According to the Embassy of India in Seoul

By Publisher Lee Kyung-sik with Editors Kim Hyung-dae and Ms. Joy Cho, Reporter Kim Ka-hee

 

The trade and economic relations between India and the Republic of Korea have gathered momentum in recent years with annual bilateral trade reaching $21.5 billion in 2018, crossing a $20 billion mark for the first time. According to the Embassy of India in Seoul, the bilateral trade in Jan-Nov 2019, the latest data as of December 2019, recorded $19.05 billion.

 

The bilateral Comprehensive Economic Cooperation Agreement (CEPA), set in place since 2010, has spurred the trade and investments both ways. In 2018, Korea’s investment to India crossed the $1 billion mark for the first time, recording $1.053 billion. Korea’s total FDI to India up to September 2019 stands at $6.29 billion. Investments from India to Korea are to the tune of approx. $3 billion led by Tata Daewoo, Ssangyong, and Novelis.
Details of the economic-commercial cooperation between Korea and India based on the data from the Embassy of India in Seoul follow:

Bilateral economic ties received a visible boost from the visit of Prime Minister Narendra Modi to the Republic of Korea from 18-19 May 2015. India and Korea decided to commence negotiations to amend the CEPA, strengthen cooperation on energy, electronics, and shipbuilding industries, including setting up of a Joint Working Group for Cooperation on the Shipbuilding sector and another in the field of Electronics Hardware manufacturing.

 

President Moon Jae-in (right) speaks with Prime Minister Narendra Modi of India at the Presidential Mansion of Cheong Wa Dae in Seoul. With the two leaders in place, relations between the two countries are growing by leaps and bounds.
President Moon Jae-in (right) speaks with Prime Minister Narendra Modi of India at the Presidential Mansion of Cheong Wa Dae in Seoul. With the two leaders in place, relations between the two countries are growing by leaps and bounds.

ROK offered to provide the US $10 billion financings (development assistance and concessional credit) to India for infrastructure projects. Recognizing the importance of the shipping industry in the bilateral relationship, PM also visited the Shipyard of Hyundai Heavy Industries in Ulsan. Leaders of both countries addressed the inaugural session of the India-Korea CEOs Forum to promote the bilateral economic cooperation, while PM also met the leadership of the top Korean conglomerates. ‘Korea Plus’ desk was created as a single-window in India to address all the issues raised by Korean companies as a result of PM visit. State visit of President Moon Jae-in during 10-12 July 2019 to India has boosted bilateral engagement with a joint vision of people, peace, and prosperity. A target of bilateral trade worth $ 50 billion to be achieved by 2030 was set up by Prime Minister Modi and President Moon during this visit. To further strengthen bilateral ties, PM Narendra Modi visited ROK during 21-22 Feb 2019 and had a series of bilateral and business engagements. PM Modi unveiled a bust of Mahatma Gandhi at the prestigious Yonsei University to commemorate the 150th birth anniversary of Mahatma Gandhi during this visit and also accepted the Seoul Peace Prize conferred upon him by Seoul peace Prize Foundation.

 

President Moon Jae-in (right) and Prime Minister Narendra Modi of India shake hands with each other during the latter’s visit to the Presidential Mansion of Choeng Wa Dae in Seoul.
President Moon Jae-in (right) and Prime Minister Narendra Modi of India shake hands with each other during the latter’s visit to the Presidential Mansion of Choeng Wa Dae in Seoul.

Status of Korean Economy and Synergies with India:

