Financial Daily from THE HINDU group of publications
Thursday, Dec 09, 2004
Industry & Economy
Alliances & Joint Ventures
Indian entrepreneurs scout for plant, machinery in S. Korea
Seoul , Dec. 8
THIS is the latest hunting ground for those hoping to add an electronics or textile manufacturing unit to the one back home at a throwaway price.
The reasons being cited for the disinterest in small and medium manufacturing units, once the backbone of the South Korean economy, vary from cheaper Chinese options to rising real estate prices in cities such as Seoul that makes it better business sense to sell land rather than continue running marginally profitable units.
The flip side is that the plant and machinery is there for the taking for those who bother to look around. With industries such as lighting, textiles and some of the precision electronics moulding showing a tendency to shift their base to China, many units across South Korea are up for sale, either on a turnkey basis or a piecemeal basis.
And figuring high among those who are in the market for such distress sale of plant and machinery are Indian entrepreneurs who stop over at some of the South Korean cities such as Seoul.
Mr Vinay Mahendru, Executive Director of the Delhi-based Indo-Asia Fusegear Ltd, is one such businessman. He told Business Line that he was close to clinching a deal in South Korea.
While declining to spell out the specifics, he said machinery in South Korea was "very cheap".
"This is a new trend developing here with many Korean small and medium sized manufacturing companies suddenly closing shop. While some of these units are facing competition from China, many Korean businessmen are looking at exit options on the strength of the booming price of real estate where the plants are located. In that sense, the plant and machinery becomes redundant to these businessmen, thus leading to an attractive deal for those on the lookout for such machinery," said Mr Mahendru.
While there are no official estimates on how many such manufacturing houses in South Korea are opting to close shop and leverage on their prime real estate holdings in cities such as Seoul and Pusan, businessmen such as Mr Mahendru, on the prowl for second-hand plant and machinery, are clear that one should not look for single-location, turnkey purchases.
"These deals can prove to be dicey as, many times, the buyer finds himself short-changed as promises made at the time of striking such deals are often not kept. It is more prudent to buy specific machinery from different places rather than go for whole-scale purchase of stripped assets," said Mr Mahendru.
Even as he moved on to renew his friendship with another Delhi-based businessman who also was passing by and `looking around' for what was on offer, one came face-to-face with the scars left by the financial meltdown a few years ago.
This is a country where unskilled workers earn more than 5,00,000 wong per month, but struggle to make ends meet. This seemingly bizarre situation became easier to handle after finding out that less than Rs 4,500 fetched one 1,00,000 Wong, the local currency. And one could buy precious little with such an amount of money, with a good pair of shoes or clothing eroding it in no time.
Clearly, the South Koreans have come to terms with their devalued currency, which had at one point dipped to 1,900 wong per dollar as against 1,062 wong currently.
With the huge US military base still not shifted out of the country's capital, it will take a while before the South Koreans get out of the dollar hangover, say old-timers.
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