India-South Korea partnership on an impressive trajectory
29 March 2012
India’s Look East policy, launched in 1991, has made steady progress in widening its economic and strategic reach to Japan and South Korea. Signing comprehensive economic partnership agreements (CEPA ) with them has opened new avenues for the growth of trade and investment ties. New structures of cooperation in the security sphere have added new dimensions to their partnerships. Prime Minister Manmohan Singh’s official visit to South Korea on 25 March, 2012 should be seen in the expanding context of India’s Look East Policy and it marks a significant milestone in the steadily growing India- Republic of Korea (ROK) relations.
Since the India-South Korea engagement has been substantially built on a strong economic base, the joint statement signed by Prime Minister Manmohan Singh and Korean President Lee Myung-bak talks a great deal about the measures that the two countries should take for the advance of the partnership. During the last two years following the coming into effect of the India-ROK Comprehensive Economic Partnership Agreement ( CEPA ) on 1 January 2010, the two-way trade has witnessed a significant increase by 70 % to record a total of $ 20 billion dollars.
Considering that even this total amount was far below the potential, the two leaders set a new target of achieving $40 billion by 2015. A Joint Committee at the level of Trade/Commerce ministers to review the situation was set up even in 2010 itself to give a boost to the bilateral trade. Now this committee will become more active in monitoring the working of the CEPA and upgrade it whenever found necessary. The first meeting of the Joint Committee was held in Tokyo in January 2011 and the second will meet in India this year. Appreciating the need for promoting balanced trade relations, both agreed to explore the ways to facilitate greater market access to each other’s products and services.
Infrastructure: One positive outcome of the CEPA is that both countries have significantly increased their mutual business activities and this has been reflected in the growing presence of Korean companies in India and that of Indian companies in Korea. For instance, the business activities of the Korean companies in and around Chennai have markedly grown thanks to the presence of companies like Hyundai Motors and Samsung Electronics. During 2012-17, India’s investment in infrastructure sector will amount to a huge $1 trillion and it will provide unprecedented opportunities to Korean companies to participate in projects for constructing highways, ports, airports, power plants, industrial parks, etc. Describing investments from South Korea a "priority", Prime Minister Singh assured Korean business leaders, "We will take pro-active steps to address investor grievances and improve the business climate in the country. Many states of our Union have been actively encouraging foreign investment and we will support these efforts. I urge Korean industry to have faith in India."
In his discussions with Korean political and business leaders, the controversy on the Pasco steel project which has been hanging fire for years in India cropped up . The fact that the Pasco steel project, the biggest foreign investment project involving $12 billion, has been badly embroiled in local protest movements against land acquisition raises the doubts of Korean companies on the wisdom of investing in India. Dr Singh however assured them that the government was very keen to implement the project. Expressing his appreciation to the Korean business people for their investment in India and the quality products they have produced, he saw great prospects for them in India and listed the following factors that favour foreign investment in India:
a. India has maintained an annual growth of 7 percent in the last several years and it will increase in the coming years; India also has a domestic saving rate of 33-35 percent of GDP;
b. A very favourable demographic factor with half the working population in their twenties;
vc. India has heavily invested in education, health and agriculture. The middle class is growing in size and importance. Further, rural markets are also expanding markedly;
d. India has plans to invest about one trillion US dollars in the next five years for developing infrastructure projects like airports, highways, ports, power plants and modern transport system; and
e. India’s energy security policies that include energy efficiency and renewables will provide new opportunities to Korea’s environmentally friendly technologies.
Political and strategic relations
In 2010 ROK President Lee made a landmark visit to India which resulted in establishing a strategic partnership between the two countries. This was followed by Indian President Pratibha Patil’s visit to Seoul in July 2011 and it gave a new momentum to the bilateral ties which have now become multi-faceted. Both countries share common concerns and interests on a number of regional and global issues including counter terrorism, UN reforms, maritime security, peace in the Korean peninsula, and peaceful uses of space. Both countries are also interested in establishing an effective institutional framework for strengthening bilateral cooperation in defence and security spheres. First, recognizing the important role played by the India-ROK Joint Commission co-chaired by the foreign ministers of the two countries, they have affirmed that that the Commission should meet every year alternately in New Delhi and Seoul.
Both leaders have also recognized the need to pursue consultations and cooperation in the field of maritime safety and security both bilaterally and in association with other countries of the region. In this context, South Korea attached great importance to the visit made by A.K. Anthony, India’s Defence Minister in September 2010.Both countries are interested in deepening their cooperation in military and defence industries like shipbuilding and aircraft industries. In this connection, one should welcome their proposal to develop a new trilateral consultation mechanism between India, South Korea and Japan.
Cooperation in the civil nuclear field
This is another area where their interests converge strongly. In July 2011, both India and ROK signed an agreement which established a framework for South Korean companies to supply nuclear power- related technologies to India. Now Seoul is very much interested in setting up its nuclear reactors in India and has asked the Indian Government to designate places for locating Korean reactors. As Korea has considerable experiences in this sphere . India’s quest for energy security could lead to a win-win situation developing between the two countries. The fact that Japan is delaying its agreement with India is an opportunity that Seoul would not like to miss.
Finally, both leaders have laid stress on the urgent need to tap the cultural dimensions of our partnership. Exchanges of students, teachers and artistes have not taken place on a big scale. Both countries now realize the need to use cultural diplomacy to further strengthen mutual bonds.
(Prof K.V. Kesavan is a Distinguished Fellow at Observer Research Foundation)