The Korean economy beckons

In 1929, Rabindranath Tagore wrote a short verse, which helped inspire a revolution in Korea. Tagore wrote: “In the golden age of Asia/ Korea was one of its lamp bearers/ And that lamp is waiting to be lit once again/ For the illumination of the East.”

This poem made Korean people look at their glorious past as a source of inspiration and, at the same time, it set before their eyes the vision of a resplendent future. This January, this Janus-headed logic is representative of India-Korea economic relations: One needs to look at this glorious past to create a vision of an even brighter future.

After nearly four decades of dis-engagement for various reasons, it was only in 1991 — as India liberalised — that South Korea began to engage with India.

Both countries once again saw a commonality of vision. India promulgated its “Look East” policy, putting South Korea clearly in its line of vision. For South Korea, it was the sheer size of Indian market that attracted its chaebols or business conglomerates.

Investment ties In terms of investment, South Korea is the 13th largest investor in India with an investment of $1.29 billion from April 2000 till October 2013, according to the Department Of Industrial Policy and Promotion.

Posco, one of the largest steel-makers in the world, is investing $12 billion for constructing an integrated steel plant in Orissa which can produce 12 million tonnes of steel a year. This would be the single largest overseas investment by Korea and the single largest inward investment into India. Added to this, Samsung Electronics will be investing around $250 million in a phased manner to manufacture mobile phones in Haryana.

On its part, Indian companies such as Hindalco, Mahindra & Mahindra and Tata Motors among others have invested about $1 billion in Korea. Several Indian IT companies have either started operations in Korea or are planning to.

Even bilateral trade has been on an upswing. Trade between India and South Korea has grown rapidly since 2002-03 when the total trade stood at a mere $2.2 billion. Bilateral trade in 2012-13 touched $17.3 billion representing a compound annual growth rate of 23 per cent.

Bilateral trade received a further boost with the implementation of the Comprehensive Economic Partnership Agreement between India and Korea in January 2010. However, the worrisome feature is the growing trade deficit which now stands at $8.9 billion in favour of Korea.

There is, however, much scope for strengthening the bilateral relationship especially in terms of cutting edge industries such as electronics, telecom, energy, biotech and drugs and pharmaceuticals.

A base of many India can act as an ideal manufacturing base for Korean products for exports to third country markets. Contract manufacturing of electronics and hardware goods in India can form one such sector where the two countries can cooperate for just such a purpose.

This is an area of great promise for both Indian and Korean electronics and hardware sector. A strategic alliance between India’s software capabilities and Korea’s global competitiveness in hardware can prove to be a fruitful trade proposition.

Possibilities also exist for joint development and outsourcing of projects for third countries.

Microelectronics and software development outsourcing with specific focus on applications such as telecom software, broadband networking solutions, banking and insurance, multimedia and system integration is possible.

There also exists an ideal opportunity for Korean companies to set up manufacturing facilities in India in telecom equipment and handsets. India and Korea can cooperate in 4G mobile telecommunication system for providing multimedia via high-speed network.

Other areas of cooperation include mobile wireless programme, digital home and office broadband technology, Next Generation PCs, digital content, digital broadcasting and so on.

Oil’s Well India and Korea should encourage their oil companies to work together to exploit the petroleum and natural gas resources in third world countries.

The two countries can also cooperate in developing technologies for renewable sources of energy — including nuclear power — and exchange experiences in energy management.

In genetic engineering, biotechnology and medical diagnostics, Indian expertise can combine effectively with Korea’s to create new hub of knowledge-based industries. India and Korea can jointly promote research in areas such as bio-fertilisers, bio-pesticides, bio-prospecting and molecular taxonomy, plant tissue culture, etc.

There is also potential for cooperation in areas bio-safety research and development, medical biotechnology and agricultural biotechnology.

Given India’s strengths in generic drug making and the focus of Korea in R&D related areas, the pharma industry offers a lot of opportunities for cooperation.

Further, the vast availability of medicinal herbs in India and Korea provides the impetus for technical cooperation in the development of traditional medicinal products.

Both countries can cooperate to develop regulatory requirements for clinical trials and regulatory control for pharmaceuticals, vaccines, blood products, biotechnology products and traditional complementary medicines.

Also, over the next five years, India plans to invest $1 trillion to strengthen its infrastructure. Korean companies are known for successfully executing infrastructure projects all over the globe.

Keeping this in mind, Korean companies could consider actively participating in infrastructure development in India.

It is this strategy that CII would like to suggest for the two countries to consider as Park Geun-Hye, President of the Republic of Korea begins her state visit to India.

It is with this strategy that the two countries can work together to illuminate not only the east but also the rest of the world.

( The author is Director General, CII .)

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