In less than four decades, Korea has achieved remarkable progress transforming its economy into an export-driven powerhouse. Its GDP has crossed $1 trillion from a mere $ 2.3 billion in 1962 and recorded as the 12th largest in the world according to 2017 GDP. It's per capita income in 2017 was $ 29,745. Services, Manufacturing and Agriculture account for 54.1 %, 26.3% & 2.1% of its GDP respectively. (Source: Bank of Korea). The economic transformation has been achieved despite Korea’s high dependence on the import of natural resources including crude oil and essential minerals. Korea became the 29th member country of the Organization for Economic Cooperation and Development (OECD) in 1996. Korea is now the 5th largest exporter and 9th biggest importer in the world as of 2017. Its exports increased by 15.8% to $573.7 billion and imports also reduced 17.8% to $478.5 billion. Over 40% of Korea’s trade is with China, USA, and Japan. Korea’s other major trading partners are Vietnam, Hong Kong, Saudi Arabia, Taiwan, Australia, Germany, Singapore, and Indonesia. Korea has the world’s 9th largest foreign exchange reserves at $ 402.5 billion as of July 2018 (Source: Bank of Korea). It has the world’s largest shipbuilding industry and ranks among the top producers of semiconductors and electronic products. A major auto manufacturer, Korea produces over 4.5 million vehicles annually.

 

President Moon (left) and Prime Minister Modi of India shake hands with each other at the Sky Observation Room on the Lotte World Tower in Seoul on Feb. 21, 2019.
President Moon (left) and Prime Minister Modi of India shake hands with each other at the Sky Observation Room on the Lotte World Tower in Seoul on Feb. 21, 2019.

Korea, India share considerable synergies:

India and ROK, having pursued different economic paths for development since their independence, currently share considerable synergies. ROK is an export-driven economy and is drawn by India’s huge market. ROK developed considerable expertise in shipbuilding, steel, nuclear energy, heavy electrical machinery, etc. and is keen to invest in India in these areas. Similarly, ROK wants to take advantage of India’s prowess in IT software and to combine it with its expertise in IT hardware, designing, engineering, and manufacturing. However, India has to diversify its export market, particularly focusing on high-tech products in addition to primary goods, if it has to penetrate the Korean import market. Even in textiles and garments where India used to have an edge, ROK has closed the gap and is exporting its own finished products to overseas markets. It is encouraging that the two countries are exploring commercial opportunities in space, defense, and nuclear energy areas.

 

President Moon (right) gives a hearty applause to the remarks made by Prime Minister Modi of India at a joint press conference at the Presidential Mansion of Cheong Wa Dae during the latter’s visit to Korea in February 2019.
President Moon (right) gives a hearty applause to the remarks made by Prime Minister Modi of India at a joint press conference at the Presidential Mansion of Cheong Wa Dae during the latter’s visit to Korea in February 2019.

India is Korea’s 20th biggest source for imports, 7th biggest market:

India’s share in Korea’s global trade was 1.89% in 2018, India’s contribution in Korea’s global imports increased from 0.78% in 2001 to 1.10% in 2018. India is Korea’s 20th biggest source for imports and the 7th biggest export market as of 2018. In the last four decades, the pattern of Korean exports has undergone a significant transformation. Exports moved up the value chain from primary goods to light industrial products, to heavy industrial, high-tech, and knowledge-based products. One barrier that India faces is Korea’s restrictive policy towards the import of primary agricultural products such as fruits and vegetables. These matters are being discussed in the annual CEPA review meetings. There is also a need for diversification of the export products which at present are driven overwhelmingly by petrochemical products, mainly Naphtha, which accounts for more than half of India’s total exports to Korea.

Publisher-Chairman Lee Kyung-sik of The Korea Post media
Publisher-Chairman Lee Kyung-sik of The Korea Post media

Major items of exports of India to Korea:

Major items of India’s export to Korea are mineral fuels/oil distillates (mainly naphtha), cereals, iron, and steel. Basic materials comprise the bulk of our exports, around 74% of total exports. Naphtha has emerged as the most important item of India’s export to Korea commanding 21 % in 2015, 23.9% in 2016, and 21.2% in 2017. As of December 2018, among the top 10 items importing from India, mineral fuels, mineral oils, bituminous substances, mineral waxes (HS Code: 27) increased 22.3% to 1,282 million, sharing 21.8% of the total imports. The import of aluminum and articles thereof (HS Code: 76) also increased by 6.5% and marked $904 million. Organic chemicals increased by 29% and recorded to $594 million. Iron and steel (HS code: 72) also rose 22% to $447 million. Cotton (HS Code: 52) also recorded a growth of 44.1% to $269 million.
 

