core sector communique

Address by His Excellency Kim Joong-Keun

Ambassador of the Republic of Korea at an Interactive Session on

‘India – Korea Bilateral Trade & Investments’

at MCC Chamber of Commerce & Industry, Kolkata

February 6, 2012

Members of MCC Chamber of Commerce & Industry,

Ladies and Gentlemen

·                 I am indeed delighted to be here in Kolkata and have this opportunity to interact with such a distinguished group of industry and business leaders. November last year when I received the invitation from MCC Chamber of Commerce & Industry, to address the distinguished members of the Chamber, I accepted it readily because I believe business interactions such as this go a long way in promoting bilateral business and economic ties. Thank you Mr. Deepak Jalan.

·                As the first voice of Indian business and Industry in Eastern India, MCC Chamber of Commerce & Industry is playing an important role in promoting West Bengal as a major commerce and investment destination in the country.

·                     I am confident that MCC Chamber of Commerce & Industry, along with other State and national level business and industry bodies, would make their fullest contribution towards promotion of economic and commercial cooperation between Korea and India.

·                This is my second visit to Kolkata, having visited the great city last year. Once again, I am struck by the charm and rich legacies of this historical city.

·                As some of you may know, when Korea was suffering under Japanese colonial rule, Nobel Laureate Rabindranath Tagore wrote a short poem praising Korea : “ In the golden age of Asia, Korea was one of its lamp bearers. And that lamp is waiting to be lighted once again for the illumination in the East”. Tagore’s powerful words inspired Koreans to revive their past glory. Even today the poem infuses confidence and hope in the minds of Korean people to march ahead towards a better future. Please, allow me, to pay my tribute to the great soul of India.

Ladies and Gentlemen, I would like to start my interaction with you by presenting a broad overview of where Korea stands today.

·                    Korea has scripted a number of success stories in building a strong and resilient economic architecture, which has propelled phenomenal economic growth and prosperity for its people.

·                    As you may know, 60 years ago, Korea, devastated by the Korean War, was one of the poorest countries in the world. Today, Korea has grown to acquire centre stage of international politics and economics.

·                    November 2010, Korea hosted G20 Summit and coming March it hosts the Second Nuclear Security Summit to contribute to the international efforts to make the world safe from nuclear and radiological terrorism.

·                    Let’s consider some statistics. Korea’s GDP has since grown 400 times to reach over 1 trillion US dollars at presen6t. In 1961, Korea’s per capita income was only 78 US dollars, today it is over 20,000 US dollars. Last year Korea, for the first time, posted an annual trade volume of one trillion US dollars, making it the world’s ninth biggest trading nation.

·                    Further, Korea is the world’s third largest producer of intellectual patents, and global provider of cutting edge IT products and services and a leading player in shipbuilding, automobile, steel, petro-chemical, refinery, electronics, to name a few.

·                    President Lee Myung-bak has announced a vision of ‘Global Korea’ which envisages a fully-advanced Korea that stands tall in the global arena. A key part of this vision is the New Asia Diplomatic Initiative, the main thrust of which is to strengthen Korea’s close partnership with friends in the Asian region. It is in this backdrop that Korea places a high priority on developing comprehensive, mutually beneficial and enduring bilateral relations with India.

·                    Looking at the current situation of the Korean economy, I would like to say that despite its strong macro economic fundamentals, prolonged global economic downturn is casting a shadow on Korea’s economic growth rate. The Korean economy expanded 3.6 per cent during 2011, slowing down from 6.2 per cent growth in 2010.

·                    But despite all gloom and doom, I would like to sound optimistic. I firmly believe that every crisis presents an opportunity. The task before us is to handle the challenge of global slowdown with confidence and seize its opportunities. We have overcome previous regional and global financial and economic crisis in the most successful manner in the world. This time, too, I am sure, we will emerge stronger from the crisis.

Ladies and Gentlemen, I would like to briefly look at current state of Korea-India bilateral relations.

·                    Korea-India economic relations have been expanding and deepening remarkably in recent years. This is truly reflected in frequent mutual exchange of high-level visits, growing trade and investment cooperation and expanding people-to-people contacts.

