Through sustained and concerted efforts, the two countries have decided to prioritise a more reciprocal and mutually beneficial partnership.
visit to India has been significant on multiple accounts. It has taken place in the backdrop of two raging conflicts, disrupted supply chains, a resurgent Japan, turbulence in South China Sea, critical requirements of friendshoring, reset of geopolitical alignments and 75 years of the Korean war. The Indian Army and the diplomatic corps have a sterling contribution in this brutal war, which is well documented but not very well known.
The relations between the two nations are rooted in the ancient past. Princess Suriratna from Ayuta (Ayodhya) sailed to Korea in 48 AD. She became Heo Hwang-ok and married King Kim Suro of ancient Gaya kingdom, thereby becoming the first queen of Geumgwan Gaya and an ancestor to many modern-day Koreans.
South Korea is the 14th largest economy in the world and fourth largest in Asia. It is dominated by large conglomerates or “Chaebols” like Hyundai, Samsung, SK Group and LG which contribute to beyond 40% of the total national GDP. The major industrial output comes from semiconductors, electronics, chemicals, steel and shipbuilding. South Korea has a very large export footprint, with China, US and Japan as its major trade partners. It has a stable fiscal structure but with an increasingly ageing population. Being a small country, the economy is sensitive to geopolitical changes especially with US-China rivalry.
Over 600 South Korean companies have a presence in India. It is significant to note that foreign direct investment in India by Korea is just about US$16.2 billion as compared to US$92 billion in Vietnam, which is a far smaller market in terms of its size and talent pool. Trade in the last eight years has grown only by a modest 3% but as both countries aim to diversify from US markets and sourcing from China, several realignments are likely.
India and South Korea signed a Comprehensive Economic Partnership Agreement (CEPA) in 2009, which came into effect in January 2010. It committed both countries to lower or eliminate import tariffs on a wide range of goods over a decade and expand opportunities for investments and exchanging services. By some metrics, the provisions of this were imbalanced, tilted against India. Since then, bilateral merchandise trade between the two countries has increased by 92.7%, with India’s imports rising by 103.7%, clearly not in favour of India. Thus, while overall trade expanded, the trade deficit also apparently widened.
Through sustained and concerted efforts, the two countries have now decided to prioritise a more reciprocal and mutually beneficial partnership. A strong focus on key sectors of shared interest, while also addressing non-tariff barriers and rules of origin are likely to accrue mutual benefit. These talks are expected to conclude by 2027.
The outcomes of this visit and corresponding engagements are many to include a joint strategic vision for a Special Strategic Partnership, comprehensive framework for partnership in shipbuilding, shipping and maritime logistics, sustainability and energy resource security. The various MoUs signed encompass myriad sectors to include ports, establishment of the Industrial Cooperation Committee, cooperation in technology and trade for steel supply chains, MSMEs, maritime heritage, financial payments network, climate, environment, cultural exchange and sports. Some important announcements like launch of Economic Security Dialogue, dialogue on global themes to encompass climate change, Arctic and maritime cooperation are pathbreaking announcements. South Korea joining the Indo-Pacific Oceans Initiative and International Solar Alliance will be important waypoints in terms of security and renewable energy.
South Korea is a major global hub for air turbine fuel production and export with refineries run by SK Energy, GS Caltex, S-Oil and Hyundai Oilbank. Ulsan complex is now pioneering Sustainable Aviation Fuel (SAF) via co-processing. This domain can be a large avenue of financial as well as technological collaboration, especially in these trying times.
South Korea’s semiconductor industry is one of the largest in the world and dominates the memory sector. However, as the world moves into Industry 4.0, it has become important to shift into the non-memory sectors, competing against Taiwan’s TSMC and others. Samsung Electronics and SK Group’s SK Hynix are the dominant players in the memory sectors, and they are making aggressive plans to foray into non-memory semiconductor industries. South Korea has started production of cutting edge 3-nanometer process-based chips and plans to create the even more powerful 2-nanometer chips by 2027. While it aspires to become semiconductor powerhouse in the world, major challenges include the lack of talent, advanced technology, and localization of equipment and materials. India can be a valuable partner for talent and materials supply chain for the future.
Regardless of its size, South Korea’s defence industry is driven by global players like Hanwha Aerospace, Korea Aerospace Industries, Hyundai Rotem and LIG Nex1 with huge order books to Europe and the Middle East. In terms of shipbuilding, it is a dominant growth leader, ranking next to China by volume. Several collaborations especially in the strategic weapons co development, talent pool optimisation as well as cutting edge R&D are thereby feasible. India’s dominant space sector can be a harbinger of change for South Korea with its ability to launch and develop new technologies with a large institutional knowledge and legacy.
India has the required political stability, leadership, a vibrant marketplace, enabling policy reforms and an enviable demographic dividend. It has the potential to be the “talent powerhouse” of the world. A thriving manufacturing sector will serve as the lynchpin for India’s economic growth and prosperity in the coming decade and South Korea can be an integral part of it. Mode 4 mobility for engineers, technicians and specialists in the fields related to STEM could be a game changer in this landscape.
Conincidentally, there is a silent rebalancing of global supply chains taking place all over the world with diversification and de-risking as the core focus. These augur well for the two countries but with a balanced trade metrics and long-term collaborations. Creation of India-South Korea electronics supply development programme with bilateral investment in components and sub-assemblies could also present a great opportunity.
Collaborations and international groupings are an important aspect as these give impetus to mature systems, increased emphasis on dialogue and trade. It provides a greater elbow room for negotiations. In a multi-aligned world, rise of the tech giants and ever evolving nature of warfare and diplomacy, both countries have the wherewithal to optimise both efficiency and competitiveness but with a combination of guardrails and rewards.
