IPCS Discussion

Korea-India Relations and the Situation on Korean Peninsula

15 May, 2019    ·   5584

Report of the discussion held at IPCS on 23 April 2019.

On 23 April 2019, IPCS hosted H.E. Dr Shin Bong-kil, Ambassador of the Republic of Korea to India, who spoke on ‘Korea-India Relations and the Situation on Korean Peninsula’. The interaction was held under the aegis of IPCS’ Ambassador Lecture Series, and was chaired by Dr Sandip Kumar Mishra, Associate Professor, Centre for East Asian Studies, Jawaharlal Nehru University, & Visiting Fellow and Columnist, IPCS.

This is a summary report of the lecture and subsequent discussion.

Both population and area wise, India is nearly 30 times the size of South Korea. India’s GDP is much higher than South Korea’s, but in terms of GDP per capita income, South Korea’s is higher.

In 2018, the number of Koreans visiting India was higher than the number of Indians who visited South Korea. India has offered visa on arrival to South Koreans.

South Korea’s exports to India are more than India’s exports to South Korea. With regard to the Comprehensive Economic Partnership Agreement (CEPA), it is essentially a free trade agreement, and negotiations are still ongoing. Seoul has a positive outlook regarding its prospects but New Delhi has been apprehensive of upgrading the CEPA primarily due to a concern that an upgraded CEPA might result in a further increase in the trade deficit.

Foreign Direct Investment (FDI) from South Korea to India has been on a continuous rise. In fact, between 2017 and 2019, it has nearly doubled. Chennai and New Delhi are the biggest areas of Korean investment. Hyundai Motors is located in Chennai, Samsung is in New Delhi, LG is in Greater Noida, and Bengaluru houses also some IT-related companies. Mumbai and Pune have manufacturing companies. However, Koreans in India number a little over 10,000 – a relatively small number.

Today, South Korea exports much more to India that it imports from India. One of the reasons for this difference is that Korean companies that invest in India bring the equipment from South Korea. Samsung is a useful example. Samsung recently inaugurated the world’s biggest smart phone factory in Greater Noida. Technically, in terms of the capacity of a smart phone factory, the plant in Vietnam is bigger than the one in India, but as single unit, the one in Greater Noida is the biggest in the world. It can produce over 100 million units per year, and also provides substantial local employment.

In terms of trade-related relations, South Korea’s contribution to India is mainly employment. For example, the Samsung Research & Development centre in Bengaluru is staffed by less than 15 Koreans, and the remainder, i.e. approximately 4,500, including the CEO and deputy CEO, are Indians. This is a noticeable characteristic in all locations where Korean companies have invested in India.

Although the size of Indian investment in South Korea is not huge, the existing investments are doing well. India’s Mahindra is an example. Mahindra purchased South Korea’s SsangYong, which was in financial difficulty at that time. Today, Mahindra- SsangYong is doing very well and the products are very popular in South Korea. Mahindra is doing robust business in South Korea. Similarly, India’s Tata, State Bank of India, etc are all present in the country.

For South Korea, India is one of the most important countries in the region because India’s population and GDP are greater than the sum total of those of all the Southeast Asian countries. And South Korea is seeking a new economic partner in the region.

Previously, China was South Korea’s main economic partner. As of 2018, South Korea’s trade volume with China stood at US$ 250 billion. Today, China itself has become a big economic power. Earlier, South Korea’s Samsung, LG, Hyundai, etc were very dominant companies in Chinese markets. Now, they are now competing with Chinese companies. Overall, too, the economic environment is not improving for Korean companies. Korean companies are withdrawing and moving to ASEAN countries, particularly Vietnam.

Today, Vietnam is South Korea’s top investment destination. India too has great potential but emotionally, Koreans feel closer to Vietnam as compared to India. There is a sizeable Korean community in Vietnam. There is a Korean community in India as well but it is much smaller.

South Korea's New Southern Policy and India's Act East Policy find significant convergences. Thus far, South Korea’s most important relationships have been with the US, China, Japan and Russia. However, Seoul is also exploring new kinds of partners, and in that regard, it is now focusing on Asian countries.

While the New Southern Policy and the Act East Policy share extensive complementarities, there is also a view that India’s Act East Policy is focused primarily on Japan and that South Korea is perhaps a close second in order of priority.

South Korea places importance on its relationship with China. China is a neighbouring country, and is historically, economically, and politically important. The US desires that South Korea move actively towards joining the ‘Indo-Pacific’, a concept that China is apprehensive of. For these reasons, Seoul is unable to choose sides, as it were.

South Korea can develop healthy relationships with China, India, and the US simultaneously. And, since India and South Korea do not share negative historical baggage, individual relations with different countries would not affect India-South Korea relations.

Rapporteured by Bashir Ali Abbas, Research Intern, IReS, IPCS.