Samsung Electronics Defers $630m India Investment Plan

Samsung Electronics Co Ltd, a part of the $88 billion Samsung group of South Korea, has decided to defer its proposed additional investment in India due to nervousness about the market .

The company had obtained the Union governments approval last year to set up a holding company in the country to invest $630 million over three years.

However, the company board in Seoul only recently approved the initial investment plan, which has yet to be approved by the Korean government.

Although the company has taken an in-principle decision to establish a 100 per cent subsidiary holding company by December this year, it has yet to firm up details of the investment plan.

 

SEC corporate executive councillor J H An said the company would conduct further feasibility studies before finalising its plans. The Indian environment is not as favourable as it was two years ago, he said.

Samsungs fears about the Indian economy are based on its assessment that the government has not taken enough steps to retain the foreign investment that has been attracted into the domestic economy.

The government needs to focus on corporate incentives in the form of tax changes, infrastructure like power and telecommunication networks, and reduced rates of interest for the investment climate to improve. That is why many foreign companies are investing in Thailand and Malaysia inspite of the higher labour costs in these countries, stated An.

A market study team assessing the companys plans for a colour picture tube (CPT) manufacturing facility in the country has yet to fix the exact size and timing of the project. However, the estimated investment for the project has been downgraded to about $200 million against the $300 million announced by SECs chairman and chief executive officer J K Kang during his last visit to the country.

Samsung Display Devices, the electronics subsidiary which manufactures colour picture tubes, has now extended the deadline for completion of its India project from 1997 to 1999. The project was initially projected to have an annual capacity of 3 million tubes, which may now be reduced. The plan is expected to be finalised by the end of the year.

We are also looking at investment opportunities in other areas of interest in the country, including colour television-related parts and components manufacturing. However, the timing of entry in these areas is very important and needs to be carefully assessed, said S T Shin, general manager of the India Desk in the Global Operations division of SEC.

Samsung has projected a maximum demand of 40 lakh colour televisions in the country by the year 2000, which is a conservative estimate by industry standards. However, Samsung has stated that it views India as a market with tremendous potential.