President Moon (fourth from left) and Prime Minister Modi (left) are discussing ways to further expand bilateral cooperation at their meeting at the Osaka G20 Conference in Japan on June 28, 2019.
President Moon (fourth from left) and Prime Minister Modi (left) are discussing ways to further expand bilateral cooperation at their meeting at the Osaka G20 Conference in Japan on June 28, 2019.

Main exports of Korea to India:

Korea’s main exports to India are automobile parts, telecommunication equipment, hot rolled iron products, petroleum refined products, base lubricating oils, nuclear reactors, mechanical appliances, electrical machinery & parts, and iron & steel products. Among the top ten items exporting to India, as of December 2018, Electrical machinery and etc. (HS Code: 85) showed a downturn of -16.6% year-on-year, amounting to $ 2,578 million and shared 16.5% of the total exports. Iron and Steel (HS code: 72) increased 23.7 % to $2,503 million. Nuclear reactors, boilers, etc. (HS Code: 84) gained 46.8% and marked $2,439 million. Plastic articles thereof (HS Code: 39) gained 24.7%, amounting to $1,740 million. Organic chemicals (HS code: 29) showed 13.2% growth to $1,056 million.
 

President Moon (second from left) and Prime Minister Modi (third from left) are discussing ways to further expand bilateral cooperation at their meeting at the Osaka G20 Conference in Japan on June 28, 2019.
President Moon (second from left) and Prime Minister Modi (third from left) are discussing ways to further expand bilateral cooperation at their meeting at the Osaka G20 Conference in Japan on June 28, 2019.

Comprehensive Economic Partnership Agreement:

Korea and India signed a Comprehensive Economic Partnership Agreement in Seoul on 7 August 2009 and was operationalized with effect from 1 January 2010. CEPA is Korea’s first free trade agreement with a member of the BRICS nations. The trade deal, which came after negotiations of more than three years and twelve rounds, commits the two countries to lower or eliminating import tariffs on a wide range of goods over the next 8 years and helps expand opportunities for investments and trade in goods as well as services. Korea was to phase out or reduce tariffs on 90 percent of Indian exports while India would phase out or cut tariffs on 85 percent of Korean exports.
 

President Moon (right) shakes hands with Union Commerce and Industries Minister Suresh Prabhu after the signing of an agreement with Trade Minister Kim Hyun-Chong of Korea.
President Moon (right) shakes hands with Union Commerce and Industries Minister Suresh Prabhu after the signing of an agreement with Trade Minister Kim Hyun-Chong of Korea.

Bilateral trade between India and Korea increased by 40%:

During the first year of operation of CEPA in 2010, the bilateral trade between India and Korea increased by 40% to over US $17.57 billion. Indian exports rose by 37% in 2010 while Korean exports increased by 42.7%. In the second year of implementation, i.e., by the end of 2011, the bilateral trade reached $20.57 billion recordings a growth of 20.28%. In 2012 the bilateral trade came down to $18.84 billion. In 2014, South Korea’s imports from India dropped 14.7% to $5.28 billion on the back of rupee depreciation and an unstable economic climate. 2015 saw a further global economic slowdown, reduced prices for raw materials, and the fall in international oil prices, which reduced Korea's import from India by 19.6 % to $4.24 billion. The trend has continued in 2016 and Korea’s import from India has decreased by 1.2% to $4.19 billion. However, in 2017, the world economy has recovered and Korea’s import from India has increased by 18.1% to $4.9 billion. As of the latest trade data (November 2018), imports from India recorded $5.36 billion with 18.5% growth.
 

Prime Minister Modi (center) is seen with Minister of Trade, Industry & Energy Paik Un-Gyu of Korea (second from left) and Minister of Commerce and Industry Suresh Prabhu of India (fourth from left) at the India-Korea Business Summit 2018.
Prime Minister Modi (center) is seen with Minister of Trade, Industry & Energy Paik Un-Gyu of Korea (second from left) and Minister of Commerce and Industry Suresh Prabhu of India (fourth from left) at the India-Korea Business Summit 2018.

