How Kihak Sung stayed with Bangladesh for 45 years
In 1979, when young entrepreneur Kihak Sung flew from Seoul to Chattogram to see if he could set up an apparel factory there, the place did not look so promising. Bangladesh did not allow 100 per cent foreign investment and its infrastructure support was abysmal.
Kihak Sung came to Bangladesh because it has quota-free access to the European market. At that time Korea was facing quota restrictions in the developed world. Many Korean exporters were exploring Sri Lanka, India or Pakistan to see if they could set up factories there and utilize their quota-free access to remain competitive.
Kihak Sung chose Bangladesh despite its shortcomings. He set up his factory with Bangladeshi partners in May 1980 under the name Youngone Bangladesh Limited.
He started with his Swedish buyer's favourable order—a batch of simple garments. That factory had around 250 workers who received training from experienced Korean operators. By 1984, his company was exporting $18 million dollars worth of apparel.
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Today, Kihak Sung's Youngone Corporation employs nearly 85,000 people in different countries around the world—of which 70,000 work in Bangladesh. Youngone, enlisted in the Seoul Stock Market, has an annual turnover of between $2.5 billion and $3 billion dollars—one-third of this revenue from Bangladesh.
While his company now has factories in Vietnam, Uzbekistan, El Salvador and Ethiopia—his biggest legacy is the Korean Export Processing Zone or Kepz in Anwara which is still flourishing with new industrial complexes every year.
Born in 1947, Kihak completed 18 months of training in the Korean army after his graduation. He did not want to join his father's business in cold storage. He was rather fascinated by the variety of clothes that are displayed in the high street stores.
At the age of 25, he joined a garment company as a sales executive. South Korea was already in a transforming stage. Its journey in textiles and garments manufacturing started in the mid-sixties and by the mid-seventies, it was a big name worldwide.
He very quickly became a Swedish business specialist and also developed a network with the Americans.
After two years of salesman experience, Kihak Sung founded the Youngone Corporation with two partners in 1974. Youngone set up its first factory in sub-urban Seoul city to produce and export garments.
Early years in Bangladesh
In an interview with The Business Standard (TBS) at the Kepz in early 2022, Kihak Sung recalled how he remained stuck in Bangladesh for over four decades and how his business in Bangladesh grew against many odds.
He recalls how Youngone Bangladesh dealt with the first order in May of 1980.
"The raw materials came to the port and to take delivery we deployed hand carts. These carts created a queue of one kilometre when they brought the materials to the factory," he recalls.
The venture clicked. With 250 workers, the factory thrived as Kihak brought with him technical support from Korea and experience. Alongside his marketing skills, Kihak brought in his culture of keeping the factory neat, clean and trouble-free.
"But back then there were often political protests outside in Agrabad. Inside the factory, there were some labour issues that I did not like and my partners did not resolve," he says.
By 1984, Kihak decided to buy the shares of his partners of Youngone Corporation back in Korea. His partners were much older than him and the business back then was not very big. But Kihak thought if he took all the decisions by himself, it would help his company grow.
He applied the same strategy with Youngone Bangladesh ltd by parting ways with them in 1986. In the same year, he set up a factory in the Chittagong Export Processing Zone (Cepz) hoping it would have a better electric supply and a trouble-free environment.
The government in the early eighties built the Chittagong EPZ. Kihak Sung recalls, "The start was very slow when I was considering moving in there. At that time there were only two small factories. The government had built some more factories there for investors and garments makers. It picked up very slowly.
In 1986, Youngone Corporation rented a factory space marked as SS2 in CEPZ which was a properly built factory. Gradually, as the company grew bigger it took over other buildings. "I was selling and buying. I visited for a week every six months," he said.
"I was not very satisfied with our growth here. By the time we were moving into CEPZ, we had also established a factory in Jamaica in 1986. We were reasonably successful there. Meantime we were trying in Indonesia—that's a much bigger place," he said.
