Korean brands such as Hyundai, LG and Samsung are household names in India. Indeed, there seems to be a strong India-South Korea connect, aided by phenomenal popularity of Korean pop among several Indians. The Dollar Business caught up with the South Korean Ambassador to India, H.E. Hyun Cho, to understand the current state of affairs of Indo-Korean trade ties and to discuss ways to bolster them further.

Ahmad Shariq Khan | November 2016 Issue | The Dollar Business

TDB: How do you see the long-held friendly Indo-Korean relationship? Why, despite the strong economic foundation, has the bilateral trade not realised its full potential?

Hyun Cho (HC): In the recent times, I believe that both the countries have witnessed substantial progress in their relations with fruitful cooperation in trade and investment, culture, politics, technology, and many other areas.
Korean companies are one of the very few foreign companies that have entered the Indian market right after the economic liberalisation in the early 90s. Twenty years later, they have become household names in India, leading various segments of the industry. Not only do these companies contribute to India’s manufacturing growth, but also to the country’s export performance. For instance, last year, Hyundai, India’s largest car exporter, exported 1.61 lakh cars to 92 different countries. They also utilise India’s software expertise; parts of Samsung’s recently launched Galaxy S7 were developed in its R&D centres in Noida and Bengaluru. Hyundai’s Hyderabad R&D centre also supports its headquarter in Korea and develops cars for the Indian market.

Despite all these positive developments, going forward, there is an ample room for improvement. On the same note, I would like to add that a couple of months back, a meeting was held between the two commerce ministers to upgrade the bilateral free trade deal – it’s because we believe there has been an urgent need for a revision since both the countries have not been able to fully utilise the existing agreement. In the meeting, “Korea Plus,” a special initiative to promote and facilitate Korean investment in India, was finally launched as well.

Recently, India and Korea have agreed to increase the number of flights and destinations. The duo is also looking to enhance people-to-people exchange by increasing bilateral official visits, inviting Indians to various training programmes in South Korea, increasing student exchange programmes and promoting tourism. So, I believe these small steps will help both countries to reach the full potential of the relationship.

TDB: In the last 40 years, Republic of Korea has made remarkable achievements and transformed its economy into an export-driven powerhouse. While 74% of Korea’s total imports from India are mineral fuels, cereals, iron and steel, cotton, etc. Korea’s main exports to India are automobile parts, telecommunication equipment, mechanical appliances, electrical machinery & parts and iron & steel products. Tell us about your endeavours in promoting these sectors. And what are the key challenges faced by Korea?

HC: A large fraction of Korea’s exports to India is intermediate goods that are needed for Korean companies in India to manufacture products. However, with exports falling consecutively for almost two years and surging imports of certain products, the Indian government has recently imposed various trade remedies. Unfortunately, some of the Korean companies are suffering from such measures and procurement has become difficult. I fully understand and sympathise with the Indian government’s concern, but I believe, effects of trade remedies should be more carefully viewed and examined from various angles.

Policy unpredictability is another challenge that undermines investors’ confidence. Some Korean businessmen tell me that while at the ministerial level things look straightforward and hassle free, but when it comes to execution (of various MoUs and contracts) processes are subjected to various (procedure related) issues and delays. I think these are factors that are acting as real bottlenecks to both the inflow and outflow of Korean investment into the country. The cost of doing business rises when there is an abrupt policy change, and since, such changes are unpredictable, it is difficult for businesses to plan ahead. The industry will appreciate if policy making becomes more predictable and transparent.

A case in point could be POSCO that has been in the doldrums for quite a long time now. But I am now hopeful that the Narendra Modi-led government is going to find a way out. I would like to emphasise that POSCO has made several good investments in many other sectors and regions. So, lessons should be drawn from its failures and successes, and we should learn from our mistakes and vow not to repeat them again. I also want to add that POSCO alone is not representing Republic of Korea, there are many more Korean companies that have been successful in India, such as Samsung, Hyundai Motor, LG, etc.

