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Business Evaluation of the Economic Trade Advantages Between India and Korea The Prime Minister, Dr. Manmohan Singh with the South Korean President, Mr. Lee Myung-bak, at a bilateral meeting, in Seoul on March 25, 2012. by Chung-Yeon Cho India and the Republic of Korea have had a long and strong cultural, political, historical as well as economic co-operation. In the past decade, the relationship between the two countries has strengthened, especially on the economic front. This can be attributed mainly to the historic Comprehensive Economic Partnership Agreement (CEPA) that was introduced during January of 2010, as well as the positive ‘Look East’ policy adopted by India. However, considering the size as well as the structure of the economies of the two countries, experts opine that the size of trade and the spread of investment is rather less than it could be. © pib.nic.in Evaluation of the Economic Trade Advantages Experts, however, also place the unprecedented growth in merchandise trade between the two countries to have occurred due to the changes in demand structures within both economies. Besides, the inherent advantages of trading in complementary economic sectors in the past few years have largely contributed to the development of a robust trading structure between the two nations. In fact, studies using advanced economic research tools such as The Revealed Comparative Advantage (RCA) analysis have revealed the pattern of trade between these two countries. The studies typically included aggregated as well as disaggregated-levels, revealing that Korea has a niche and specialized focus: manufacturing technically sophisticated, high-value products; while India has a more spread-out export portfolio. Further, within the same industry domain, both countries have complementary advantages allowing great scope for intra-industry trade opportunity. Additionally, the TCI (Trade Complementary Index), which is of great critical value, has revealed that with increasing exposure to skill-sets and patterns of each nation, they have achieved a high level of compatibility across most sectors of trade. The high TCI index therefore reveals that trade agreements between the two countries will therefore increase the flow of trade enormously. Studies have also identified that Korean exports to India are at a higher rate in comparison to Indian exports to Korea and hence India needs to focus on its exports exposure to Korea. The areas where Indian exports have great potential are Information Technology, Broadcasting, Healthcare, Science and Technology, Human Resource Development, as well as tourism. Recommendations Trade bodies across both nations recommend that greater trade as well as revenues can be enhanced if the respective governments were to become more proactive about removal of tariff and non-tariff barriers. The sector-specific barriers too are a great impediment and hence, further relaxation of tariff-barriers will further contribute to increasing investments and trade. Taking great cognizance of the trade requirements, the government has adopted (in a phased manner) reduction of several trade tariffs leading to cuts of nearly 93 percent on goods exported to Korea from India. A major section of trade barriers was comprehensively handled by the introduction of CEPA (Comprehensive Economic Partnership Agreement). CEPA and Growth in Trade The CEPA, in a sense, is the foundation of India’s and South Korea’s trade relationship. Ratified on August 7, 2009, it is a special economic privilege India shares with Korea to trade across the various sectors. In principle, the CEPA is a free trade agreement that allows enormous opportunity for Indian business, from the service sector, to penetrate the South Korean market. Therefore in the past few years, the quantum of trade possible on services provided 24 www.biztechreport.com INDIA-KOREA Glorious Past Bright Future in the information technology, finance, the legal field, and engineering has been enormous. Thanks largely to CEPA, trade between India and Korea has grown by a phenomenal 70 percent, crossing the US$20 billion benchmark in 2011. New Targets Set as Trading Opportunities Mature Trade analysts believe that the total trade revenues earned so far are much less than the expected potential. The governments have addressed this shortfall in achieving what they have thus far, and have hence set an ambitious trade target of US$40 billion by 2015, as against the $30 billion amount that was set earlier. Following Indian Prime Minister Manmohan Singh’s visit to South Korea in the last week of March 2012, greater emphasis is now being placed on key trade exports for greater expansion. During his discussions with President Lee Myung-bak of South Korea, the Prime Minister said that, “bilateral trade had risen by 65 percent over the past two years since the two countries implemented the Comprehensive Economic Partnership Agreement. We want the Korean companies to help us realize this objective and benefit from the