-                     Reflecting on the past years, we find that our two countries continued the momentum of high-level visits set by the historic visit of President Lee Myung-bak to India as Chief Guest on its Republic Day celebration in 2010. President of India Pratibha Patil paid a State Visit to Korea last July. A number of cabinet rank ministers from both sides exchanged visits. This March Prime Minister Dr. Manmohan Singh will visit Korea to attend Seoul Nuclear Summit and for bilateral summit meeting with President Lee Myung–bak. We are sure Prime Minister Singh’s visit will give further impetus to our strategic partnership.

-                     Two-way trade and investment continued their growth momentum during 2011, a strong indication that Comprehensive Economic Partnership Agreement or CEPA which came into force in January 2010 is helping bilateral trade to grow.

-                     The two-way trade crossed 20.6 billion US dollars last year which represents a healthy growth of 15.2 per cent over the previous year. During the year, while Korea’s exports to India grew by about 11 per cent, its imports from India grew significantly by 40 per cent, shrinking India’s trade deficit with Korea and allaying the fear and concerns expressed in some quarters in India that the CEPA will widen Korea’s trade surplus with India.

-                     People to people contacts and cultural exchanges witnessed the strongest growth during 2011. Our two governments celebrated the Year 2011 as the ‘Year of Korea in India’ and ‘Year of India in Korea’ and to mark the occasion, organized a number of cultural and other events in each other’s country. These events have greatly helped in enhancing mutual understanding and friendship between the peoples of our two countries to a higher level.

Now coming to success stories of our economic cooperation in various sectors in India

·                    Korean companies showing their unique dynamism and adventurism have established their big presence in India and have become household names in the country.

·                    Hyundai Motors accounts for about 20 per cent market share in the domestic care market, ranking second, next to Maruti. It produces 3000units of cars annually and exports more than 1/3^rd of its produce to third countries, thereby contributing India’s exports.

·                    LG and Samsung together account for 40 to 60 per cent domestic market share in electronics goods, such as TV sets, refrigerators , washing machines, air conditioners, microwave ovens, etc.

·                    POSCO’s 12 billion dollars steel mill project in the state of Orissa is the single largest FDI ever made in India.

-                     Besides this, it currently has coil processing units at Pune, Gurgaon and Chennai which produce steel used in home appliances, automobile and power stations and it is also setting up three other projects in the State of Maharashtra.

-                     Not only are the Korean companies investing in India but Indian companies are also making some large investments in Korea.

-                     Tata Motors, Birla Group, and Mahindra and Mahindra are among many Indian companies which have some big-ticket investments in Korea.

Ladies and Gentlemen, now, I would like to talk about future potential and opportunities for bilateral trade and investment.

·                    Even while growth in our economic ties has been impressive in recent years, it is still modest compared to the vast potential that exists.

-                     For example, Korea’s share in India’s global trade volume is less than 3 per cent.

-                     Similarly, Korea’s FDI in India accounts for only 1.3 per cent of Korea’s total outbound FDI flow.

-                     This means that there are tremendous opportunities to further expand our trade and investment relations.

·                    As far as bilateral trade is concerned, there is a huge scope to further deepen and expand the relations.

·                    Up till now our bilateral trade has mainly been dominated by merchandise transactions. Even under the merchandise trade, list of products being traded between the two countries have not changed much over the years. Korea’s top 10 exports to India have been auto parts, vessels, synthetic resins, parts for wireless telecommunication equipments, etc. Similarly there has been no significant change in top 10 goods imported from India which are mostly intermediate goods and raw materials.

·                    There is a tremendous scope for expanding our merchandise trade basket by exploring new products of mutual interest which can boost our bilateral trade further.

·                    Similarly there is a vast scope for trade in services, between the two countries, particularly in areas such as IT & ITES, Communications, banking, insurance, education, broadcasting, tourism, healthcare, etc.

·                    Now CEPA is in its 3^rd year of operation and as the tariff’s get progressively reduced over the next 8 to 10 years under the terms of CEPA, I am sure our bilateral trade will multiply many more times.

·                    Furthermore, as Korean investment in India and Indian investment in Korea continue to grow, ample opportunities will be created for bilateral trade to grow significantly.

