THE PACIFIC: SPOTLIGHT ON HIGH-GROWTH COMPANIES : Asia Looks Within to Prosper

Despite recent headlines concerning Commerce Secretary Ronald H. Brown’s trade mission to China and impending U.S. economic sanctions against Japan, even a casual perusal of recent news out of the Asia-Pacific region shows that a lot of business there has little or nothing to do with the West.

Indeed, analysts say, Asian nations are looking more to themselves--and one another--for new trade ties, economic development and new wealth. And that has propelled the fortunes of Asia-Pacific-based companies at a velocity unheard of in the United States, as a survey for The Times of public companies in the region showed.

Just this month:

* Malaysia’s Seng Hup Electric Co. said it would manufacture and sell lighting equipment in Indonesia.

* Japan’s Furukawa Electric Co. said it would establish a joint venture to manufacture and market auto air bag parts in South Korea.

* Investors from Australia, New Zealand and South Korea said they would spend $871 million to buy 82% of the industrial land available at the Singapore-Suzhou Township in China, 50 miles west of Shanghai. The development itself is a $200-million venture among a group of 19 Singaporean companies, led by Keppel Corp., and a group of Chinese companies.

“Asia has the fastest-growing intraregional trade in the world,” said Tom Robinson, chief international equity strategist at Merrill Lynch in New York. “What has developed is a takeoff into sustained growth, where they are trading increasingly with each other rather than outside the region and are able to carry on their own business development.”

Such transactions are the logical next step for businesses in the world’s most rapidly growing region, where national economies are expanding at a pace that the United States and other Western nations can only envy.

A sampling of national economic growth rates in 1993, according to the East-West Center in Honolulu: Singapore (9.8%), Malaysia (8.5%), Thailand (7.9%), Indonesia (6.7%), Taiwan (6%). That compares with between 2% and 3% for the United States.

Much has been made of the rapid economic surge and huge potential of China, whose economy grew faster than 13% in 1993.

But the Asia-Pacific region is multifaceted, encompassing the mature economies of Japan, South Korea and Taiwan; the rapidly developing manufacturing economies of Malaysia, Thailand and Indonesia, and the financial and service centers of Hong Kong and Singapore.

Although the region is diverse, analysts say there are several trends converging in the 1990s:

* Rapid development is creating an explosive need for infrastructure, particularly electric power and telephones.

As an example, Malaysian and Indonesian companies are signing an agreement to build a $7.5-billion 500-megawatt coal-fired power plant in southern Sumatra, the Business Times reported this month.

* There is a burgeoning consumer class hungry for TVs and appliances.

James Ayer, a portfolio manager of global fund at Oppenheimer Management Corp. in New York, observes that there is also a growing body of residents, particularly in Singapore and Malaysia, who can afford to own their homes. * Asian nations are moving away from being a source of cheap labor and low-cost assembly work, increasingly becoming centers of high technology and engineering expertise--in part because of a new class of professionals educated abroad.

“In the 1990s . . . in places like Singapore and Malaysia and Thailand, where what they were selling ten years ago was cheap labor, what they’re selling now is moving up the technological scale,” said Daniel J. Duane, managing director and chief investment officer for global equities at Prudential Investment Advisors in Newark, N.J. Assembly will be subcontracted to Vietnam, India, Pakistan, China, Cambodia, even Myanmar, he said.

A look at firms in Asian nations provides examples of these trends.

South Korea’s Pohang Iron and Steel Co., the nation’s largest producer of steel, and Korea Electricity Power Corp. recently sought listings on the New York Stock Exchange, a first for companies from that nation.

CITIC Pacific Ltd., meanwhile, is typical of the Hong Kong-based conglomerate, with investments in a wide range of businesses and subsidiaries that are involved in trade, aviation, warehousing and distribution, real estate and telecommunications.

“Our company’s strategy has always been to focus on three areas,” said Chairman Larry Yung Chi-Kin last month in an interview with the South China Morning Post. “The first is infrastructure, which provides a fixed income. Trading is another because it generates a strong cash flow. And, apart from these two, we think property investment in Hong Kong is a major area that guarantees steady revenue.”

The economy of the Philippines accounted for a 65% rise in profits in the first six months of 1994 for Ayala Corp., one of that nation’s top industrial conglomerates, the company reported.

Ayala holds interests in food manufacturing, agriculture, banking and finance, telecommunications, office buildings, property management and other businesses. Last month, the company announced that it would lead a consortium of private companies and government agencies in the Philippines and Singapore to bid to redevelop a Manila army base.

To be sure, there is a downside to Asia’s growth. “The biggest risk to these countries is I think twofold,” said Bill Wilby, director of global equities at Oppenheimer Management Corp. in New York. “The first is inflationary risk. The second is political, in that many of these countries have not yet made full transition to representative democracy.”