"In 1988, Youngone floated an IPO in Korea. This improved our cash flow. We wanted to make more investments in the CEPZ. So we built the-then rather big factory having 100,000 sqft area in 1990. We were getting a lot of orders back then.
In April 1991, a deadly super cyclone hit Chittagong. The cyclone devastated the coastal region—killing 138,000 people.
"The cyclone wiped out our main door. Then torrential water got in and all of the factories were under the mud.
I stayed in Chittagong for a long time to salvage the factory. During the recovery period, I realized that these workers here really want their jobs and they want to keep us in this country. After this rough recovery when I was leaving, they all cried.
After that, we headed to make further investments. Because we recovered from the disaster successfully and our customers saw our strength and how we protected their business. Our buyers recognized our efforts very well and they were really pouring orders to us," he said.
After that disaster, Youngone started making multi-storied buildings and putting all warehouses above the flood level. Youngone was enjoying massive growth.
"At that point, we came across a lot of problems—the EPZ was not designed to handle massive business growth. The administration was not simply able to cope with the growth. So I was thinking, maybe we should have our own EPZ."
How Kepz came to be
By the mid-nineties, a new chapter opened for Sung when he attended a Jica programme where the Japanese development agency shared its study on making a new furniture export processing zone in Anwara. JICA suggested that the zone may be set up under a private-public collaboration.
At the programme, Kihak Sung gave his opinion that if something should be done, it should be a private initiative. The private sector knows the pulse and it works faster.
"I was not planning any EPZ myself at that time," Sung recalls, "but after that Jica programme, I was under pressure from the-then Korean ambassador in Bangladesh who believed I could develop such an EPZ."
Sung initiated the process of developing an EPZ in 1995.
When Sung visited the place prescribed by Jica, he noted how arid and barren the land in Anwara was.
"People used to collect sand for this area that was infested with smugglers, pirates and goons back then," recalls Sung, "in fact, the local people called the place Texas because of its sandy environment."
"I knew there was some water on the northern side. There was nothing. It was dry most of the time—but during monsoon, everything would go under the water. But to set up factories we will need water," he said.
The Karnaphuli river water here is saline, and there were not many water bodies in the area. The adjacent newly launched Kafco factory drew huge underground fresh water and local villagers began complaining that their tube-wells have become dry because of Kafco.
Keeping the water problem in mind, Kihak Sung turned to the government for land acquisition for the Kepz. The government acquired more than 2500 acres of land (about 1700 acres belonging to the government) for the Kepz by 1999 as well as framed a new law under which the private EPZs would operate.
But then things slowed down following the change of the government. While the Youngone spent Tk 100 crore for the purchase of land and to build roads and some basic infrastructures, the government refrained from issuing it the license to operate the EPZ. Youngone finally was given a conditional license in 2006 and then again a revised license during the caretaker government regime in 2007. It took several more years for Youngone to get environmental clearance. The Kepz still had not received land mutation documents.
But despite the problems, Kihak Sung gradually went ahead to build an industrial complex beginning in 2008.
The Kepz launched its first factory operations in 2011.
"We sourced our water through medium depth tube-well. But our water consumption is not much compared to Kafco. The Kepz also recycles its water," he said.
Then we decided to keep the rainwater. We built dams and roads together—which did the magic. We are keeping all rainwaters in the huge water bodies (that we have created). Before that the rainwater would wash down the river or villages.
The Kepz now stores about 500 million gallons of water a year in its water bodies. It has prevented flooding in the villages as it happened before while water is found here even during the dry seasons.
"I want to make the Kepz one of the best areas to live and work in. Kepz has so many hills and forests. I want to preserve this area with very productive industries with good living and nature. From the start, 50% of this area has been kept reserved for green. EPZ can not just be all concrete, sell plots and go away—I don't want to go away. I cannot go away with Kepz. So I make it a good urban setting for healthy living and work," the veteran investor told TBS in 2022.
The current government finally cleared the Kepz land mutation documents—more than 25 years after it acquired the land. This will allow the Kepz authorities to sell industrial plots to other investors from anywhere in the world.