A view of the Port of Busan. Located at the
southeastern tip of the Korean peninsula, it’s
the largest port in South Korea.

TDB: In recent years, the Republic of Korea has developed a considerable expertise in shipbuilding and manufacturing of heavy electrical machinery, and looks keen to invest in these sectors in India. Also, we understand that the two countries are looking forward to explore commercial opportunities in the areas of space, defence and nuclear energy. What collaborative benefits do you foresee for both the countries?

HC: As you have mentioned, shipbuilding, nuclear energy, space, defence, manufacturing and infrastructure are sectors where I see big opportunities for cooperation and collaboration. A number of discussions are already happening between Korean and Indian governments, and between Korean and Indian companies. And, going forward, I believe the collaboration should be geared towards sustainable development of Indian economy and wellbeing of the ordinary Indian citizen as well.

The presence of Indian companies in Korea is getting bigger. For instance, Mahindra acquired SsangYong Motor in 2011. And its Tivoli, a small SUV that was launched in January 2015, has been a huge hit in Korea. Even Samsung’s Global Vice President of Research is an India-born scientist, Pranav Mistry.

Samsung has two R&D centres in Suwon (popularly known as the city of Samsung) where it has hired some 1,000 Indian techies. Even at its two R&D centres in India, the company employs more than 7,000 Indian techies. In addition, Hyundai has an R&D centre in Hyderabad. And, in coming times, we would love to plan and help both Indian and Korean companies to execute many such win-win propositions.

TDB: In the last 15 years, FDI from South Korea in India has reached only $1.67 billion, which is much lower than that from other countries, including UK, US, etc. In fact, despite a good number of Korean companies already present in the country, PM Modi has recently pointed out that there is still a lot of scope for improvement. Do you agree with this notion? How do you see Indian government’s pro-FDI stance?

HC: I believe, each country presents its unique challenges when it comes to ease of doing business on its territory, and, India, is no different. After PM Modi’s visit to Korea last year, Korean companies’ interests in India have surged dramatically. There is no doubt that there is still room for improvement. I believe we would soon see some substantial progress of Korea’s investments in India.

Foreign investment is an irreplaceable tool for economic development. Republic of Korea is one of the great examples of developing its economy with favourable policies for foreign investments, which were viewed as the means to improve the skills and capabilities of the workforce and advance technology. I believe, the current Indian government is fully aware of the importance of foreign capital and technology in carrying out its various initiatives and have reached out to foreign investors accordingly. A number of reforms are already in place to reduce bottlenecks and attract foreign investments, and we are already seeing a marked improvement. I am 100% hopeful that, in coming times, Modi government’s pro-FDI policy and reform will lead to robust and sustainable growth.

TDB: India and Korea are economies characterised by a large amount of MSMEs. How do you see MSMEs associations between the two countries gaining further momentum in the future?

HC: MSMEs play a substantial role in both the economies. In India, MSMEs generate almost 40% of GDP and employ 80 million people, and in Korea, MSMEs generate over 40% of GDP and employ over 75% of labour force. There is no doubt that bilateral MSMEs cooperation will enhance MSME competitiveness and seize job-supporting trade and investment opportunities. However, in recent times, Korea’s investments in India have been mostly led by large corporations, and even the SMEs present in India are usually tied to large companies.

I hope that in future, both the governments will work together to promote cooperation between MSMEs. In this regards, I believe, KOTRA (Korea Trade-Investment Promotion Agency) and KITA (Korea International Trade Association) can play an important role. Both have of?ces in India to support Korean SMEs to extend their business in India. Indian companies interested in ?nding Korean partners or entering Korean market can also reach them for support.

TDB: How lucrative is Korea as an investment destination for Indian businesses and investors?

HC: Located in the heart of North East Asia, Republic of Korea is world’s 11th and Asia’s 4th largest economy, and the 5th easiest place to do business in the world. Our government has numerous favourable policies for foreign investments. And with a strong and diverse purchasing power of more than 50 million consumers, I believe, Republic of Korea is an ideal global market of the future.

