VISION FOR INDO-KOREA TRADE RELATIONS
 
NK GoyaI       10-01-10

Noble Laureate Rabindranath Tagore composed a short but evocative poem in 1929 about Korea's glorious past and bright future. He wrote:

"In the golden age of Asia
Korea was one of its lamp bearers,
And that lamp is waiting
To be lighted once again
For the illumination of the East."


Historical and cultural contacts between the two peoples date back to ancient times. According to ¡°Samguk-Yusa" or "The Heritage History of the Three Kingdoms," written in the 13th century, a princess from Ayodhya came to Korea and married King Kim Su-ro and became Queen Hur Hwang-ok in the year 48 AD [former President Kim Dae-jung, former President Kim Young-sam and former Prime Minister Kim Jong-pil trace this ancestry]. The enduring philosophy of the Buddha, which has influenced the lives and thoughts of the people of the two countries, has also provided a strong link. The rationale for a close relationship between India and South Korea has been reinforced in modern times by political and economic imperatives.

Gimhae, the city where the Indian princess from Ayodhya landed and married Kim Su-ro, signed an MOU establishing a sister-city relationship with Faizabad-Ayodhya. A monument in memory of the princess was erected in March 2001 at a site donated by the Ayodhya administration. Busan and Mumbai signed an MOU on mutual cooperation in 1977. Gyeonggi Province signed an MOU for mutual benefit with the State Government of Maharashtra in March 2007. Seoul has a sister-city relationship with Mumbai and has expressed interest in establishing a sister-city relationship with Delhi. And twinning between Pocheon & Jaipur and Incheon & Kolkata is at an advanced stage.

India played an important role in Korea after the end of Japanese colonial rule in 1945. India was the chairman of the nine-member UN Commission set up to hold elections in Korea in 1947. The successful general elections held for the first time in the South in 1948 led to the establishment of the Republic of Korea on Aug. 15, 1948. During the Korean War (1950-53), both warring sides accepted a resolution sponsored by India and cease-fire was declared on July 27, 1953. India contributed a medical unit and 60 para-field ambulances to the UN multinational force during the war. Also, India, in its capacity as the Chairman, led by Lt. Gen Cariappa, of the Neutral Nations Repatriation Commission [NNRC] contributed significantly to resolving the humanitarian issues arising out of the war, which received all-around appreciation.

In the post-Cold War era, the ROK's move to broad-based political and economic relations as well as political liberalization and the democratization of its society have boosted India-South Korea relations by creating common ground with India's economic liberalization and 'Look East Policy.' Exchange of high-Ievel visits and consistent Indian support for the peaceful reunification of the two Koreas has strengthened bilateral relations.

During the visit of President Dr. A.P.J. Abdul Kalam, the first by any president of India to the ROK, the signing of a Joint Ministerial Statement on the Launching of a Joint Task Force to develop a Comprehensive Economic Partnership Agreement (CEPA) between the two countries was held. Two other Agreements viz. Agreement on Cooperation in the fields of Science and Technology and Agreement on Cooperation and Mutual Assistance in Customs Matters were also signed during the visit. An MOU on Scientific and Technological Cooperation between the Department of Science and Technology and the India and Korea Industrial Technology Foundation (KOTEF) was also signed separately.

Bilateral CEPA negotiations have formally concluded and the CEPA has since been signed. Some of the highlights include the fact that the CEPA binds South Korea to phase out or reduce tariffs on 90 percent of Indian goods over 10 years, while India is to eliminate tariffs on 85 percent of South Korean exports within the same period, which is longer than what is written in other FTAs South Korea has signed. In addition to tariff reduction, South Korea will be able to move into various industrial sectors of the Indian economy, such as food processing, textiles, garments, chemicals, metals and machinery. The deal also opens the service and investment sector, with India accepting South Korean company inflows in its telecom, accounting, medical and advertising markets, as well as allowing South Korean financial firms in the investment market. With respect to rules of origin, both countries agreed on the allowable level of foreign contents to be up to 65 percent. South Korea expects massive inflows of information technology (IT) workers, engineers and English teachers as both sides agreed to allow temporary migration of professional workers.

Two-way trade between India and South Korea has gathered momentum recently, making South Korea the 12th largest trading partner for India. In the last four years alone, trade volume has gone up more than two and half times. As against a target of US$10 billion, bilateral trade is expected to exceed $16 billion in 2008.