opportunities provided by this.” The present South Korean and Indian relations – strategic, political, economic as well as cultural – have been greatly influenced by the Indian Prime Minister’s maiden visit to Korea, which has become instrumental in reworking some of the older trading process as well as the introduction of an innovative trading environment that gives modern business the opportunity to explore trading potentials on both sides of the border. On the defense front, the Prime Minister, responding to his Korean counterpart’s call, announced that, “We have agreed to expand the political and security cooperation between the two countries. With this objective in mind, I informed President Lee of India’s decision to position a Defense Attache at our Embassy here in Seoul before the end of the year.” India has also proposed further strategic support, in saying that, “India has also offered to launch Korean satellites on Indian space launch vehicles,” but emphasized that “cooperation and coordination on several regional issues should remain, especially during the East Asia Summit process.’ However, on the economic front, the Prime Minister emphatically encouraged and sought Korean business investment into India, “We want the Korean companies to help us realize this objective and benefit from the opportunities provided by this,” said the Prime Minister. To further ease travel constraints, both governments proposed to simplify visa formalities, thereby helping businessmen from both countries to travel more easily for business purposes. Given the fact that South Korean conglomerates such as LG, Samsung, and Hyun- Continued on Page 29
INDIA-KOREA Glorious Past Bright Future Continued from Page 22 tion treaty. India has blasted the treaty as discriminating between “haves and havenots” by artificially restricting nuclear weapons to a small elite group of nations. Fears of a nuclear holocaust have escalated since arch-foe Pakistan exploded its first warhead in 1998. India, however, has vowed never to explode a nuclear device in war unless attacked first – an unusual “first-strike” qualification that has appeased some of its critics. The Hindu, one of India’s leading newspapers, said “the accent on a comprehensive partnership in all fields had helped to reverse South Korea’s skepticism” over India’s policy on that score. “The intention is to forge a healthy all-round relationship with this crucial country on the periphery of the Association of South East Asian Nations (ASEAN),” said the paper. “Besides agreeing on an annual meeting between finance ministers that would resolve trade-related irritants at the political level,” the paper noted, “India has also signed a defense cooperation agreement and a social security agreement” – all proof positive of a growing relationship that might extend far beyond trade and industry as South Korea and India together look for ways to cooperate against the specter of rising Chinese power. A-P Donald Kirk, author of Korea Betrayed: Kim Dae Jung and Sunshine and books on Korean business and industry, got his introduction to Asia as a Fulbright student at the Indian School of International Studies in 1962-1963. CEPA and firms in that sector are believed to benefit substantially from the deal. According to the South Korea Institute for International Economic Policy, the CEPA was expected to increase bilateral trade by US$3.3 billion and increase South Korea’s gross domestic product by 1.3 trillion won (US$1.05 billion). Both countries are anticipating stronger economic ties through the CEPA. It seems like so far the results have met the expectations, as exports by both countries have risen. According to the joint statement issued by the two countries after the Indian Prime Minister Singh and South Korean President Lee met in Seoul, Korea in March of 2012, the two leaders were satisfied that the bilateral trade had been increased by around 70 percent in two years since the activation of the India-South Korea CEPA on January 1st, 2010. Whereas Indian trade with South Korea stood at US$7.1 billion in 2006, increased trade activity had propelled the number to US$17.5 billion in 2010, about a 46 percent increase from the previous year. Very much satisfied with these results, the two nation leaders decided to set a new bilateral trade target. The previous one was US$30 billion for 2014, yet it was decided to push the target higher up to US$40 billion by 2015. Also they agreed to enhance business cooperation and strengthen trade ties. Prime Minister Singh and President Lee also welcomed the growing presence and investment of Korean companies in India and those of Indian companies in South Korea, which had been promoted by the bilateral CEPA. The Indian Prime Minister highlighted the desirability of balanced trade relations, mentioning how it would facilitate a robust growth rate for both countries in the long term. It was agreed that both sides would facilitate greater market access to each other’s products and services. Prime Minister Singh also stressed that the Indian