But some analysts point to the support of governments as a key factor in the region’s economic growth: the use of military or other public funds to finance infrastructure spending and other economic development.

“They don’t have enormous social spending programs,” Oppenheimer’s Ayer said. “The other key point is: In the late 1970s and early 1980s, Japan spent a great deal of money investing in the smaller Asian countries. They moved manufacturing and assembly plants to Malaysia and Thailand. We are now seeing the benefits of that very large investment in manufacturing capacity . . . through rapidly rising exports.”

Moreover, analysts argue that a growing middle class will put pressure on more authoritarian governments to moderate their policies.

“The dropping of political barriers allowed a lot of international economic transactions . . . in areas where they either simply didn’t happen or were discouraged,” said Charles Morrison, director of the program on international economics and politics at the East-West Center. “And you have had a fair amount of deregulation and privatization at the domestic level, occurring in countries where a lot of efficiency was bottled up by overplanning and excessive government controls.”

And for all its increasing interdependence, the region still needs a continuing United States presence, said Ayala Corp.’s chairman, Jaime Zobel de Ayala. “The U.S. is the only country that can play a security role,” he reportedly said last spring before a meeting of the Pacific Basin Economic Council in Kuala Lumpur. “If the U.S. goes into isolation, it will throw this region into a tailspin.”

How the Listings Were Compiled

The survey includes companies in Japan, Hong Kong, Singapore, Australia, New Zealand, Malaysia and Thailand. Companies in South Korea and Taiwan were not included in the growth surveys because information was not available on enough companies. To be included in the growth survey, a company must have been publicly traded, had data available for the past three consecutive years and had a positive net income for each of the years.

All of the companies report on an annual basis, and companies under a certain size were excluded from some of the listings.

All growth percentages were calculated based on each company’s native currency to avoid exchange rate fluctuations.

Net income figures for Japanese companies are based on unadjusted net income. Net income figures for the Asia-Pacific companies are based on adjusted net income.

Star Data Inc. compiled the data for most of the listings, using information provided by Data Stream Intl. Bloomberg Business News and Investext also supplied data for listings.

Asia Pacific Growth

The extraordinary growth of companies based in the Asia-Pacific region reflects the fast economic growth in the area. Most of the region’s economies grew at a far faster rate in 1993 than did the United States which had a growth rate of between 2% and 3%. The 1993 gross domestic product growth:

Singapore: 9.8%

Malaysia: 8.5%

Thailand: 7.9%

Indonesia: 6.7%

Taiwan: 6%

Hong Kong: 5.6%

Australia: 4.0%

Philippines: 3.0%

Source: East West Center

Largest Companies

Recession in Japan has taken its toll on even its largest and most powerful firms as ranked by revenue, while large companies elsewhere in the Asia-Pacific have fared better.

‘93 revenue (in billions of % change Company Industry U.S. dollars)* from 1992 JAPAN Itochu Diversified industrial $194.7 -6.5% Sumitomo Diversified industrial 182.1 -9.6% Mitsubishi Diversified industrial 181.1 -1.8% Marubeni Diversified industrial 175.0 -7.5% Mitsu & Co. Diversified industrial 173.3 -3.7% Nissho-Iwai Diversified industrial 107.4 -6.0% Toyoto Motor Automobiles 103.1 0.5% Tomen Diversified industrial 77.5 -3.5% Hitachi Electronic equipment 76.1 -2.9% Matsushita Electronic equipment 72.2 -5.3% AUSTRALIA Broken Hill Props Minerals 11.84 10.3% Coles Myer Retail 11.27 -0.1% Adelaide Steamship Diversified 9.88 10.1% News Corp. Media 7.94 4.8% BTR Nylex Diversified 4.62 8.3% CRA Mining 4.40 11.6% HONG KONG Jardine Matheson Diversified 8.42 6.0% Swire Pacific Diversified 4.76 3.7% Hong Kong Telecom Telecom. 3.14 12.2% Cathay Pacific Air Airline 3.10 3.0% Hutchinson Whampo Diversified 3.05 19.7% China Power & Light Utility 1.91 10.0% Cheung Kong Property 1.38 4.0% MALAYSIA Sime Darby Diversified 2.76 13.6% Telecom Malaysia Telecommunications 1.54 15.0% SINGAPORE Singapore Airlines Airline 4.16 10.4% Singapore Telecom. Telecommunications 1.84 11.3% Cycle & Carriage Autos 1.15 68.6% Keppel Corp. Diversified 1.01 -2.0% NEW ZEALAND Fletcher Challenge Forest Products 5.70 -5.0% Telecom Corp. Telecommunications 1.50 ** Carter Holt Harvey Forest products 1.49 ** THE PHILIPPINES San Miguel Corp. Brewery 2.21 9.2% SOUTH KOREA Samsung Electronics Electronics 10.4 33.0% Korea Electric Power Utility 9.60 12.0% Hyundai Eng. & Con. Construction 5.76 -16.8% THAILAND Siam Cement Cement 1.33 -1.3%

