President Park Geun-hye’s visit to India this week marks a high point in a relationship that’s been on an upward trajectory for the past 40 years.
She’s advancing prospects for Korea-India relations at a turning point at which much depends on the outcome of difficult negotiations for POSCO finally to begin construction of a $12 billion steel plant in the eastern state of Odishia. The project, when completed, will be the largest single foreign direct investment in India.
How did India and South Korea come to have such an active relationship after India in 1962 formed consular relations with North Korea?
When India opened full diplomatic relations with South Korea in 1973, India in keeping with its policy of non-alignment elevated its relationship with North Korea to the same level. North Korea to this day maintains a large embassy in New Delhi while an Indian ambassador remains in Pyongyang.
India’s ties with South Korea have improved steadily, but it took another two decades for economic cooperation to begin to develop by leaps and bounds. Two-way trade, $2.3 billion in 2000, stood at $20.6 billion in 2011. The relationship reached a new stage in 2010 with the signing of the Comprehensive Economic Partnership Agreement.
“Korea thus became India’s first FTA (Free Trade Agreement) partner in the OECD (Organization for Economic Cooperation and Development), while India became the first BRIC (Brazil, Russia, India, China) economy to become Korea’s FTA partner, according to Wook Chae, president of the Korea Institute for International Economic Policy (KIEP).
“This has raised the relationship between the two countries to a strategic partnership.” In fact, “The new exponential growth in just 11 years has made India the ninth largest destination for Korea’s exports.”
One reason for India moving close to South Korea as well as Japan is India’s concern about the fallout from the 1962 war on India’s northernmost and northeastern frontiers with China. India needs close ties, though not quite politically controversial alliances, with major countries that might form a counterweight to Chinese intimidation and acquisition of land overrun by China in 1962 and never returned.
Yet another reason is India’s need for foreign direct investment, FDI. Both South Korea and Japan have invested heavily in major projects in India, notably motor vehicles and electronics. POSCO remains determined to build a plant despite the pleas of local people forced to give up their homes.
Indian authorities are totally committed to providing space for the plant. India’s Board of Approval has had to grant annual extensions in which Posco has argued that takeover of the 1,620,496 hectares “is not encroachment….and that encroachment removal and compensation disbursement process is still going on.”
India’s evolving relationships with Northeast Asian economic powerhouses is an integral facet of its “Look East” policy that was enunciated in 1992 after the collapse of the Soviet Union and the breakup of that massive political and geographical conglomerate into separate nations.
Prime Minister Manmohan Singh, often widely criticized at home for weakness in dealing with the economy and corruption, skillfully courted Korea and Japan while also appealing to Russia, a source of arms and planes during the Soviet era, and China, which remains India’s biggest trading partner.
The octogenarian Singh, in the final year of a long career topped by ten years as prime minister, will be stepping down in several months after elections in May for the Lok Sabha, the lower house of the Indian parliament, in which Narendra Modi, leader of the conservative, Hindu-centric Bharatiya Janata Party, a staunch foe of the long-ruling but amorphous Congress Party, is campaigning hard to succeed him. A question is whether the deals engineered by Singh, 81 years old, will stick after he left office.
The evolution of India relations with South Korea is noteworthy since India is one of the few countries outside the old Soviet bloc and China that has maintained close ties with North Korea since the Korean War. India did, reluctantly, contribute an ambulance unit to the allied forces under the banner of the United Nations Command, after having refused to support a United Nations resolution authorizing military aid.
The most important Indian role in that period was that of chair of the Neutral Nations Reparation Commission responsible for reaching an agreement acceptable to the United States and the UN Command and China and North Korea on repatriation of prisoners of war.
More than 60 years later, major South Korean companies are poised to export military materiel. “Koreans are very new in the defense market,” said a Korean official.
