Rajiv Kumar  

South Korea realises that their dependence on China is a threat to their economy. And, therefore, Seoul has designed a policy to diversify its economic relations and they find a rising India can replace China market

South Korean President Moon Jae-in visited India from July 8 to July 11. This was his first visit to India after assuming office in Seoul almost a year back. South Korean media, business and academic community held high expectations from Moon’s visit to India, thinking that his visit will mark a new beginning to India-South Korea ties. As Moon himself said in New Delhi, “I attach immense importance to cooperation with India. There are limitless possibilities for economic cooperation between our two countries.”

Moon’s visit was devoted to deepen Seoul-New Delhi economic ties. South Korea’s vision for bilateral relations was reflected in the joint statement by Moon Jae-in and Indian Prime Minister Narendra Modi, which focused on three areas: “People, prosperity, and peace.” Demonstrating his desire to strengthen India-South Korea economic relations, South Korea’s head of state showed his strong willingness to partner with India’s flagship initiatives, including “Make in India”, “Skill India”, “Digital India”, “Start-up India” and “Smart Cities”. In addition to this, he also recognised the importance of supporting India’s infrastructure through South Korea’s Economic Development Cooperation Fund (EDCF) and Export Credit, and agreed to continue discussion on potential EDCF projects in India. Above all, he urged the business community from both sides to work towards the goal of raising India-South Korea bilateral trade to $50 billion by 2030 from $20 billion currently.

In recent years, India has gained a wide attention in South Korea’s foreign economic policy strategy. As soon as Moon came into power last year, his Government launched a new foreign policy initiative called “The New Southern Policy”, in which Seoul has given prime attention to deepening its bilateral relations with India and Association of Southeast Asian Nations (ASEAN) countries. South Korea’s recent attention toward India is a result of a growing contention in its relations with its largest economic partner, China. It is significant to note that since the normalisation of Seoul-Beijing ties in the immediate aftermath of the Cold War, China emerged as South Korea’s largest trading and investment partner, which in turn caused South Korean economy’s huge dependence on China. South Korea’s such economic dependency on China came under serious threat when Beijing adopted an economic retaliation policy to pressurise South Korean policy makers not to deploy the US missile defense system in the South Korean territory. Such posture harmed South Korea’s trade with China as well as South Korean companies’ presence in China.

Accordingly, Seoul came to realise that their economic dependence on China is a direct threat to their economy, which is highly dependent on international trade and investment activities. As a result, the South Korean Government has designed a policy to diversify its economic relations and they find a rising India as an alternative to China market. In addition to this, the ongoing US-China trade war, which is impacting South Korean economy, is also contributing to rise in South Korea’s interest in India. As tension between the US and China is intensifying, South Korean Minister for Trade Kim Hyun-chong said in Seoul recently, “We are attempting to build new relationships of cooperation, elevating the ASEAN countries and India to partner status on par with the four “big ones” as the “next China” to reduce the threat from the US and China.” His statement underlines that South Korea wants to deepen relations with India amid the growing tension between the US and China.

Against that backdrop, the Government of South Korea is taking various measures to improve Seoul’s engagement with India. For instance, efforts are currently underway to revise the current trade organisation by creating a “new trade order strategy office” within the office of the South Korean Ministry of Trade to intensify trade partnerships with India and ASEAN countries. Seoul is also pushing to reach a conclusion this year on the Regional Comprehensive Economic Partnership (RCEP), a regional economic arrangement which involves India. Apart from this, the South Korean Government has taken initiative to revive the India-South Korea Comprehensive Economic Partnership Agreement (CEPA), which was signed in 2009. South Korea’s Ministry of Trade has held a number of meetings with Indian officials in Seoul and New Delhi to review the progress of CEPA upgrading negotiations. The Moon-Modi summit in New Delhi also stressed the early conclusion of ongoing negotiations to upgrade the CEPA pact.

These prospects of economic cooperation must be viewed in quantified context. It needs to be therefore asked: What Seoul can offer in real term on economic cooperation with India? South Korea has been India’s crucial economic partner. South Korea was one of the largest investors when India began to liberalise its domestic economic market. When other foreign companies were still reluctant about India’s economic situation, South Korean companies — led by Samsung, Hyundai and LG —invested hugely in Indian market in the 1990s and became part of India’s economic growth story. Now, as India is looking to attract fresh investments from overseas to push its economic growth, Seoul can again become a crucial economic partner.

From Korean perspective, trade and investment is a key agenda in developing India-Korea relation in the future. In this regard, South Korea is trying to diversify its existing investment activities as well as bringing a second round of investment proposals in India. South Korean companies in India — such as Samsung, LG, and Hyundai — all are in expansion mood as they are diversifying their economic activities in India by expanding their business activities. A sign of such development can be seen when Moon and Modi inaugurated Samsung’s expanded factory in Noida, the world’s largest mobile phone production unit in terms of number of devices to be rolled out every month. Similarly, South Korean consumer electronics giant LG, which has two manufacturing units in India, has recently revealed its plan to make India its export hub amid rising tension between South Korea and China. LG Electronics India MD Ki Wan Kim remarked last year, “The main reasons for the company to explore making India an export hub is due to tension prevailing between South Korea and China.”

New South Korean companies are also entering in India to make fresh investments. Amid China’s retaliation economic policy toward South Korean business last year, South Korea car-maker Kia Motors signed an MoU to invest about $ 1.1 billion, which was further enhanced to $2 billion, to build its first factory in Andhra Pradesh. Similarly, the Lotte Group, which was the main target of Chinese retaliation strategy last year, has discussed investment proposal with the Indian Government to invest between $3 billion and $5 billion in the next five years.

The point here is South Korea is looking to expand its economic relations with India as it sees India market as an alternative to China. President Moon, who was accompanying his Trade and Industry Minister as well as a large number of powerful South Korean investors during India trip, is very keen to take India-South Korea economic relations to the next level. At the conclusion of his India visit, Moon stressed the importance of regular high-level exchanges to consolidate progress in the bilateral partnership and in this regard, he invited Modi to visit South Korea in 2020 — a move to further deepen New Delhi-Seoul cooperation. Hence, it can be argued that President Moon’s India visit may mark a watershed moment in the India-South Korea relations in the near future.

(The writer is a Research Professor at Hankuk University of Foreign Studies in Seoul, South Korea. He is currently working in a South Korean Government’s research project on strengthening India-South Korea relationships)

Courtesy: Pioneer: Sunday, 15 July 2018