, Hun Sen, has wooed South Korean civil engineers to invest $500m in the Angkor International Airport company at Siem Reap, which will be the first airport in the country to accommodate direct long-haul flights from Europe and the US. He has also picked South Korea’s Intercity Group as the developer of $400m worth of luxury leisure facilities in Siem Reap, hoping to entice visitors to linger in Cambodia rather than simply making 24-hour flying visits from Bangkok.
South Korea’s $1bn worth of approved projects in Cambodia last year surpassed the $700m-worth from China but are just the latest front in Seoul’s offensive across south-east Asia.
Commercial ties are far deeper with Vietnam, where South Koreans have sought production bases since the establishment of diplomatic ties in 1992. With $23bn of invested capital, South Korea is already neck-and-neck with Taiwan as the biggest investor in Vietnam.
Steel-maker Posco is building a $6bn steel mill – its first overseas integrated plant – in Indonesia, and Hankook Tire is planning a factory there at an estimated cost of $500m. South Koreans are the biggest expatriate community in Indonesia.
Chang Shin’s investment in West Java is typical of and mirrors Korea’s approach across the region, with small and medium-sized investors leading the charge before major conglomerates set up production bases. Although big electronics groups such as Samsung and LG have factories in Vietnam, there are also more than 2,500 smaller companies doing business there.
South Korean retailer Lotte, a rising rival to Tesco and Carrefour across Asia, is targeting Vietnam and Indonesia to help boost overseas revenues to 30 per cent by 2018 from 5 per cent now. Last year, Lotte’s sales in Vietnam rose 32 per cent to 10,101bn dong ($483m) from the year before, while Indonesian sales rose 6 per cent to 64,475bn rupiah ($7.3bn). In the absence of McDonald’s in communist Vietnam, Lotte’s chain of Lotteria burger joints has proved a hit.
While South Korean investment in Vietnam remains robust, many South Korean companies say they prefer to direct new investment to Indonesia. Small and medium-sized companies tend to be very sensitive to rising labour costs – one factor driving their earlier desertion from China to Vietnam. They are now shifting to Indonesia and the added allure of its huge domestic market.
Much of South Korea’s determination to secure investments in south-east Asia comes from its hunger for natural resources. Korea Electric Power Corporation is taking a 20 per cent stake in Bayan Resources, an Indonesia coal company, for $515m. The scramble for thermal coal in the world’s top exporter puts the Koreans in open competition with Shenhua, China’s largest coal producer, and British-born financier Nat Rothschild, both of whom are also exploiting Indonesian seams.
More controversially, South Korea is developing energy fields in Burma, looking past ethical concerns about the military junta to compete with rivals such as France’s Total and China National Offshore Oil Corporation. Daewoo International, which has the operating contract for the Shwe offshore gas field, is developing the field under a $1.4bn deal signed last year with Hyundai Heavy Industries. In financial services, South Korea is leading the development of stock exchanges in Laos and Cambodia.
Explaining how South Korea is forging such rapport with south-east Asian countries, Lee Tae-hwan, chairman of Angkor International Airport, says South Koreans have historical experience of investment as part of their own nation-building enterprise.
This chimes with Cambodia’s priorities, particularly in terms of sharing technology and training Cambodians as engineers. “We built our economy from nothing after a civil war and the Cambodians are in the same position now,” says Mr Lee. “We have gained experience through national development and have knowhow in overcoming difficulties that the Cambodians think will now be valuable for them.”
Symbolically, Cambodian government officials say the new Korean airport, due for completion in 2015, will replace a smaller airport run by the Societe Concessionaire des Aeroports, a private company from France, the old colonial power.
Additional reporting by Anthony Deutsch in Jakarta.
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