The competition was heating up. France, Ireland and Britain were vying for a giant electronics-manufacturing complex planned by LG, the South Korean conglomerate. Michael Forsyth, Secretary of State for Scotland, showed up in Seoul in May, prompting speculation that Scotland might try to steal the project from front-runner Wales. That news led a former Welsh official to denounce the whole process as "a sordid scramble."

He needn't have worried. Last week LG announced that the prize would go to Wales. The firm will spend $2.6 billion to build a semiconductor plant and a television-components factory, creating 6,100 jobs. The project will be the largest overseas investment ever made by a Korean company, as well as the biggest foreign commitment ever made in Europe. Said Barry Hartop, chief executive of the Welsh Development Authority: "We are dancing in the streets and valleys of Wales today."

LG's decision is the latest in a series of recent moves by Korea's largest chaebol, or conglomerates, to colonize Europe. Last October Queen Elizabeth and Samsung chairman Lee Kun Hee formally opened a $700 million complex to manufacture microwave ovens and personal-computer monitors near Newcastle in northeastern England. Another chaebol, Daewoo, has an automobile-assembly joint venture in Romania, and in May bought that country's second largest shipyard. The firm is now Romania's biggest foreign investor. Daewoo is also about to become the largest overseas investor in Poland, where it will devote $1.1 billion over the next seven years to turning around FSO, an ailing automaker in Warsaw.

The Korean rush to Europe is part of a frenetic effort by the chaebol to move production offshore into an increasingly important market. Setting up shop within the European Union will let them take advantage of the absence of tariffs and relative lack of customs restrictions among the member countries. The chaebol are also fleeing the high costs of doing business in the tougher markets at home. Auto sales in South Korea, for instance, are almost flat, while those in Eastern Europe are rising. Says Lee Chong Suk, senior managing director of the LG Group: "Our target market is not Korea. There is no reason to stay here, unless we are overly patriotic."

There are plenty of reasons to move. Used to doling out housing allowances and tuition for workers' children at home, the large chaebol don't seem fazed by high social-security payments and hefty minimum wages in much of Europe and point instead to the skilled and well-trained work force. Korean interest rates, now around 12%, make capital about twice as expensive as in Europe. The arrival of democracy in South Korea has brought with it strong criticism of the tight grip the chaebol have long maintained on the economy. Even now, the four biggest chaebol--LG, Samsung, Hyundai and Daewoo--account for more than half the country's exports. For decades, the chaebol enjoyed lucrative state contracts, protected markets and easy loans from a government in a hurry to industrialize. Now Seoul is trying to deregulate the economy and encourage small- and medium-size companies. Foreign competitors too are at last getting a foot in the door. "The government will open markets here," predicts Lee Hahn Koo, who heads Daewoo's Economic Research Institute. "Many oligopolistic advantages will disappear. Korean firms can expect only normal profits with higher costs."

No longer so pampered at home, the chaebol and, indeed, other large foreign investors are receiving a warm welcome in Europe from governments desperate to create jobs. LG was wooed to Wales by government incentives reportedly worth about $300 million. Subsidies are so widely offered across Europe that companies have come to expect them and sometimes base their investment moves largely on other factors. LG's decision to build in Wales, for instance, may have less to do with government largess than with the country's relatively low wages and flexible labor regulations. Those factors have helped make it Europe's most popular destination for foreign companies: in 1994 40% of all North American and Japanese direct investments in Europe went to Britain.

A manufacturing base within the European Union not only helps companies get around trade barriers but also makes the transport of materials and manufactured goods to and from factories faster and less expensive. "The EU is economically one market," says Kang Hyo Jin, a Samsung Group executive director. "Visibly and invisibly, they push us to be in that market." About 30% of personal-computer production in Europe is concentrated in the British Isles. Samsung is able to transport monitors from its plant in Wynyard Park near Newcastle to these PC makers in five days or less, compared with the 45 days it would take from Asia. Says Daniel O'Brien, who heads Samsung Electronics manufacturing operations in Britain: "Labor costs are important but not that important. Our biggest single cost is logistics. It makes for quite a compelling argument to invest here."

Koreans are especially active in the newly capitalist countries of Eastern Europe. Their mostly high growth rates are coupled at least for now with a benign competitive environment. Consumers have put up with shoddy goods made by state-owned enterprises for so long that they are not picky about brand image or quality. "Our brand is not so prestigious in Germany and France," admits Kim Yong Koo, deputy general manager of Daewoo Electronics overseas-advertising team. "In the developed countries the market is very competitive. In Eastern Europe it is easier to promote the brand." It is also easier to sell when demand is growing. Take passenger cars: for Poland, Hungary, the Czech Republic and Slovakia, sales are projected to jump from 470,000 last year to 715,000 in the year 2000. Says LG's Lee, who recently returned to Seoul from negotiating the purchase of a Polish bank: "The key emerging markets are like a Boeing 747 on the runway. If you don't get on, you will be left behind."

The chaebol are determined not merely to avoid that fate but to be flying the plane as well. Samsung, already the world's largest memory-chip manufacturer, racks up $83 billion in annual sales but has announced plans to become a $200 billion behemoth by the year 2000. For the chaebol to fulfill such an ambitious growth target, says an executive at a major U.S. consultancy in Seoul, "they have to look overseas." Daewoo's charismatic chairman Kim Woo Choong has moved to Vienna to oversee his company's expansion in Eastern Europe. The consultant in Seoul likens Kim's style to that of Genghis Khan: instead of launching a frontal attack on the major markets in Europe, the U.S. and Japan, he prefers to expand in markets on the periphery. But Kim's grand schemes raise plenty of skeptical eyebrows. No wonder: Daewoo plans to produce 2 million cars annually by the turn of the century, which would put it among the world's top 10 auto manufacturers. "If Daewoo succeeds, it will be selling more cars than Chrysler. It means doing in five years what's taken the best Japanese companies 20 years," says David Herman, chairman of Adam Opel AG, General Motors' subsidiary in Germany. "That's a daunting prospect."

The South Korean government is not pleased about the chaebol's overseas spending spree. Says Shim Sang Dal, a senior official in the Ministry of Finance and Economy: "If they make mistakes, they have a tremendous effect. The whole country is hostage in some sense." In an attempt to prevent the chaebol from racking up too much debt, the government last year ruled that 20% of their investments overseas of more than $100 million must come from internally generated funds. The regulation proved ineffectual because the government was unable to figure out how the chaebol were raising money to pay for their purchases.

Executives at the largest conglomerates seem too preoccupied with their expansion plans to pay much attention to the government. "We are beginners at globalization," says Samsung's Kang. Nonetheless, Kang and his colleagues are determined to learn quickly. Last year, in an effort to decentralize decision making, Samsung set up regional headquarters in North America, Japan, Europe, China and Southeast Asia. In a quirkier move, Samsung has allowed some younger employees to take 12 months off to live and study in nearly any foreign country they choose. LG wants 20% of its executives to be foreigners; very few are today. That's a startling goal in a country that has traditionally been less than receptive to outsiders. Predicts LG's Lee: "LG Electronics someday may be run by an Englishman or a German." The chaebol's ability to manage vast overseas empires is untested, but their determination to succeed in Europe means there will likely be dancing in the streets and valleys all over the region.

--With reporting by Barry Hillenbrand/London and Stella Kim/Seoul