Indian companies can also take advantage of Korea’s global PTA (preferential trade agreement) network that accounts for 73% of the global GDP – Korea is the only Asian economy to have FTAs with the three largest markets of the world – EU, US and China. Today, Korea is a global market leader in IT products, automobiles, chemicals, steel and shipbuilding, and also a global innovation leader in a broad range of ?elds, including ICT platforms and process innovation. My message to interested investors would be to contact ‘Invest Korea,’ Korea’s national investment promotion agency, to ?nd out incentives and policies for foreign investment.

Indian multinational Mahindra has been very successful in Korea. We all know when SsangYong Motor Company was in trouble, it was Mahindra that rescued it. Likewise, presently Korean shipbuilding sector is facing the issue of over-investments and many of its players are now on sale. Many Indian companies are going to Korea to partner with them, and, in this way, getting access to latest technical-know-how in which Korean manufacturers have expertise. I believe such deals can offer win-win propositions to both sides.

TDB: How do you view government initiatives like ‘Make in India’, ‘Startup India’, ‘Skill India’ and ‘Digital India’? How can Korean companies benefit from these initiatives?

HC: I believe Indian government is undoubtedly heading in the right direction with these flagship initiatives. I am glad to say that Korea wholeheartedly supports these and is ready to become a partner in all such campaigns. I think these are essential policies needed for a quantum jump in growth for Indian industries. I also believe that without changing the agrarian-oriented economy into a manufacturing-oriented one, it’s difficult to have robust economic growth. Korean companies are already contributing greatly to ‘Make in India’ by locally manufacturing various products and exporting them abroad. They are also providing various educational opportunities through their training programmes or CSR activities. For instance, Samsung recently signed an MoU with the Ministry of MSME to offer young students a skill development course.

As one of the most technologically advanced and digitally connected countries in the world, Korea is currently exploring the possibilities in ‘Digital India’. We can also look for cooperation in ‘Smart Cities’, ‘Clean India’ and ‘Startup India’. As we speak, we have many companies joining the bandwagon and playing their parts here. I can tell you with pride, we have expertise in cleaning our cities, rivers and air, and we are very good at water treatment and renewable energy, not just in solar panels but also in the storage of solar energy.
Several mega-projects are currently in the pipeline.

TDB: Is South Korea pitching for the upgradation of CEPA with India? How is it going to impact the two nations? Please also tell us about the threats and opportunities arising out of any proposed trade agreements in the region, e.g. TPP, RCEP, etc.

HC: Korea already has CEPA with India, which is under discussion for an upgrade, and, Korea and India are also negotiating members of RCEP. I believe trade agreements improve trade facilitation in the region, generate jobs, and enhance business and trade.
Over the last decade, Korea has been actively seeking FTAs. So far, it has signed 16 FTA with US, China, EU, etc., and there are five trade agreements currently under negotiations. Korea is also committed to continuously pursue trade liberalisation within both multilateral and regional trade architecture. However, I accept, each agreement has a different scope of agenda, which I acknowledge would yield different effects that vary from country to country.

TDB: Korean pop cultural is popular in the north-eastern states of India, and can serve as a bridge between India and Korea. In this context, the northeast states can be at the centre of India’s ‘Act East’ policy and South Korea’s ‘New Asia Initiative’. Your thoughts?

HC: Cultural links are very important in strengthening the relationships between countries. We are fully aware of the growing popularity of Korean culture, not just in the north-eastern part of India, but beyond. Korean people love Bollywood, and India is considered the birthplace of Lord Buddha – the reason why many Koreans visit India as a pilgrim. Besides K-pop and Korean dramas, Korean movies are spreading out and I am very pleased to share with you that in November Korea has been invited as the focus country at the Goa Film Festival. This is a great achievement for Korean media and culture and we plan to work proactively to support such ideas.