India and Korea can scratch each other’s back to become more advanced countries.
BusinessKorea held an interview with Skand Ranjan Tayal, Ambassador of India to the Republic of Korea to let its readers understand the level of cooperation between India and Korea
Q: India is a major emerging market in the world. Could you tell us about the current Indian economy and its outlook?
A: India is a $1.3 trillion economy, and has been growing at about 8-9% for the last four years. Despite the global economic downturn, the growth rate this year (April, 2008 - March, 2009) was 6.1%, when most other economies were in contraction. The ruling United Progressive Alliance won a renewed mandate in May this year to govern the country for the next five years. The government is headed by Prime Minister Dr. Manmohan Singh, who is a globally renowned economist. The Indian stock exchange is bullish and has witnessed a 50% surge so far in the present calendar year. India attracted over US$5 billion in foreign capital in the first 100 days of the new Government. It has attracted US$27 billion from foreign investors during the last financial year, despite the global financial crisis. The government is committed to restoring high growth rates in the vicinity of 9 ~ 10 % so as to eliminate poverty in a decade. Independent consultants like Goldman Sachs expect India to record sustained high growth into the foreseeable future, causing it to emerge as one of the top three economies in the world. India is already the fourth largest economy in terms of purchasing power parity.
Q: Could you update us on the status of trade and investment between Korea and India?
A: Bilateral relations between India and the Republic of Korea (ROK) have been vibrant - with trade and investment relations forming the core of our relationship. Twoway trade, which was barely at the US$3 billion level five years ago, last year recorded US$15.56 billion, which is truly robust growth. Korean investment in India has crossed the US$1billion mark. The ROK is the seventh largest investor in India in terms of investment approvals. POSCO has proposed to construct a Greenfield integrated steel plant with a steel production capacity of 12 million tons per annum at a total investment of US$12 billion. The POSCO Chairman is visiting India shortly to announce commencement of the construction of the plant. When the POSCO project materializes, the ROK may even emerge as the leading investor in India. Simultaneously, Indian investment in the ROK has also been expanding. Apart from the better known TATA Daewoo’s investment in commercial vehicles, another major Indian conglomerate, the Aditya Birla Group, invested about US$400 million in NOVELIS Korea which manufactures aluminum sheets. With the signing of the CEPA, this trend is expected to gain further momentum.
Q: Korea and India recently signed the Comprehensive Economic Partnership Agreement (CEPA). Could you explain to us about the meaning and effects of the agreement?
A: As the name indicates, the Comprehensive Economic Partnership Agreement is FTA plus, covering the entire gamut of economic cooperation, spanning Trade in Goods, Trade in Services, Investment, Dispute Settlement mechanisms and all other aspects. This was signed on August 7, 2009. India has completed all the related procedures on its part. The ROK side hopes to obtain the approval of the National Assembly during the current session so that the CEPA can come into force early next year. India is the first BRIC country with which the ROK has signed an FTA, and similarly is the first OECD country India has entered into a special comprehensive economic relationship with. We expect both economies to enjoy the early mover advantage in the process, via-avia other competitive economies. When implemented, most ROK manufactured goods will gain duty-free access to the huge and rapidly growing Indian market. The ROK investments would enjoy national treatment in India in terms of facilitation and protection. For India, the advantages would be in the services sector, particularly IT services, enabling Indian professionals easier access into the Korean workplace. With enhanced economic engagement, bilateral trade and investment is conservatively estimated to double during the next five years. CEPA is expected to open a new chapter in India- ROK relations. In the same constructive spirit, both India and the ROK are also working towards enhancing science & technology cooperation, defense & security ties and also civil nuclear business.
Q: Korean companies are remarkably engaged in business activities in India these days. Could you please give me an introductory account of the leading Korean companies in terms of investment and business activities?
A: I earlier mentioned the POSCO project. Besides the large steel plant in the eastern state of Orissa, POSCO is also setting up a plant in the western state of Maharashtra with an investment of US$240 million to produce galvanized zinc sheets used in the automobile and construction industries. Hyundai Motors expanded its production facilities in India last year. It can now manufacture 600,000 small cars (Santro i-10 and i-20 models) per annum in India. LG and Samsung are popular household names. Both have rather ambitious expansion plans for India, based on their impressive growth records in the past. LG Electronics India announced on September 11 that it would invest a billion dollars in marketing and R&D in India over the next five years. Samsung has huge R&D centers in Bangalore and Delhi which employ several thousand Indian researchers. Doosan has supplied 800 MW turbines to India. STX, Hyundai Heavy Industries and Daewoo Shipping and Marine Engineering have sold more than 20 ships to Indian companies. Hyundai Rotem has won a major contract to supply rolling stock to METRO in Delhi and Bangalore. There are several other examples. Korean companies have been awarded almost US$3 billion worth of construction project contracts in India in the last 3-4 years. Now it is the turn of the Korean SMEs to look to India in a big way, following the CEPA which facilitates, promotes and protects Korean investment.
Q: What is your assessment of Korean companies’ contribution to the Indian economy? Do you have any advice for them?
A: Korean companies have earned brand loyalty with Indian consumers and have emerged as market leaders within a short span of time. Thanks to the tremendous goodwill that LG, Samsung and Hyundai etc. enjoy, it should become easy for other Korean companies to do business in India, where Korean products are associated with being good value for money. Hyundai Motor plans to export almost half of its production in India, 300,000 small cars per annum. This is the business model I would recommend to Korean companies. To establish a production base in India using its cheap labor and skilled workforce and sell the product in the large Indian market as well as export to other countries in Asia, Africa and Europe.
Q: How are the business activities of Indian companies in Korea? Are they satisfied with their business in Korea?
A: Indian companies have started looking to Korea only recently. However by now, there is considerable Indian investment in Korea. TATA Motors acquired Daewoo’s commercial vehicles division, turned it around and has now emerged as a major exporter, with a more than 30% share of the Korean market. Another major Indian conglomerate, the Aditya Birla Group, has acquired an American aluminum company, Novelis, which has major facilities in Korea. The Birla investment is over US$400 million. Indian IT companies have also been trying to service the Korean market. While major Indian IT companies like the TATA Consultancy Services, Infosys and Wipro, enjoy about 50% of the American government’s procurement, they still have a long way to go in Korea. Their assessment is that the Korean IT sector is still not fully open to competition, perhaps because of cultural reasons.
Q: In addition to economic cooperation between India and Korea, how are political, social and cultural cooperation and exchanges?
A: Bilateral relations between India and Korea are excellent. We signed a cultural exchange program on September 2, this year which provides an overall framework for expanding and promoting cultural and social cooperation in a wide range of areas. Of late, we organized a mini-Indian cultural festival in Seoul, presenting various Indian dance forms, both classical and folk. We look forward to welcoming President Lee Myungbak to India shortly and seek to further enhance greater mutual understanding and closer people-to-people contacts.