* At Sept. 1 exchange rate. ** Increase less than 1% Sources: DataStream Intl., Star Services Inc., Bloomberg Business News, Investext. Researched by DAN GAINES and JULIA FRANCO

Asia-Pacific Profit Growth

Asia-Pacific companies have had huge increases in profits in recent years. Here are two-year average profit growth rates for the fastest-growing companies in the region--grouped by country--with more than $10 million in annual net income. Growth based on native currencies.

‘93 net income (in millions of Two-year Company Industry U.S. dollars)* avg. growth AUSTRALIA John Fairfax Printing $137.9 183% Bunnings Building materials 12.3 83% Wills, W.D. & H.O. Tobacco 29.5 82% HONG KONG Elec. & Eltek Electrical equipment 16.2 917% Tai Cheung Property 1,200 257% Cul Turecom Publishing 11.8 193% Hon Kwok Land Property 21.5 176% Realty Development Property 141.4 152% Laws International Textiles 34.3 149% Lai Sun Development Property 71.1 148% CITIC Pacific Property 244.1 148% TSE Suiluen Retail 10.1 137% Sing Tao Publishing 35.4 105% Starlight Electrical equipment 10.3 90% MALAYSIA Tanjong Diversified 69.4 180% Faber Merlin Hotels 19.7 128% Kamunting Mining 10 99% Pilecon Engineering Diversified 10.1 82% THE PHILIPPINES RFM Diversified 11.2 91% SINGAPORE Marco Polo Dev. Hotels 23.8 412% Hotel Properties Hotels 44.6 226% Orchard Parade Hotels 11.3 202% First Capital Financial 33.7 145% Singapore Finance Financial 10.8 93% THAILAND CMIC Financial Financial 37.6 113%

* Based on Sept. 1 exchange rate. Source: DataStream Intl. and Star Services Inc.

Asia-Pacific Revenue Growth

Here are two-year average revenue growth rates for the region’s fastest-growing firms, grouped by country. Excludes firms with less than $20 million in revenue. Growth based on native currencies.

‘93 revenue (in millions of Two-year Company Industry U.S. dollars)* avg. growth AUSTRALIA Adelaide Steamship Diversified $9,880 1,887% Petroleum Secs. Mining 23.4 713% Normandy Poseidon Mining 667.3 547% St. Barbara Mines Mining 40.2 480% David Jones Retail 938.5 394% Poseidon Gold Minerals 514.7 216% Tooth & Co. Breweries 367.2 123% Command Ptrl. Energy 20.3 115% Memtec Electronics 20 109% Plutonic Resources Minerals 155.8 68% Village Roadshow Leisure 49.5 53% Ampolex Electronics 274.3 48% HONG KONG CITIC Pacific Property $1,440 9,831% Henderson Land Property 72.9 217% Grande Hlds. Electronics 718.3 182% South Sea Devel. Textiles 63.6 103% Top Glory Intl. Property 24 100% CNT Group Chemical 92 72% Harbour Centre Property 117.1 52% Starlight Electronics 173.9 51% Ming Pao Publishing 162.8 50% Hopewell Property 62.8 50% Wo Kee Hong Electrical equipment 379.8 45% MALAYSIA Dunlop Estates Plantations 616.3 441% Tanjong Diversified 517.4 198% Multi-Purpose Diversified 721.6 198% Renong Containers 120.4 103% Promet Instruments 87.2 80% NYLEX Diversified 131.3 47% THE PHILIPPINES Ayala Corp. Diversified 348 6,553% EEI Diversified 88.1 92% SINGAPORE Orchard Parade Hotels 47.3 103% Hotel Properties Hotels 184.3 75% Seapower Asia Diversified 30.6 69% Lim Kah Ngam Instruments, tools 115 63% Cycle & Carriage Autos 1,152 56% SPP Paper 58.2 52% Sunshine Allied Food 58.2 50% Steamers Maritime Shipping 61.8 45% THAILAND Land & Houses Property 253.6 47%

* Based on Sept. 1 exchange rate. Source: DataStream Intl. and Star Services Inc.

Japanese Revenue Growth

Companies ranked by average revenue growth over a two-year period. Growth based on yen.

