Korean companies are making waves in Indian industry. They were not in India two years ago, but suddenly they are everywhere. The entry of Korean giants to the country was sudden and now they are in all segments of the industry.

Something which the Japanese and German companies are yet to do in India. After starting off with automobiles and consumer electronics, Korean companies are now getting into other segments of the industry.

The Korean expedition is being led by the three chaebols (mega business conglomerates): Hyundai, Samsung and the LG group, among others. As a matter of fact, all of them kicked off operations in India either through electronics or automobile ventures. Not satisfied with this, now they are getting into other fields like power, oil, engineering and telecom. As an Indian businessmen pointed out, ``Korean companies are competing more among themselves than with Indian companies here.''

Samsung Electronics, part of the $ 87 billion Samsung group, is already operating in the electronics business through its joint venture Samsung India Electronics. It is also setting up a fully-owned subsidiary by the year-end. The future investments of the group in India will be routed through this company. Samsung has already tied up with Larsen & Toubro to float a joint venture for the manufacture of telecom equipment. Moreover, it has tied up with two Indian groups for paging services.

The $ 84 billion Hyundai group, the leading automobile manufacturer in Korea, is investing $ 1.1 billion in a brand new plant near Chennai. Hyundai is now getting into power and engineering sectors in India. Hyundai (along with Mazagaon Docks) bagged a $ 300 million project for the construction of booster-compressor platform in South Bassein oilfield. Here, the other major competitors for the contract were Samsung and Daewoo.

Daewoo, which has plans to introduce a small car, has entered the consumer electronics sector through a joint venture with Anchor Electronics. They are also looking at other potential areas. After changing partners twice, the $ 74 billion LG group is planning to invest around Rs 500 crore through its cent-per-cent subsidiary.

Kia and Ssang Yong, major players in the automobile sector, are also looking for investments. Daelim -- an engineering firm which is also making scooters is also looking for investment opportunities. Hansol, another Korean company, has tied up with Sri Venkateshwara Paper Mills and Kesariwal Industries in to manufacture high quality paper.

The Korean invasion on the industrial front is reflected in the sudden jump in foreign direct investment (FDI) approvals from South Korea to Rs 3221 crore last year. It is now in the second place behind the US and ahead of Japan, Germany, the UK and France. In January 1997 alone, South Korean companies announced plans to invest Rs 1,679 crore in various sectors in India.

According to Shashank, India's Ambassador in Seoul, Korean companies have so far invested over Rs 700 crore in India. ``The actual inflow is expected to go up after Korean companies finalise their plans in India,'' he said. Globalisation is the buzzword among Korean companies now. ``If Nestle is recording 90 per cent of its sales outside Switzerland and Sony's 70 per cent sales outside Japan, we can also do it,'' says a Korean business executive.

The major factor which is driving Korean companies to emerging markets like India is excess capacity and slowing sales at home. A slump in the Korean economy has forced consumers to cut spending on consumer goods, including passenger cars. For example, in the passenger car sector, capacity of Korea's three leading auto makers is scheduled to touch six million vehicles per annum by 2000. However, domestic sales which stood at 1.64 million cars last year are not expected to go up much this year.

``Over-capacity in the Korean market is forcing companies to spread out to developing countries. Developing markets, such as China and India, will provide room for South Korean companies,'' said an official with the Hyundai group. It's not only in passenger cars but also in semiconductors, consumer durables like washing machines, refirgerators, microwave ovens, colour television sets, audio and video products. With the Korean market getting saturated, Korean chaebols, which have a finger in every pie, will have to expand in markets like India. This is the reason why Korean firms are moving production facilities to other countries. ``However, exports were also hurt by the weak yen which makes Japanese products less expensive in overseas markets. There is no wonder that Korean and Japanese companies fighting for market shares in emerging markets. India is also not different,'' said an analyst with a leading foreign investment firm. Will Korean firms shift their production bases to India in a big way? As Kun-Hee Lee, chairman, Samsung group, put it in Samsung's New management ``If we were to move Korea's production facilities to a more accomodating foreign location, where would the ideal location be? I envision a place with few legal restrictions, low taxes and a generous and hard-working local population. We must thoroughly research suitable locations and if possible, consolidate all nearby production facilities at the site. Infrastructure is the most important consideration in determining a site location. There must be a sport, expressway, nearby international and domestic airports, an inexpensive source of electricity, abundant water supply and a readily employable workforce.''

Korean companies, as like others, are not happy with the infrastructure facilities in India. ``The country will have to improve telecom, transport and roads in a big way. Otherwise it will be difficult to attract investments,'' said Jae-Hak An, corporate executive councellor, Samsung group. Korean companies, as like their Japanese counterparts, conduct their independent market surveys and studies about the investment climate in the country before making investments. In India also they are not different.

According to industry sources, all the three chaebols have identified potential areas of investment in sectors other than automobiles and consumer goods. Hyundai is likely to get into power sector shortly.

If India offers the right business environment and frame suitable policies in the core areas, investments from Korea and other Far East countries will increase tremendously. As Koreans have showed the willingness to invest in India, it is for the government to channelise the funds to productive areas and attract more money from the region. This will also lead to a flurry of investments from Japanese companies who are their competitors in the world market.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.