ROK-India Joint Committee undertakes views:

Joint Committee at the Ministerial level headed by the Ministry of Commerce and Industry, India and the Korean Ministry of Trade, has been set up to undertake an annual review of CEPA implementation. The first meeting of the Committee was held in New Delhi on 20 January 2011. Mr. Kim Jong-Hoon, Minister for Trade, and Mr. Anand Sharma, Minister of Commerce and Industry, co-chaired this meeting. It was agreed to establish a Joint Committee at the JS/DG level (Joint Secretary level for India and Director General level for Korea) also to assist the Ministerial Joint Committee in ensuring the effective operation and implementation of CEPA. It was further agreed to merge the erstwhile Joint Trade Committee established in 1987 into the Joint Committee under CEPA. The Indian side pointed out that Korea-EU FTA allows outsourcing of IT services in the financial sector and sought similar dispensation for India. It was also noted that the concessions made by ROK to the EU in their FTA far exceeded those made to India. The 2nd meeting of the Joint Committee at the Director-General level was held on 29 September 2011 in Seoul. The two sides set up an ad hoc Working Group which met in New Delhi in May 2012.

 

Ambassador Sripriya Ranganathan of India in Seoul speaks at a meeting on the occasion of the National Day of India in Seoul on Aug. 15, 2020.
Ambassador Sripriya Ranganathan of India in Seoul speaks at a meeting on the occasion of the National Day of India in Seoul on Aug. 15, 2020.

Both sides exchanged lists of tariff lines believed to have the potential for increased export. Another meeting at Director-level was held in Seoul, Korea on 11 July 2013. During the visit of President Park Geun-hye to India in January 2014, it was agreed to establish the "India-ROK Joint Trade and Investment Promotion Committee" at the cabinet-level to replace the current Ministerial Joint Committee. As agreed during the visit of Prime Minister Narendra Modi to ROK in May 2015, the Joint Committee meeting to review the India-Korea CEPA was held in New Delhi on 18 June 2016. It was co-chaired by India’s Minister of State for Commerce & Industry Ms. NirmalaSitharaman and Mr.JooHyung-hwan, Minister of Trade, Industry & Energy from ROK. Korea Plus, a special investment facilitation cell to provide handholding services to Korean companies was launched by the two Ministers.

 

Ambassador Ranganathan of India (third from left, foreground) and Defense attaches salute to the Flag of India on the National Day of India.
Ambassador Ranganathan of India (third from left, foreground) and Defense attaches salute to the Flag of India on the National Day of India.

Korean Investments in India:

Korean FDI to India (up to Dec 2019, latest data as of Sept 2019) stood at $6.29 billion, as per the Export-Import Bank of Korea, of which $198 million was received in 2010, $452 million in 2011, $311 million in 2012, $342 million in 2013, $325 million in 2014, $314 million in 2015, $330 million in 2016 and $514 million in 2017, 1,053 million in 2018 and 340 million in Jan-Sep 2019.

 

Ambassador Ranganathan of India (third from left) cuts celebration cakes of the 71st Republic Day of India. Gwangju City Council Lee Yong-sup is seen at fourth from left and Vice-Chairman Jang Jae-Sung of the Gwangju City Council Fifth from left.
Ambassador Ranganathan of India (third from left) cuts celebration cakes of the 71st Republic Day of India. Gwangju City Council Lee Yong-sup is seen at fourth from left and Vice-Chairman Jang Jae-Sung of the Gwangju City Council Fifth from left.

Prominent Korean companies in India:

Among Korean companies that have invested in India, Hyundai Motor Group, Samsung Electronics, and LG Group have been the leaders. Hyundai Motors has set up an automotive plant in Tamil Nadu with a capacity to produce more than 650,000 cars annually. Hyundai Motors India Ltd, an Indian subsidiary of Hyundai Motors, would receive the next tranche of investment to the tune of $ 1.05 billion for expansion of the Sriperumbudur unit in order to manufacture electric vehicles. Kia Motors, a sister company in the Hyundai Group, announced an investment of $1.6 billion in two phases to set up two manufacturing units in Ananthapur, Andhra Pradesh. The units will have the capacity to produce 300,000 cars and production is expected to start in 2019. Samsung Electronics has two factories – one each in Noida and Sriperumbudur (TN) and five R&D Centres. Samsung announced $780 million investment to expand its Noida facility for manufacturing smartphones and consumer electronics.

