South Korean companies, squeezed by the global financial crisis, are migrating to the UAE in search of business opportunities, Emirates Business has learned.
Some of the companies that have landed in the country include Emirates & Korea Elevators (Hyundai Elevators), interior design firm Design Rich LLC, information technology and system integration company Enrich, construction materials firm LG Chemical, and LED lighting and green energy integrator Luxrich Middle East.
And there are more to come, said Leonard Lee, Chief Executive Officer of Emirates & Korea Elevators LLC, as more companies try to find a haven in the UAE, especially in Dubai.
"Because of the economic crisis, more and more companies in Korea are now looking for opportunities abroad," he said. "Korea is more export and manufacturing oriented so we are really hit by the financial crisis. Dubai, and the UAE as a whole, is one of the few places in the world that is still moving. So we are looking for opportunities here."
Lee, who set up the company in Dubai in June last year, expects orders to increase by 20 to 25 per cent despite the slowing economy. The elevator manufacturer has received orders worth Dh18 million in its first six months in Dubai.
However, it would still be a tough time for these companies as the 2009 growth rates in the UAE have been revised downwards from the 11 per cent predicted earlier last year to 2.7 per cent.
"The pie has become smaller now but we expect the demand for our products will remain strong, as our goods are competitive," Lee said. "It's not just the price – Chinese products are cheaper – customers now demand quality. They wouldn't like accidents or something like that. And these cheaper products also do not fit into the Dubai model."
Myung KIl Kang, CEO of Enrich, said he will receive the business licence for his company within the next two weeks. While opportunities are there, he said, making good cash flow in the near term would be difficult.
He said: "My business in Korea has been affected a little by the financial crisis because public and private companies have reduced their expenses, or in some cases, have postponed their IT projects.
"When I decided to launch a business in Dubai several months ago, the economic situation here was really good. A huge number of large buildings have been constructed in Dubai, however, in the future buildings where innovative technologies are imbedded could maintain competitiveness. Therefore, our business will survive here in Dubai and in the Gulf Co-operation Council countries."
The current number of Korean companies seen in the emirate is just the "tip of the iceberg", said Richard Lee, Vice-President of Sungwon Corporation Middle East.
"There is a number of new South Korean companies coming to Dubai," he said.
"While I cannot divulge as much as I would like to, rest assured that this sudden increase in in-bound investment into Dubai from Korea is part of a larger co-ordinated effort that will result in many more strategic foreign direct investors coming to Dubai, hopefully adding to the diversity of the industrial scene of the emirate."
Leonard Lee, on the other hand, declined to talk more about the "larger co-ordinated effort" and who are the people behind it. However, he said: "We are trying to help one another, sometimes we even share offices. We also shared an office with another Korean company when we first came here, but we now have our own."
In the recent years, major South Korean builders have begun to penetrate the UAE's booming construction and real estate markets. Samsung Corporation is leading a consortium that is building Burj Dubai; Sungwon is building multi-billion worth of projects for Dubai's Roads and Transport Authority, while Bando Constructing Company and Axon Gulf have also been involved in building major projects in Dubai.
South Korea's export-driven economy has been hit by the global slowdown, with exports falling sharply and domestic consumer spending weakening. The South Korean central bank said the country's economy will grow two per cent in 2009, down from five per cent in 2008.
Even before the blow of the credit crisis, which started with the United States sub-prime problem, Korea was already struggling and had been losing its attraction as an investment destination.
According to Jung Moo-Sup, Research Fellow at Samsung Economic Research Institute, foreign direct investment (FDI) into Korea or inward foreign direct investment (IFDI) in 2007 was $2.63 billion (Dh9.66bn), a 46.2 per cent decrease from 2006. "Korea is the only country that posted three consecutive years of decrease among major Asian countries in this respect," he said.
The share of Korea's IFDI in the Asian region has also dropped, reaching two per cent from 2005 to 2007, a 2.2 percentage point decline compared to the period from 2002 to 2004. The decrease, said Moo-Sup, is driven by slow economic growth, China's absorption effect, high wages and land prices, and negative business sentiment toward investment by foreigners.