S. Korean investors brave Sri Lankan war

By Moon Ihlwan

COLOMBO (Reuter): South Korean business executives who built an economic powerhouse from the ashes of the Korean War are now in the vanguard of foreign investment in war-torn Sri Lanka, Colombo officials say.

Wansasiri Abeywickrema, a manager at the state Board of Investment, said Japan, Korea and Singapore were Sri Lanka's top targets in a drive to attract foreign investors to Sri Lanka, whose economy has been hit hard by prolonged ethnic war.

But South Koreans seemed less worried by the Sri Lankan conflict than some other potential investors.

"Japanese are very scared by the internal conflict but Koreans appeared used to a difficult and dangerous life," he said in an interview.

Liberation Tigers of Tamil Eelam (LTTE) rebels have been fighting government troops for the past 13 years to back their demand for an independent homeland for minority Tamils in the north and east of predominantly Sinhalese Sri Lanka.

Colombo says more than 50,000 people have died in the war.

A total of 145 South Korean investment projects totaling 12 billion rupees ($218 million) were under way or awaiting implementation in Sri Lanka, the board said. The figure did not include expansion after initial investment.

"The Koreans are the most active investors here," Abeywickrema said. Korean projects are in the manufacturing sector which creates many jobs, unlike investment by Singapore which focuses on the real estate and service sectors, he said.

In the latest South Korean investment foray, Korea Heavy Industries and Construction Co said it was negotiating with Sri Lanka to invest a total of $650 million in steel, power generation and oil refinery projects.

If implemented, it will be the largest ever investment by a single foreign investor in the Indian Ocean island.

Korea Heavy executive managing director Shin Sang-hong told Reuters he was confident his company would win a 90 percent stake in Ceylon Steel Corp being privatized by Sri Lanka.

"If we take over Ceylon Steel, we will upgrade capacity first but our major investment in steel production will be in the form of a new mill near a harbor," Shin said after visiting Sri Lanka last week to explore investment opportunities. Ceylon Steel's plant is inland.

Shin said the state South Korean company tentatively planned to spend a total of $150 million on steel projects in Sri Lanka and hoped to build power plants at a cost of $150 million and an oil refinery at a cost of $350 million.

"We see oil refining as a promising business in Sri Lanka which is short of supply in petroleum products," he said.

Shin's visit to Colombo followed a bomb attack last month by rebels which diplomats said appeared intended to warn South Koreans that they should not help the Colombo government.

Seoul officials said two suspected LTTE members threw two grenades at a building where South Koreans were working in the eastern port of Trincomalee.

The South Koreans had been building telecommunications facilities at the port's navy base. There were no casualties in the attack, which coincided with a visit by Sri Lankan President Chandrika Kumaratunga to South Korea.

South Korean diplomats said the rebels might fear Seoul will provide arms to Sri Lanka.

"South Korea's relations with Sri Lanka are largely limited to the economic and commercial fields," an embassy spokesman said. "South Korea has kept the principle that it would not sell weapons to areas of military conflicts."

The spokesman said South Korean business executives wanting to set up ventures in Sri Lanka had an average success rate of more than 90 percent against 50-60 percent elsewhere.

"A cheap and cooperative labor force and friendly government attract Koreans here," he said.

Military service in South Korea -- still technically at war with the North since their 1950-53 conflict -- helps steel South Koreans against the fear of warfare and hones their business acumen, business leaders say.

"All Korean men must serve in the military for more than two years and they have naturally become used to war and probably get aggressive in their business practices as well," said South Korean executive Kang Dong-hyun, whose Kabool Textiles has spent $100 million on a factory here.