Since Seoul normalised relations with Beijing in August 1992, South Korean companies have been among the most aggressive foreign investors in the mainland. But the Asian economic crisis has put an end to that with South Korean direct investment expected to collapse this year, forcing some firms to return home. Evidence is anecdotal - and South Korean firms have steadfastly maintained their silence over changes to mainland investment plans - but there is little doubt that even South Korea's largest mainland investors, including Samsung and Daewoo, have been affected by economic troubles at home. 'Investment this year will fall,' acknowledged Kim Hong-ji, director-general of the semi-official Korea Trade Investment Promotion Agency's Beijing office. 'But not many companies have gone back,' he said. 'They will not give up this market. There are still profitable opportunities here. China has rich labour resources, a vast area, while our land and labour costs are expensive. 'We hope investment will go up in 1999,' he added. 'Our economies are complementary. Our technology is at the right level for them.' At the end of June last year, South Korean firms claimed 3,880 approved investment projects worth a contracted US$4.57 billion. Realised investment reached $3.1 billion in 3,196 projects. Of these, 2,700 worth $2.51 billion were in manufacturing, accounting for 81 per cent of the total. The three northeast provinces across the Gulf of Bohai from South Korea - Liaoning, Jilin, and Heilongjiang - as well as Shandong, accounted for $1.59 billion or 51 per cent of the total. South Korean firms started investing in China even before the normalisation of relations. Small and medium-size companies moved their factories the short distance across the Gulf of Bohai to take advantage of the cheaper land and labour costs to process raw materials and export the finished goods to existing markets. With normalisation, the South Korean chaebol followed and the scale of investment rose sharply, with firms targeting the domestic market as well as exports. Over the past two years, Daewoo, Hyundai, LG and Samsung have laid claim to a variety of strategic sectors, ranging from consumer electronics and vehicle manufacturing to real estate and financial services. Still, Mr Kim observed, mainland domestic sales were fraught with difficulties. 'Chinese are not used to paying cash on delivery,' he said. 'If you sell for cash, the profit margin is very low. 'If you do not, it is hard to collect the debt.' Samsung's mainland manufacturing ranges from semiconductor components and colour televisions to clothing and shipbuilding. Its initial mainland target called for investment of $5 billion and sales of $12 billion by the end of the decade. But with South Korea's financial crisis and the lack of foreign funds, this schedule is likely to be delayed. Yong Chung, Samsung China's president and chief executive, said last November: 'If the unfavourable situation continues like this, of course there will be an impact. 'The volatility of fund mobilisation is affecting everybody.' An official with Kumho, which is building tyre factories in Nanjing and Tianjin involving investment of $209 million, said the Asian crisis had not affected its mainland investments because the needed capital was already in place. 'We are discussing future projects,' he said. 'The foreign exchange exposure of our head office was limited.' That may not be as true for other South Korean multinationals. Even companies with diversified funding sources such as Daewoo are affected. Like Samsung, Daewoo had targeted investment of $5 billion by the end of the decade. Despite the present economic situation, Daewoo said it remained committed to construction of a $1.1 billion 92-floor office-hotel complex in Shanghai. But a company executive said implementation of the investment plan might be delayed. Daewoo Construction also is deciding whether or not to back away from another real estate project, a $200 million residential development in Shanghai.