Treading water is not CSR style. With the bulk of its A$6.4 billion (US$4.3 billion) investment in the stagnating markets of Australia and the United States, the Australia-based building materials giant is diving into Asia head first. In 1991, CSR decided to open factories in Asia. In 1992, it selected Taiwan as its Asian headquarters and production center. By the end of 1994, its first two Taiwan-based joint ventures will be supplying high-quality sewage pipes and lightweight aerated concrete blocks to Taiwan's construction boom.
Taiwan is one of Asia's biggest spenders on infrastructure. CSR's aggressive entry is designed to win the company a profitable share of the US$300 billion infrastructure upgrading scheduled in the Six-Year National Development Plan. Although the island is three years into the plan, less than one-third of construction is complete.
For CSR it is a ready-made opportunity. “We are offering new high-quality products that are needed if construction is to be cost efficient,” says Brian Mallon, president of CSR Taiwan Co. For example, the company expects healthy sales of its patented Plastiline lining, which CSR claims will double the life of water and sewage systems.
Entering in a boom helps create the profile CSR wants. So does the company's November 1993 signing of a strategic alliance with the ROC's Ministry of Economic Affairs. The formal agreement to make Taiwan a corporate regional center gives the company an automatic link with government officials. A small working group of CSR and key government agency representatives is being set up to meet regularly. Although the formation of CSR's first two joint ventures has run smoothly, Mallon views this close government contact as vital in facilitating future investments.
“We are busily looking for other investment opportunities,” Mallon says. “Through the strategic alliance and its contacts, we hope to identify other opportunities and other partners.” The head office in Sydney has big plans for the Asian market. Geoffrey Kells, CSR corporate managing director, recently announced that the company has identified ninety possible growth opportunities in Asia. At the signing of the strategic alliance, he announced that CSR is actively evaluating fifteen of these. Development of options throughout Asia will be spearheaded from Taiwan.
With only a year's presence in Taiwan, CSR management is already keenly aware of the importance of close working relationships with key bureaucrats. Although building materials are the company's main specialty, it has substantial aluminium holdings and is Australia's largest sugar producer. CSR is building relationships that it hopes will sell its state-of-the-art sugar processing equipment to the government's sugar refinery expansion in Kaohsiung. Close government contacts may give the company early insight into other government enterprises opening to foreign investment. In addition, CSR may need anti-dumping protection; South Korea is reportedly dumping products into Taiwan that will directly compete with the lightweight concrete Hebel blocks CSR will soon be producing with its new joint venture, CSR-SYC Hebel Taiwan.
The company's growth strategy in Taiwan is based on joint ventures. Already, CSR has an A$50 million (US$34 million) investment commitment to two joint ventures; by 1997, Mallon expects CSR to have tripled its initial investment on the island. In the first joint venture, the company holds a 55 percent interest in CSR-SYC Hebel Taiwan with the Hsin Tung Yang Group. This partnership brings new technology to the local partner, a major property developer and building company. The new company will be the licensed producer of Hebel blocks, which weigh one-fourth as much as concrete but are equally strong. In the second joint venture, CSR holds a 75 percent interest in the pre-cast sewer pipe company CSR Taiwan Humes. It will manufacture a range of reinforced concrete pipes and products.
Critical to CSR's selection of Taiwan as its main Asian production center is its sizable, affluent domestic market. Other selling points, according to Mallon, were direct flights to Australia, “semi-Western” legal and accounting systems, and “tremendous cooperation from all levels of government.” Taiwan's major weakness, he says, is overpriced industrial land. It is hard to find suitable land for less than NT$30,000 per ping (US$31 per square foot). Mallon says the company also anticipates some difficulty in recruiting workers for its two factories being built in the Miaoli industrial park, two hours' drive south of Taipei. Taiwan's unemployment rate is only about two percent.
But Mallon is upbeat overall. “We have been trading here for fifteen years and are comfortable with Taiwan as a business platform," he says. “We consider Taiwan our launching place for investment in neighboring countries. With such a central location, we see Taiwan as the base for managing companies in Vietnam, Hong Kong, Korea, and particularly China – where we are assessing a lot of opportunities at the moment.” – Linda Pennells