South Korea is the 4th largest investor in India in terms of actual inflow of FDI into India. During the first three quarters of 2008, for which data is available, 164 investment proposals from 52 Korean companies for a proposed total investment of $243 million approved. The cumulative investment from South Korea in India has been $1.46 billion in terms of actual flow from 382 Korean companies for over 900 projects.

The ROK¡¯s investments in India have largely taken place in the transportation industry, energy (power and oil refinery), electrical equipment (including computer software & electronics), chemicals (other than fertilizer), commercial, office & household equipments, metallurgical Industries and food processing pndustries. Major South Korean companies active in India include Hyundai Motor, Samsung Electronics, LG, Lotte Group and Doosan Heavy Industries. Now, major South Korean companies like Samsung, Hyundai and LG are expanding production facilities in India and smaller companies are focusing on technical collaborations. The Lotte Group acquired Parry¡¯s Confectionery Chennai in 2004. Samsung Electronics opened a mobile phone plant in the state of Haryana in March 2006. Samsung Engineering has opened its Global Engineering Centre in New Delhi.

Tata Motors Limited, India, acquired Daewoo Commercial Vehicle (DWCV), of Gunsan, South Korea, for a total price of 120 billion won (approximately $102 million or Rs. 4650 million) in March 2004. Aditya Birla group acquired over $600 million worth of a stake in Novellis Korea in the field of aluminum. Additionally, during the first three quarters of 2008, over 70 Indian investment proposals were made.
Bilateral trade between India and Korea has gathered momentum during the last few years. Compared with 2001 when total bilateral trade turnover was $2.52 billion (Indian exports to South Korea were $1.11 billion and Indian imports from South Korea were $1.41 billion), the total trade has increased by more than six times since then and as per the ROK¡¯s figure, stands at $15.5 billion at the end of 2008. During the last three years, the trade between the two countries has shown an increase of more than 100 percent. During 2007, the bilateral trade crossed the landmark of $10 billion, well ahead of the target set to be achieved by the two countries in 2008.
(In billions of USD)
Year Exports to India Imports from India Total turnover Growth (%)
2001 1.41 1.11 2.52 8.8
2002 1.44 1.25 2.69 4.7
2003 2.853 1.232 4.085 55.2
2004 3.632 1.850 5.482 34.2
2005 4.597 2.112 6.709 22.4
2006 5.532 3.640 9.172 38.4
2007 6.600 4.624 11.224 22.35
2008 8.977 6.581 15.558 39.00
2009
(Up to June) 3.646 1.590 5.236 (-)43.47
Source: Korea International Trade Association (KITA)

A remarkable feature of South Korea is its transformation from a developing country in the 1950s to a high-income country with a substantial per capita income today. The economic reforms of the 1990s in India were influenced by East-Asian successes and South Korea was among the chief countries to have an impact on Indian policymakers' thinking process. Though consular relations between India and South Korea were set up in 1962, it was in 1973 with the establishment of formal diplomatic ties that a new chapter was opened in the history of Indo-Korean cooperation.

Both India and Korea contribute significantly to the world GDP. Korea is among the few Asian countries that are counted among the developed countries of the world; India, too, has a growing stature and increasing role in international affairs.

In addition to the above, studies have also revealed that the two countries could set up joint collaborations in the sectors of infrastructure – power, ports, telecommunications, shipbuilding & ship repair, petrochemicals, automobile ancillary, electrical & electronics, office equipment, banking & financial services, software and iron & steel.
Out of 44 contracts awarded for a National Highway Development Project, nine were won by Korean companies in collaboration with Indian companies or independently.

The vision statement includes the prospective areas of growth for Korea and India are shipping and port development, infrastructure development, tourism and hospitality industries, agro food industries in addition to auto, communication and IT industries, which are already present in India. At the SME level, the following areas could be suitable for joint ventures, technology transfer and 100-percent investment:
- Automobile components
- Digital contents of animation & gaming
- Pharmaceutical products
- Software application & hardware engineering
- Textile/garment apparel industry
- Mechanical tools
- Small- and medium-sized machinery
- Food processing industries

With respective governments backing the business community positively and with the growing amount of globalization and liberalization, not only Korean companies are making their presence felt in India, Indian firms too are establishing themselves in Korea, and this is a positive sign of growth of the economies of both the nation.

* The writer is President of the Communication and Manufacturing Association of

.