Overview

An integral part of the triple bottom line is economic prosperity, which is fundamental in enabling a corporation to fulfill its environmental and social obligations. We are pleased to report that, despite the tough economic challenges and the SARS epidemic in Asia in 2003, Dow has made significant strides in this respect in the region. Our revenue in Asia-Pacific achieved a 20 percent year-to-year growth.

A major part of that growth can be attributed to the combination of two key factors: increased focus on reducing costs and serving customer needs with low cost positions; and capitalising on the rapid growth in China.

We began to address our cost structure issue globally in 2003, when the Company as a whole reduced discretionary spending by $US1 billion, shut down more than a dozen plants globally and reduced the workforce by 3,500 positions, half of them through divestitures and synergies from the Union Carbide acquisition. These actions, combined with capital expenditure reductions, selected divestitures and increases in both price and volume, delivered solid financial results, including substantial improvements in earnings, cash flow and debt ratio.

In Asia, with China continuing with its robust economic growth — 9.1 percent in 2003 and an annual average of 9.4 percent since 1979 — Dow worked alongside customers to ensure their increased demands were met. Sales in Greater China grew more than 30 percent year to year. Dow’s supply position in Greater China was further strengthened with the full operation of the manufacturing site in Zhangjiagang, Jiangsu province, which comprises Dow wholly-owned plants for producing latex and epoxy, a jetty, and a 120,000 metric tons polystyrene joint venture plant between Dow and Asahi Kasei, being operated by SAL Petrochemical (Zhangjiagang) Company Limited, a 50/50 joint venture between Asahi Kasei and Dow.

We continue to see synergistic effects as a result of the Union Carbide acquisition, which was closed three years ago. This brought together the best talents of the employees, products and technologies, and work processes of both companies. It also brings to Dow a broadened customer base as well as new partnerships and relationships, which open new opportunities in Asia.

In Malaysia, the association with PETRONAS — the national oil and gas company —  brings to Dow our first world-scale, ethylene integrated petrochemical facility in South East Asia. The OPTIMAL Group of Companies, which is an affiliate of Dow and PETRONAS, provides a strategic growth platform for Dow's olefins, chemicals and performance chemicals businesses in Asia-Pacific. PETRONAS' excellent infrastructure and capabilities combined with Dow's strong technology base and global market knowledge creates a formidable team focused on growth. This $US 2 billion joint venture, which started up in the first half of 2002, continues to serve as a strong growth platform for Dow and its customers in the rapidly expanding markets of Asia-Pacific.

As these growth opportunities would not have been possible without the support of excellent Dow employees, investment in people is a major commitment in Asia-Pacific. We recognise that it is people, with their ideas and energy, who will ultimately lift us to the next level of performance. Dow, therefore, has continued to sharpen our focus on addressing key aspects of how we attract, retain, develop, recognize, and lead Dow people.

Another key impact of local presence is a company's contribution to economic prosperity through salaries and wages, taxes and local purchases which contribute significantly to economic health.

When it comes to local purchases, as a competitive, global enterprise, Dow has a responsibility to minimise costs and maintain and strengthen our low-cost-to-serve position. For some products this means consolidating purchases and buying in great volume independent of the location of the supplier. But many other products and services are bought locally and our purchasing departments work closely with local suppliers to bring them in line with about our strategic purchasing requirements. Tax paid by a company to the various local authorities is another important part of its economic "footprint" in a country.

Asia-Pacific — in particular Greater China — continues to be a very important part of Dow’s plans for growth. We continue to face major challenges for economic prosperity — over-capacity, slowing demand and economic uncertainty — which are putting tremendous pressure on the business performance of petrochemical companies. But our continued focus on the triple bottom line will help us set our priorities and respond to the challenges we face in the future.

Dow and its associated companies in the Pacific employ about 3,700 people in over 13 countries.