 

Shown here are the representatives from Korea’s medical circles with their counterparts of India. India opens doors to Korean medical equipment companies for global business development.
Shown here are the representatives from Korea’s medical circles with their counterparts of India. India opens doors to Korean medical equipment companies for global business development.

This Noida facility is the world’s largest mobile manufacturing unit, doubling its current capacity of 68 million to 120 million mobile phone units by 2020. LG Electronics operates two factories in India, one each in Noida and Pune, with an R&D Centre in Bangalore. LG Group, in a partnership with the Vedanta Group, is set to build India’s first LCD manufacturing unit in Maharashtra. POSCO has completed the construction of its first steel mill in Maharashtra and set up another JV with Uttam Galva Group. The former entailed a total investment of $ 240 million for a galvanized plate facility, whose production would cater to the high-end galvanized needs of automakers in and around Pune besides those of home appliances companies. A leading Korean textile firm, Youngone Corporation-largest investor in Bangladesh, has signed an MoU with Telangana Government to establish a $ 300 million factory in Warangal with a capacity of 10,000 jobs. Hyosung Corporation, a global spandex leader, has announced to invest worth $450 million in a greenfield spandex manufacturing facility in Aurangabad Industrial City, Maharashtra with an initial capacity to generate 1000 jobs. Lotte confectionary has spread further by acquiring Havmor, a Gujrat-based unit, besides its earliest investment in Chennai and recently in Rohtak.

 

Hand of Korea (right) and that of India (left) are in firm grips. Cooperation between Korea and India continue to grow rapidly in the economic and various other spheres, especially after the arrival of Ambassador Ranganathan of India in Seoul (Source: shutterstock.com)
Hand of Korea (right) and that of India (left) are in firm grips. Cooperation between Korea and India continue to grow rapidly in the economic and various other spheres, especially after the arrival of Ambassador Ranganathan of India in Seoul (Source: shutterstock.com)

Korean Model of Investment:

According to the Korea Trade-Investment Promotion Agency (KOTRA), about 88% of all Korean subsidiaries established in India are wholly-owned while approximately 11.3% are joint ventures. The joint ventures are mostly between Korean companies themselves, and joint ventures with Indian companies are rare. This is mainly due to the indifferent experience in the mid-1990s of Korean SMEs when they tried to enter India through JVs with Indian companies. Korean enterprises, including Hyundai Motors, LG, and Samsung decided to have wholly-owned subsidiaries with large scale investments, which allowed them to operate on economies of scale, establish their brand image at an early stage, and gain negotiating power with local government. The Korean model of investment of working through wholly-owned subsidiaries is in contrast with the Japanese model, which followed the typical process of technical tie-ups, participation as a minority stakeholder, and subsequent expansion of stakes.

 

A representative from the Indian Chamber of Commerce in Korea (behind rostrum) speaks during a forum for the promotion of economic ties between Korea and India hosted by the Korea Trade-Investment Promotion Agency (KOTRA) in New Delhi in September 2017.
A representative from the Indian Chamber of Commerce in Korea (behind rostrum) speaks during a forum for the promotion of economic ties between Korea and India hosted by the Korea Trade-Investment Promotion Agency (KOTRA) in New Delhi in September 2017.

Korean investment in India is concentrated in manufacturing sectors:

According to statistics of KOTRA and Korean Exim Bank, Korean investment in India is concentrated mainly in the manufacturing sectors accounting for 83.8% with wholesale and retail trade at 5.9%, financial and insurance activities at 1.9% and electricity, gas, steam, and water supply at 1.5%. Major centers of investment are NCR (Delhi, Noida, Gurgaon), Chennai, Mumbai /Pune. The USA continues to be Korea’s main investment destination with a total of $102.9 billion (accumulated until September 2018); and China its main destination in Asia with an overall investment of about $62.7 billion (Source: Exim Bank Korea). Korea’s accumulated worldwide investment as of September 2018 is $437.8 billion. Korea’s other major investment destinations are Hong Kong -$25.2 billion and Vietnam - $19.8 billion. The average investment in India during the last four-year period (2014-2017) was $370.8 million per year.

