INDIA - KOREA RELATION

INDO-KOREA RELATION
AND STRATEGY FOR FUTURE COOPERATION

India and Korea are two Asian countries separated by vast continental mass. Despite the geographical distance between India and Korea there have been historical and cultural contacts between the people of the two contraries dating back to ancient time. Buddhism was transmitted into Korea and the relationship found a firm foothold. During medieval period, because of decline of Buddhism in India and withdrawal of royal patronage from Buddhism in the Choson dynasty of Korea there is no cultural interaction between the two countries. Once again our relationship getting stronger and stronger in modern period.
South Korea transformed from a developing country in 1950s to a high-income country of the world with a substantial per capita income. India and South Korea were set up economic tie in 1962. In 1973 there was a formal diplomatic tie between two countries and new chapter was opened in the history of Indo-Korean cooperation. Since the diplomatic ties between the two countries in 1973 there was a several trade agreements reached between these two nation like agreement on Trade Promotion and Economic and Technological Cooperation in 1974, Agreement on Cooperation in Science & Technology in 1976, Convention on Double Taxation Avoidance in 1985, and Bilateral Investment Promotion Protection agreement in 1996.
The liberalization of the Indian economy in 1990s under "The New Economic Policy" which started the trade and investment related activities. India's "Look East Policy" launched in 1992 and it helped the bilateral relations with North-East Asia and the ASEAN. The reform process happened at the right time in terms of the South Korean business's search for alternative markets for investment and to hedge their investment risk since the primary destination for their investments till then was China. Trade between the two nations has increased very fast and exemplified by the $530 million during the fiscal year of 1992-1993 and the $10 billion during 2006-2007. The India-South Korea bilateral relationship is a remarkable example of how trade is the primary driver in global relationships. Both India and Korea contribute significantly in the world GDP. Korea is among the few Asian countries that is counted among the developed countries of the world. India too has a growing stature and increasing role in international political and economic affairs. After china, India is the second fastest growing economy of Asia. Because of this now a days South Korean business groups have a firm presence in the Indian market. The primary areas of business that Korean firms in India are in transportation, electronics and metallurgical industries, chemical and industrial machinery. South Korea is the fifth largest investor in India and India is the fifteenth largest investor in Korea. Bilateral trade has witnessed a phenomenal growth since the opening up of the economic cooperation. However, this relationship is not balance and there is lot of scope to improve this relationship. Recently India and Korea signed a FTAs agreement, which may be reduce this gap.

The POSCO India project which is the new hope for India and Korea relation began with the signing of a memorandum of understanding (MOU) with the Orissa government in June 2005. The project was the single largest FDI proposal in India and Korea's biggest single investment abroad to date. Progress on the project has been marked by repeated backward-forward movements which have pushed the deadline for the plant's groundbreaking until 2008. Finally both parties are ready for mutual ties and it will bring the new hope for both countries.
The Indian export basket has traditionally been limited to a few primary commodities such as cotton, oil cakes, iron ore, iron & Steel, organic and inorganic chemicals, and electrical machinery & equipments. Other side South Korean business groups such as LG, Samsung and Hyundai have not only established their presence in the Indian business scene but are also looking at diversifying their businesses into different sectors. There is need for balance partnership and India should concentrate more on high value added sector in comparison to primary commodities.
Influence of BRICs countries and changing of global Economy is very important for both India as well as Korea. An important point I want to mention here that the economic scenario in South Korea is the impact of four rapidly emerging economies – Brazil, Russia, India and China (BRIC). For Korea to sustain a high growth rate its economy needs a large amount of foreign investment. There is a large untapped potential for investment and trade in petrochemical, shipping, construction and infrastructure, automobile parts, pharmaceuticals, electronic components and computer hardware sectors in India. Prospects for cooperation in the area of knowledge-based industries, infrastructure development, Biotechnology, energy, health, agriculture, tourism, science and technology and defense are potential area for mutual tie. India Korea bilateral economic relation is not balanced so, there is need to improve it. Historically we are close to each other and once again time has come to celebrate our strong bond. Rise of India is one of the most important factors to make the relationship closer and closer and plan for strong and powerful Asia. Recently Korea and India is sign a de facto free trade agreement (FTA) which will remove or reduce tariffs over the next 10 years, and open up the two countries services and investment markets more wider in future. Korea will become the second country after Singapore to sign a deal with India, which is in negotiations with the European Union and Japan. This is also the first trade agreement that Korea will sign with a member of the BRICs, a fast-growing group of Brazil, Russia, India and China. India agreed to open its telecommunication, accounting, medical, advertising and banking markets to Korea. Both sides will also allow freer temporary migration of professional workers, including English teachers, engineers and computer programmers. The deal will have long-term benefits for both countries. The Indian economy with the second-largest population and fourth-largest GDP in the world has great potential to improve globally.
The past few years has seen the increasing trend of South Korean MNC’s investing in India. But liberalization is not the only reason for South Korean capital moving abroad. In the era of globalization the South Korean companies have obviously matured with their technological, marketing and management capabilities and capital resources to plan production at the global level. In 2004 South Korea's investment in China, mostly in steel and cars, overtook Japan's which has an economy four times as large as South Korea's. In 2005 Korean companies like Hyundai. Samsung and LG invested in India and now these companies are household name in India. In spite of failure of POSCO and DEWOO in India there is huge area in which Korea can invest in India. Now India slowly but strongly starts investing in Korea. Hopefully in coming year India-Korea relation will be stronger politically as well economically.


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