‘93 revenue (in millions of Rank Company Industry U.S. dollars)* 1 Sega Enterprises Leisure $4,200 2 Carolina Textiles 98 3 Chiyoda Construction 4,460 4 Mutoh Instruments, tools 690 5 Tsurumi Mfg. Electrical equip. 267 6 Jomo Twisting Thread Textile 34 7 Clarion Auto Parts 1,850 8 Renown Textiles 2,180 9 Xebio Retail 530 10 Daiichi Sangyo Retail 1,510 11 Fuji Seito Food 120 12 Daito Trust Construction 2,810 13 Heiwa Corp. Instruments, tools 1,220 14 Aoyama Trading Retail 1,520 15 Sumikura Kogyo Instruments, tools 100 16 Tokyo Electron Indus. components 1,550 17 Tokai Senko Textiles 410 18 Catena Corp. Indus. components 332 19 Ishikawa Jima Specialties 501 20 Toyo Kanetsu Construction 551 21 Towa Meccs Electronics 245 22 Ryosan Indus. components 2,260 23 Nippon Typewriter Office equipment 562 24 Bandai Leisure 2,450 25 Nippon Conveyor Instruments, tools 140 26 Uniden 21 Electronics 206 27 Zuken Electronics 117 28 Japan Steel Works Steel 2,260 29 Ishii Iron Construction 207 30 Namco Leisure 750 31 Aoki Intl. Retail 816 32 Yoshimoto Kogyo Leisure 153 33 Nohmi Basai Instruments, tools 752 34 Kissei Pharmaceutical Pharmaceuticals 420 35 L & M Foods Food 151 36 Horiba Electrical equip. 444 37 Nippon Tetrapod Construction 372 38 Koyo Iron Works Instruments, tools 189 39 Odakyu Railway Railroads 5,510 40 Santen Pharmaceutical Pharmaceuticals 520 41 Komai Tekko Steel 596 42 Ohba Construction 226 43 Hinode Kisen Shipping 83 44 Yamato Setsubi Construction 344 45 Nintendo Leisure 6,410 46 Miyaji Construction Construction 162 47 Oyo Corp. Construction 440 48 Kanematsu NNK Building materials 224 49 Tsukishima Kikai Construction 643 50 Senshukai Retail 1,420

Two-year Rank avg. growth 1 92% 2 64% 3 61% 4 56% 5 53% 6 44% 7 44% 8 42% 9 40% 10 40% 11 36% 12 36% 13 35% 14 32% 15 31% 16 30% 17 30% 18 29% 19 29% 20 28% 21 28% 22 26% 23 25% 24 24% 25 24% 26 24% 27 24% 28 23% 29 23% 30 22% 31 22% 32 22% 33 21% 34 21% 35 21% 36 20% 37 20% 38 19% 39 19% 40 19% 41 18% 42 18% 43 17% 44 16% 45 16% 46 16% 47 15% 48 15% 49 15% 50 15%

* Based on Sept. 1 exchange rate. Source: DataStream Intl. and Star Services Inc.

Japanese Profit Growth

Companies ranked by average profit growth over a two-year period. Includes only companies with net income of more than $9 million. Growth based on yen.

‘93 net income (in millions Rank Company Industry of U.S. dollars)* 1 Namco Leisure $20.3 2 Itoki Crebio Office equipment 25.2 3 Aiwa Electronics 22.2 4 Misawa Homes Construction 22.6 5 Japan Steel Works Steel 22.2 6 Fukusuke Textile 61.9 7 Kokusan Denki Electrical equip. 10.2 8 P.S. Concrete Cement 56.6 9 Chiyoda Contractor 117.6 10 Calsonic Corp. Auto parts 15.5 11 Meiji Seika Food maker 295.7 12 Nihon Shokuhin Kako Food 15.6 13 Bridgestone Auto parts 286.7 14 Konami Industry Computer services 18.1 15 J.G.C. Corp. Contractor 148.4 16 Inabata Distribution 36.8 17 Unicharm Household goods 20.7 18 Shoei Foods Food 9.2 19 Kansei Auto parts 18.5 20 Chugai Pharmaceutical Pharmaceuticals 67.2 21 Nikken Chemicals Chemicals 9.8 22 Onoda Cement Cement 90.6 23 Koike Sanso Instruments, tools 11.2 24 Sega Enterprises Leisure 284.0 25 Toyo Kanetsu Contractor 16.3

Two-year avg. Rank growth 1 1,188% 2 1,017% 3 768% 4 376% 5 284% 6 274% 7 231% 8 199% 9 190% 10 183% 11 180% 12 155% 13 140% 14 126% 15 104% 16 100% 17 98% 18 97% 19 94% 20 93% 21 92% 22 91% 23 84% 24 84% 25 83%

* Based on Sept. 1 exchange rate. Source: DataStream Intl. and Star Services Inc.