 

Korean business leaders and their counterparts of India raise their fists in a gesture of emphasizing friendship and cooperation with each other at their “Power Silk Road Program in India 2018” meeting.
Korean business leaders and their counterparts of India raise their fists in a gesture of emphasizing friendship and cooperation with each other at their “Power Silk Road Program in India 2018” meeting.

Indian Investments in Korea:

Major Indian investments in ROK are as follows:
Novelis Inc., a subsidiary of Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, acquired Alcan TaihanAluminium Ltd. in January 2005. Novelis Inc. holds 68% share amounting to about US$ 600 million in Novelis Korea Ltd, which is Asia’s number one manufacturer of aluminum rolled products with state of art production facilities in Yeongju and Ulsan and employs more than 1,200 employees. Novelis’ total investment in Korea is over $700 million.
Tata Motors Limited acquired Daewoo Commercial Vehicle based in Gunsan, Korea for a total price of KRW 120 billion (approximately $102 million) in March 2004. Its cumulative investment now is over $400 million.

 

India-Korea Technology Exchange Centre is inaugurated at a meeting between the competent authorities of Korea and India, including Minister of SMEs & Startups Hong Jong-Haak of Korea (fifth from left) and Minister Shri Giriraj Singh of SMEs & Startups of India (center).
India-Korea Technology Exchange Centre is inaugurated at a meeting between the competent authorities of Korea and India, including Minister of SMEs & Startups Hong Jong-Haak of Korea (fifth from left) and Minister Shri Giriraj Singh of SMEs & Startups of India (center).

Mahindra and Mahindra (M&M) in August 2010 acquired a majority stake in ailing Ssangyong Motors with an estimated investment of about $ 360 million. Its cumulative investment now has crossed $ 1.5 billion and it has made the acquired company profitable in 2016-17.
Nakhoda Ltd, one of the large Indian producers of yarn acquired Kyunghan Industry Company which has a capacity for 150 tons per day of partially oriented yarn (POY), 90 tons per day of fully drawn yarn, and 60 tons of polyester fiber, with an investment of $40 million.
M/s Creative Plastic invested US$ 2 million in ROK and set up a 100% Alchemy Mold & Plastic Ltd. in Pyeongtaek.
In addition, Indian IT majors including Tata Consultancy Services (TCS), L&T Infotech, and Mahindra Tech set up operations in ROK and have been serving both Korean and other foreign clientele in this country.

 

Photo shows members of the Korea Trade Delegation to India on May 31, 2018.
Photo shows members of the Korea Trade Delegation to India on May 31, 2018.

Market Access for Indian Agricultural Products in Korea:

Technical data for Pest Risk Analysis (PRA) in respect of agricultural products including walnut, mangoes, grapes, and vegetables such as Okra and Brinjal (aubergine), was submitted to the Korean authorities from time to time since September 2004. These are at different stages of processing. PRA process was completed only in respect of mangoes and Indian mangoes were launched in ROK in 2017. ROK also applied for PRA clearances for fresh mushrooms, pear, apple, grape, and paprika and these are under consideration of the Indian authorities. Korean Organic standards team, the Ministry of Agriculture, Farmers, and Rural Affairs has visited India in 2018 for an onsite visit and provided a report on equivalency standards determination as a step towards Mutual Recognition Agreement in organic products.

 

Picture shows a firm hand-shaking between Korea and India with ships of the two countries carrying export goods to each other. Cooperation continues to grow between Korea and India in all fields, especially in the sphere of economic and trade.
Picture shows a firm hand-shaking between Korea and India with ships of the two countries carrying export goods to each other. Cooperation continues to grow between Korea and India in all fields, especially in the sphere of economic and trade.
A merger of the national flags of Korea (right) and India. The picture signifies the continuously growing ties of relations and cooperation between Korea and India.
A merger of the national flags of Korea (right) and India. The picture signifies the continuously growing ties of relations and cooperation between Korea and India.

 

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