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Korea's apparel company SAE-A is betting on Latin America to keep it competitive globally.

SEOUL -- Korea-based SAE-A is one of the Leading apparel manufacturing companies in the world, with exports to the United States and Europe exceeding more than $1.1 billion. Its major clients include Walmart, Target, Kohl's, and Gap in the United States, and H&M, Zara, Mango, Adidas and Tesco in Europe.

And it is counting on Latin America to keep it competitive. Most of its manufacturing plants are Located in two countries in the region--Guatemala and Nicaragua--as well as in Indonesia and Vietnam. It is now also expanding into another country in the Americas: Haiti.

SAE-A currently has five sewing factories and one printing facility in Guatemala, with more than 5,000 employees producing more than five million garments a month, valued at $240 million a year.

"When textile quota limitations still existed, we selected Guatemala as our first country for investment because of several factors [such as] relatively low-cost labor, reasonably high productivity, good government support and an adequate infrastructure as well as its close proximity to the U.S." O.Y. Hwang, SAE-A's Vice Chairman, told the Korea-LAC Business Forum here. "Guatemala is still important to our overall. sourcing strategy but rising wages are adversely affecting its competitive advantage.... In 1998, when we opened our first factory there, the monthly average wage was less than $250 but now it has more than doubled."

The duty-free benefit from CAFTA (the free trade agreement between Central. America and the United States) is not enough to offset rising costs when compared to Southeast Asian countries, he points out.

SAE-A's second-largest Latin American investment is in Nicaragua, where it began operations in 2004. It currently has five factories there with more than 6,000 workers producing four million garments a month valued at $150 million a year.

"The duty free program which has helped Nicaragua to nurture a growing textile industry is unfortunately set to expire in 2014," complains Hwang. "Hopefully, those responsible with the authority to extend this agreement will take this matter under careful review and will come to the conclusion, as we recommend, that Nicaragua needs an extension."

SAE-A's next big project is in Haiti, where it is building an $85 million manufacturing complex in an industrial park located in the northern part of the country, near Cap Haitien, that will create more than 20,000 jobs and double the existing Haitian garment industry. It will be one of the world's largest vertical fabric mills and apparel, manufacturing complexes, according to Hwang. It is expected to open by mid-year when the first phase of construction is scheduled to finish.

Given the difficult post-disaster environment, many consider Haiti high-risk, Hwang acknowledges. "However we have identified numerous opportunities and advantages that actually make Haiti attractive for investment."

They include Haiti's proximity to the United States (which gives the advantage of shorter delivery time), an abundant and motivated labor force and duty-free shipping to the United States of Haitian-made apparel.

The SAE-A investment is part of a $300 million project in partnership with the IDB and the U.S. and Haitian Governments. The United States is building a power plant and employee housing near the park that will be made available to workers through low interest loans. It is also upgrading the local port and other infrastructure. Meanwhile, the IDB is funding creation of the industrial, park itself, including providing financing for equipment and machinery.

SAE-A isn't only bringing business and new jobs, but also know-how. It is training group of Haitians to run the new plant. "Haiti's existing garment manufacturing industry is relatively small so the availability of experienced factory supervisors is very limited," Hwang says. "We could bring in all. Korean or other foreign talent but we believe in the localization of management."

Meanwhile, SAE-A is working on plans to build a school for local children living near the factory who currently don't have access to a quality education. It also plans to offer adult education classes at the school, in the evenings, open to any workers wishing to pursue their education after work.

"With our investments in garment and fabric manufacturing in Guatemala and Nicaragua and Haiti, we hope to maximize the development of business and economic prosperity in the region," Hwang says.
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Comment:Korea's apparel company SAE-A is betting on Latin America to keep it competitive globally.(KOREA: ROLE MODEL FOR LATIN AMERICA)
Publication:Latin Trade
Geographic Code:2GUAT
Date:Jan 1, 2012
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