“CEPA has not been utilised well” March 2018 issue

“CEPA has not been utilised well”

Since its inception in 2010, on the heels of the implementation of the India-Korea CEPA, the Indian Chamber of Commerce in Korea (ICCK) has been working to increase trade between the nations. The Dollar Business caught up with Vasudev Tumbe, Chairman, ICCK, to understand the business linkage between the two countries and what needs to be done to strengthen it.

Interview by ANISHAA KUMAR | February 2018 Issue | The Dollar Business

TDB: How do you envisage the future of Indo-Korean trade relationship?

Vasudev Tumbe (VT): While Indo-South Korean relations have always been cordial, there is not much confidence amongst South Koreans when it comes to doing business with or in India, unlike the Japanese who have invested in various parts of India. For South Koreans, China has always been a big market and that has been their focus market. China has the benefit of proximity and size, making it more beneficial for Korean trade and investments. South Korea is an export-powerhouse and hence there is scope for Korean exports to India but the reverse does not hold true. Indian goods and services exporters to Korea are thus finding the road difficult. One of our major strengths is our IT services expertise. But, when it comes to South Korea, Indian companies like TCS and Tech Mahindra have been struggling with small operations and are finding it difficult to make any headway. South Koreans know that India is good in IT, but when it comes to doing business they will give business to only a Korean company. It is a case of mindset and it takes a long time to make a breakthrough.

TDB: India and South Korea signed CEPA in 2010. How has the treaty impacted trade between the two countries and what changes are needed?

VT: While CEPA has undoubtedly been beneficial and the volume of trade increased in CY2011, bilateral trade over the last few years has been slowing down. The utilisation rate of CEPA has been low and hence both sides saw a need to review and upgrade CEPA. Three rounds of upgradation negotiations have been held so far. Both sides need to see the importance of long-term strategic relationship and build more partnerships in the many sectors where we can work together. When it comes to India’s IT exports, many people talk about Indian IT software and Korean hardware being a perfect match, but honestly, this has not gone beyond theory. South Korean companies are still reluctant to work with Indian IT companies. We need to take a long-term view of things and work hard to make real partnerships happen.

TDB: What role does the Chamber play in facilitating business relations between India and South Korea?

VT: The Indian Chamber of Commerce in Korea (ICCK) was formed in 2010 after the signing of the CEPA. The Chamber is growing steadily and now has over 50 members. ICCK’s main activities involve arranging B2B meetings when central and state government delegations visit Korea for investments. ICCK also arranges visits to India for Korean businesses to enable them to build contacts for better opportunities. We also arrange speakers’ forums and networking meets.

While the Chamber has been active for the last seven years, I believe that it is still a young organisation. In the first three to four years, there was hardly any recognition of our efforts. But, over the last few years, we have arranged events where we have seen enthusiastic participation from Korean companies. We act as a brand ambassador of India and promote it as the best business destination for the Koreans. The membership size of the Chamber is small when compared to the chambers of other countries in Korea. But participation from both Indian and Korean companies is on the rise.

Every year, two to three delegations from India come to South Korea to explore opportunities. In 2017, we saw the Chief Minister of Maharashtra Devendra Fadnavis and the Chief Minister of Sikkim Pawan Kumar Chamling leading delegations to South Korea. A few months ago, we also hosted the Chief Minister of Chhattisgarh. In 2016, we had delegations from Telangana, Gujarat, Punjab, etc. Different state governments come with delegations and we set up meetings with Korean companies for them. But the main problem is that after the meeting, the states do not follow up with the Korean businesses.

We also bring Korean business delegations to India. We have been doing that for the last two years. It is good that we have gotten this far, but the next thing we have to do is follow ups. This will show the Koreans that we are serious about doing business. Then we will just have to wait and see if trade grows. I will be happy if, at the end of the day, trade increases and Korean investments reach India.

TDB: What are the advantages of investing in South Korea?

VT: Indian businesses can find a very mature and organised market in Korea, especially for premium high-quality products. With the right mix of quality and branding, Indian businesses can find a good price for their products. Over the long term, quality and standard of our goods should also improve. IT, agro- products, food processing are some prospective areas for Indian businesses in Korea. There is also a lot of scope in high-tech manufacturing.

Indian companies can also learn from Korean partners about the latest in tech-manufacturing.

TDB: And why should Korean companies look at Indian market?

VT: Indian market is a huge opportunity for Korea because infrastructure is something India needs, and Korea is extremely good at that. Though South Korea is known for its automobiles (Hyundai) and electronics (Samsung and LG), it also has strengths in defence, shipbuilding, maritime infrastructure and transport infrastructure like roads, ports, etc.

Further, South Korean exports to China have slowed down due to geo-political factors and it is a good opportunity for South Korea to start exporting to and investing in India. Korea’s economy is driven by exports, and India can become a major export destination for Korea.

Recently, Larsen and Toubro signed a big two-way deal for investments in both Korea and India. In October 2017, the Maharashtra Chief Minister Mr. Devendra Fadnavis had come to Korea and signed an MoU with the Korean government for developing the Nagpur-Mumbai expressway. This is a very important development in bilateral trade.

While Korea is known the world over for shipbuilding, currently, the Korean shipping and shipbuilding industry is in a slump. This is making Korean businessmen look for new opportunities in India as we try to improve our port infrastructure in a big way. Some delegations have shown interest in sectors like defence manufacturing and negotiations are underway. All these sectors will play an important role in bringing in Korean investment to India in the coming days.

"Korean regional governments are actively seeking foreign investments"


TDB: What do Koreans need to know about doing business in India?

VT: Korean businesses need to understand our regulations better, including India’s federal structure and the relationship between the Centre and states. We have explained the Korean businesses that India is more like a continent than a country. Talking to New Delhi alone does not provide an understanding of India. There are 29 states and they need to understand the rules and regulations of each state they would like to do business with. Though the Indian government has done a lot to ease these concerns, there remains a scope for improvement.

TDB: Indian government has launched initiatives like ‘Make in India’. Are there similar programmes in Korea?

VT: Korean regional governments are aggressively trying to attract investments. There are several SEZs in Korea that offer attractive incentives. Invest Korea, an organisation under the government, assists in facilitating investment into Korea.
‘Make in India’ is definitely a great initiative to invite foreign players to come to India, invest, use their know-how and grow. This fits very well with Korean businesses. Now, we need to better educate the Koreans and give them the confidence to partake in the initiative.

TDB: While South Korea ranks number 5 in the World Bank Ease of Doing Business Index, India ranks 130. What issues need to be addressed to attract Korean businesses to India?

VT: Some more time is needed to gain the confidence of foreign investors – we need to ensure that investors from Korea have a good experience while doing business in India and share their success stories. It’s important to note that the fate of POSCO’s project in the state of Odisha is still fresh in their memories.