By Steven Mufson
Washington Post Foreign Service
Monday, March 2, 1998; Page A01

TIANJIN, China—Just a few months ago, four companies in Thailand were vying for shares of the worldwide market for leather golf bags. Today, two are bankrupt, crushed by the weight of foreign debts.

The surviving two, however, are making more money than ever. Smart enough to have borrowed only in Thai currency, they were not hurt by the plunge in its foreign-exchange value. In fact, they are in better shape than before; they can't work fast enough to fill their orders. Sales prices are holding steady, because there is less competition, and the slump of the Thai currency cut the cost of labor and local leather and fattened profit margins.

Similar stories are unfolding across Asia from the shakeout of the continent's fiscal crisis. The financial earthquake has altered the economic landscape, and while for the most part it has brought hardship and even catastrophe, it also has left standing some winners in an intensified international competition for money and markets.

"If you had low debt, if you're exporting and getting dollar revenues and have local currency costs, then you're doing great," said John Seel, a Hong Kong-based economist for Bear, Stearns & Co. "Unfortunately, there are not too many companies like that."

Some of the winners and losers are well known. Among the losers are Thailand's entire banking sector, South Korea's biggest conglomerates and the vast majority of Indonesian companies. J.P. Morgan & Co. is laying off Asian staffers, and the Union Bank of Switzerland took a huge write-off for an ill-fated Asian currency transaction. The winners are some foreign-funded ventures and Taiwan-based companies, which for the most part still have plenty of cash to buy raw materials or even boost investments. One winner is Goldman Sachs & Co., which bought 30 percent of a Thai hotel chain that has been packed with bargain-seeking tourists.

The stakes of the shakeout are high: the survival of thousands of companies, the jobs of millions of workers, and the political and economic prospects of nations.

In some cases, subsidiaries of a single company have been pitched into a head-to-head conflict, with each unit's survival at stake. A plant here in Tianjin owned by South Korea's Samsung conglomerate recently refused to supply any more parts to another Samsung factory in Indonesia unless that unit starts coughing up some cash.

Every year, the Tianjin plant makes 2 million VCR decks, a key component of videocassette recorders. It uses half the decks in VCRs it makes and exports the other half to the Indonesian plant, which assembles a similar product. But with the collapse of the Indonesian currency and VCR market, the Indonesian Samsung operation has run out of cash. Over the past month, it has given the Tianjin plant letters of credit to cover $3 million in component purchases. Those letters of credit -- issued by ailing Indonesian banks -- are virtually worthless.

"They are just pieces of paper," said Lee Bak June, managing director of the Tianjin plant. "No one accepts them. Now we want cash on delivery." Samsung headquarters in South Korea is struggling to find a solution, but it too is short of cash.

One aspect of the new Asian landscape is an intensified scramble for new export markets to compensate for the collapse of domestic and Asian export markets. The Samsung plant in Tianjin, for example, had planned to ship 15 percent of its VCRs to South Korea and 10 percent to Southeast Asia. But Southeast Asian customers are broke, and VCRs are less expensive to make in South Korea. Now manager Lee hopes that increased sales to Pakistan, the Middle East, Germany and Russia will compensate.

While companies scramble for markets, cities and countries are competing for investment dollars. The Tianjin Economic Development Area southeast of Beijing is one of the places striving to be a winner, even though the Asian crisis has hammered many of the South Korean, Japanese and Southeast Asian companies that have been among the area's biggest investors since China opened its doors to the outside world in the early 1980s. South Korean and Japanese firms have accounted for 7.3 percent and 5.2 percent respectively of the $9.5 billion in foreign investment in this showcase enclave.

To ease the pain for investors, the authorities here are offering to relax requirements for local inclusion, reduce export requirements, postpone rents, lobby local banks to extend loans, help deal with labor problems and promote products for the local market.

One recipient of Tianjin's aid has been the South Korean giant Hyundai Electronics Industries Co., which this year plans to import equipment to its plant here that eventually will supply parts to Motorola Inc. To ease Hyundai's cash crunch, the Tianjin Economic Development Area agreed to postpone millions of dollars in rent payments on the 200,000-square-foot factory for two years.

"We mean that each tree we plant, we'd like to see grow as healthy as possible," said Tianjin Deputy Mayor Ye Disheng, who in early February went to the United States to woo more American investment. Although China has not devalued its currency since 1994, Ye vows that he will make sure that "Tianjin is a place where foreign investors can make money." Ye has plenty of reason to worry, as most Asian companies are pulling back on investment plans. Samsung has shelved plans to spend up to $5 million to expand its Tianjin VCR plant, according to the manager. In Beijing, so many South Korean companies have trimmed operations that a Singapore-run school lost 37 percent of its 104 Korean students and the Beijing International School lost 23 percent of its 127 Korean students.

"I don't see any further investment from Korea for the foreseeable future," said Ye. The best the Tianjin Economic Development Area hopes for overall investment is to match last year's total of $1.23 billion. That looks good compared with other places in Asia. In Thailand, investment is expected to drop by 21 percent this year, according to official figures.

While South Korean companies are contracting, other companies are expanding. A Taiwan-based food company, Imei, which owns one of the two surviving Thai golf bag companies, plans to spend $3 million to set up a cookie factory in the Philippines.

The privately owned Imei can do that because it has been cautious about borrowing money, unlike the grossly over-indebted conglomerates of South Korea.

Imei is typical of the type of company that has helped Taiwan escape serious harm from the Asian contagion. Founded 65 years ago as a family bakery, it grew into the largest baked goods supplier in Taiwan. Now it owns a chain of stores and supplies goods to supermarkets and international chains, including McDonald's. The company does not allow its overall debt to exceed half of its equity, said Kao Chih-shan, son of the firm's founder.

Unlike the South Korean conglomerates -- which have their fingers in everything from making steel, ships and auto parts to running retail stores, securities firms and semiconductor businesses -- Taiwan's companies have stayed afloat because they haven't ventured too far afield.

"Taiwan companies invest in other areas, but they take care of their core businesses," said Taipei business executive Chong Hongchia.

"I think our economic structure is different," said Parris H. Chang, an opposition member of the Taiwan legislature. "Taiwan is blessed with small and medium-size enterprises that are much more dynamic and flexible and don't fall like dominoes."

The flexibility and financial strength of Taiwanese companies -- as well as an exchange rate that has dropped only about 15 percent against the U.S. dollar in recent months -- have encouraged foreign customers. Moreover, Taiwan has expanded more successfully into higher technology industries.

Last week, Taiwan Semiconductor Manufacturing, the island's biggest electronic chip maker, won a $148 million contract to produce central processing units for the American firm National Semiconductor Corp. The deal represents about 12 percent of the world's central processing unit capacity.

Ma Kai, a research fellow at Zhonghua Institution for Economic Research, a Taipei think tank, said Taiwan's technological edge in Asia is crucial. "If Thailand, Malaysia and Indonesia are competing with no technology and no capital, in the end they will have to sell their labor at the same wage rate as India or mainland China," Ma said.

In addition, Taiwan's foreign debt is tiny. Perhaps spurred by its diplomatic isolation, Taiwan has become self-sufficient. The foreign exchange reserves of the island of 21 million people amount to $84 billion, fourth largest in the world. Foreign debt is a negligible $100 million.

Taiwan's relatively healthy corporate structure has helped boost confidence there. The stock market hit a new record last week, while foreign reserves have climbed by more than a half-billion dollars.

But even relatively healthy Taiwan is not escaping all adverse effects of the Asian turmoil. Its exports fell 14.3 percent in January from a year earlier.