side was hopeful of providing South Korea with pharmaceutical and agricultural products, as well as IT-enabled services. However, there are still problems that need to be sorted out. Although bilateral trade has increased significantly, the pres- Continued on Page 31 Continued from Page 23 under the ownership of an Indian Group. Mahindra Group had acquired SYMC for US$500 million last year. Lee Yoo-il, President and CEO of Ssangyong Motor Company, recently told the press that Ssangyong is now on the path to a strong revival as witnessed by a nearly 40 percent growth in sales volumes in 2011. Since last March, the company has committed to investing around US$350 million in a new SYMC product portfolio and facilities, including US$260 million towards a next generation compact CUV and a new engine, to gain momentum in global markets, added Dr. Pawan Goenka, chairman of Ssangyong Motor Company and president of Automotive and Farm Equipment Sectors at Mahindra & Mahindra Ltd. The company is now looking forward to introducing Ssangyong products in the fast growing Indian market. India’s largest producer of yarn, Nakhoda’s acquisition of Kyunghan, is another notable Indian investment in South Korea. Also, India’s Creative Plastic invested around US$2 million and established a 100 percent investment company called Alchemy Mold & Plastic Ltd. In the Korean city of Pyeongtaek. India and South Korea inked a Comprehensive Economic Partnership Agreement (CEPA), a free trade agreement, in August of 2009 and the agreement was implemented in January, 2010. According to media reports, there has been a “huge surge in bilateral trade following the implementation of the agreement.” In 2011, trade turnover was around US$20.6 billion, which is up by around 65 percent over a two-year period. Indian IT companies are now getting a foothold in South Korea because of CEPA. A-P India-Korea Business Ties after CEPA by Amanda Min Chung Han An economic agreement between India and South Korea, the Comprehensive Economic Partnership Agreement (CEPA) went into effect in January of 2010. The agreement got its unique name at the request of the Indian side, and it basically means a free trade agreement. It was not an easy path for these nations to reach their eventual destination. The whole negotiation process took three and a half years since the first session took place in February 2006. The agreement between Asia’s third and fourth largest economies was originally signed on August 7, 2009. The signing ceremony took place in Seoul, Korea, between Indian Commerce Minister Anand Sharma and South Korean Commerce Minister Kim Jong-Hoon. Indian lawmakers ratified the agreement in 2009, after which the South Korean National Assembly ratified it. The pact took off 60 days later in Jan. 2010, after it earned approval from the lawmakers. Under the CEPA, South Korea needs to eliminate tariffs on 90 percent of Indian products over 10 years while India reduces tariffs on 85 percent of South Korean exports within the same period. Also, South Korea is privileged for a reduction of 4459 types of tariffs imposed on major export items to India such as auto parts, steel and machineries. Experts foresaw in particular that the country’s biggest trade sector auto industry would have a one to five percent tariff reduction over eight years from the current 12.5 percent level. Tariffs on refrigerators and color televisions were lowered by fifty percent from the previous 12.5 percent. Auto parts are one of South Korea’s biggest exports to the world. South Korea sold US$1.13 billion worth to India before 25 www.biztechreport.com Business © pib.nic.in The Union Minister of Commerce and Industry, Shri Anand Sharma and the South Korean Trade Minister, Mr. Kim Jong Hoon, at the Joint Press Conference during the signing ceremony of the Comprehensive Economic Partnership Agreement (CEPA) between India and Republic of Korea, in Seoul on August 07, 2009.
Page 1: India-Korea Relations: Present & Fu
Page 8 and 9: cover story INDIA-KOREA Glorious Pa
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Page 12 and 13: Q a & lution would be unacceptable.
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Page 16 and 17: DIPLOMACY INDIA-KOREA Glorious Past
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Page 20 and 21: Business Ssangyong Motors Advances
Page 22 and 23: Business Why is Indian Investment i
Page 26 and 27: Q a & Yeo-Song ParkDirector of the
Page 28 and 29: Defense & STRATEGY Taking a Closer
Page 30 and 31: Defense & STRATEGY © pib.nic.in Th
Page 32 and 33: Defense & STRATEGY Military and Str
Page 34 and 35: health Why Korea and India Should M
Page 36 and 37: health Potential of Health and Medi
Page 38 and 39: Science & Technology Professor Siva
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Page 42 and 43: ENERGY Potential of India-South Kor
Page 44 and 45: ENERGY by Anshu Shrivastava As one
Page 46 and 47: EDUCATION Human Resources Developme
Page 48: Guards of emperor palace at Seoul.

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