“It’s very difficult to crack the Indian market. Indian needs, however, opened up possibilities. India on its own manufactures mainly basic infantry weapons, ammunition and military vehicles. Samsung Techwin, founded in 1977 as a manufacturer of specialized optical equipment, is negotiating the sale of self-propelled artillery of the type that it’s been manufacturing for the Korean army since 1984.
The Koreans seem to have beaten the Japanese in one area in which they sense huge profits. Lee Myung-bak, in the fourth year of his five-year presidency, and India’s President Pratibha Patil signed an agreement in Seoul in July 2011 laying the groundwork for cooperation on nuclear power plants.
The agreement rested on an understanding worked out in New Delhi in January 2010 between Lee and Prime Minister Singh, whose position gave him far more power than India’s figurehead president. They placed emphasis primarily on a “Strategic Partnership” – wording that suggested a bond almost as tight as an alliance.
Then, meeting in Seoul in March 2012, less than a year before the end of Lee’s presidency, Singh and Lee “agreed to continue high-level exchanges between the defense establishments of both sides, undertake activities as mutually agreed for deepening bilateral defense relations and to explore the possibilities of joint ventures in research & development and manufacture of military equipment, including through the transfer of technology and co-production.” Looking for both commercial and military benefits, Lee “underscored that the ROK side wanted to increase cooperation with India in military and defense industry including, inter alia, naval ships, aircrafts, and ship-building.”
Buried lower in the joint communique was a summary of what may, in retrospect, have been the most portentous aspects of the Singh-Lee summit when viewed in the glow of North Korea’s subsequent successes in putting a satellite into orbit and then in conducting its third underground nuclear test.
The two leaders “pledged to enhance cooperation in the peaceful uses of outer space” in accordance with a memorandum of understanding between the Indian Space Research Organization and the Korea Aerospace Research Institute.
In fact, they "proposed that the concerned agencies of both countries study possible cooperation in future space activities including launching a nano-satellite developed by Korean students on an Indian launch vehicle.”
President Lee, always with an eye for economic benefits, also “requested that the Indian Government allocate a site for Korean nuclear reactors.”
India, aiming for nuclear power generation of 63,000 megawatts by 2032, remained a prime target for aggressive marketing by KEPCO, the Korea Electric Power Corporation, in charge of deals for selling reactors produced by Doosan Heavy Industries, the sole manufacturer of reactors for Korean nuclear power plants.
Already producing four reactors for the United Arab Emirates, the first foreign buyer of its reactors, Korea sees India as a likely market though coming to terms would prove difficult.
A critical element in the “strategic partnership,” the India-Korea Comprehensive Economic Partnership Agreement, in force since January 2011, compelled India to cut or get rid of tariffs on 85 percent of imports from Korea while Korea did the same for 90 percent of imports from India. At the same time, most of Korea’s biggest companies were investing in India. Visions of India as a growing market for Korean products and technology extend to virtually all areas of enterprise.
LG and Samsung account for between two fifths and three fifths of the market in electronics while Hyundai Motor, producing vehicles in Chennai, accounts for 20 percent of the cars on Indian roads. Korean companies are checking out the possibilities of manufacturing ships, of building roads and highways, oil pipelines and refineries as well as petrochemical plants.
Not all the investment was from Korea into India. The other way around, some of India’s biggest companies, Tata Motors, Novelis and Mahindra, also have invested in South Korea.
It would be impossible, however, to overlook some of the problems. “What can be done to accelerate cooperation to the mutual benefit of our two countries,” asks Kim Chulsu, former minister of trade, industry and energy.
“First of all I hope that the POSCO’s investment project will see the light of day as soon as possible.” Blaming the delays on “regulatory hurdles,” he predicts the project will symbolize Korean-Indian cooperation “as a flagship venture having the effect of substantially boosting trade and investment.”
-Donald Kirk, Future Korea contributing editor, spent most of 2013 in India as Fulbright-Nehru senior research scholar affiliated with the School of International Studies at Jawaharlal Nehru University, New Delhi.
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