·                    Our two governments have set bilateral trade target of 30 billion US dollars by 2014. The two countries are well on course to achieve the set target. Interestingly, there are some studies which show that Korea-India bilateral trade has a potential to reach 100 billion US dollars by 2020. To me, this does not seem to be an unrealistic target provided that our two sides make concerted efforts to tap unexploited trade potential.

Ladies and Gentlemen, now, I would like to look at the potential of our bilateral investment.

·                    India enjoys a strong position as a global investment destination with the country registering the second highest growth in FDI inflow in the world during 2011. According to a recent Ernst & Young attractiveness survey, total FDI inflow in India grew by 25 per cent during the period from January to November 2011, which is second only to Brazil where the growth was 48 per cent.

·                    This represents the robust faith that international investors, including Koreans have in India’s strong fundamentals and the resilience of its economy to external shocks.

·                    Korean companies see India as a promising economy and are actively looking at expanding their business in sectors such as automobile, construction and infrastructure, nuclear and renewable energy, ICT industry, shipbuilding, defence, chemical and petrochemicals, etc.

·                    Cooperation between Korea and India in the automobile sector has existed for several years now but there is still tremendous scope for further enhancing the ties in this sector.

-                     With only 8 in every thousand people owning a car in India, and also the country emerging as a global hub for car production, there are huge opportunities for existing auto companies to further expand their operation in India to meet both domestic demands and global requirement.

-                     Studies indicate that passenger vehicle production in India would touch more than 5 million units in 2015 & above          8.5 million units in 2020, from the current level of around 2.4 million units.

·                    There is huge untapped potential, beckoning for our two governments and enterprises. Those are;

-                     Strengths of Korea and India in the ICTE sector are complimentary in nature, with India being strong in software capabilities and Korea in hardware manufacturing.

-                     According to a report of the task force of department of information technology, ICTE production in India could grow to 400 billion US dollars by 2020, including USD 80 billion of exports. This presents immense scope for Korean companies already present in India to scale up their hardware manufacturing facilities here.

-                     Similarly, South Korea has some of the most competitive industries like electronics, hardware and telecom.               These industries require sophisticated software, strong R&D

          infrastructure, digital imaging and solutions. This presents vast opportunities for Indian software companies and IT professionals to participate in the development of Korean IT industries.

·                    Given India’s plan for infrastructure expansion and Korea’s experience in this field, there is scope for synergic collaboration between companies of our two countries for developing world-class infrastructure in India.

-                     India has the potential to absorb an estimated investment of around 1 trillion US dollars in infrastructure.

-                     Korean companies can utilize their abundant experience in construction to help India meet its infrastructure needs.

-                     They have successfully executed several infrastructure development projects in India in diversified fields like road and highways construction, chemical/ petrochemical plants, oil pipelines, refinery facilities, power projects and so on.

·                    Civil nuclear energy cooperation has now opened up new avenues for enhancing our economic relations.

-                     India aims to reach 60,000 MW of installed capacity by 2032 from the current level 4,780 MW for which it is seeking international cooperation.

-                     Korea has been building nuclear power plants for the last four decades and has 20 nuclear power plants which account for 40 p.c. of its energy need. It has the latest and proven cutting edge technology in nuclear power plant construction, management, maintenance and safety practices.

-                     We are already in discussions to set up nuclear plants in India.

-                     It may also be recalled that last year a South Korean led consortium secured a 20 billion US dollars contract to build and operate four nuclear reactors in UAE by 2020.

·                    A related area with immense scope for bilateral cooperation is renewable energy.

-                     According to reports, India has an estimated renewable energy potential of around 85,000 MW from commercially exploitable sources such as wind, small hydro and biomass.

          In addition, India has the potential to generate 35 MW per square km using solar photovoltaic and solar thermal energy.

-                     Korea is a global leader in green growth investing 2 per cent of its GDP annually into research and development on new green infrastructure.

-                     Korea, with its wealth of modern technology and expertise in wind power turbine, solar cell, LED manufacturing can be an ideal partner for India to help develop its new and renewable resources such as solar, wind and hydro.

·                    Defence industry cooperation is an area of great promise for bilateral cooperation.

-                     India is expected to spend 100 billion US dollars on defence modernization and acquisition program over the next                  5 years.

-                     Korea, with its cutting edge technology in shipbuilding, electronics and aeronautics industries is keen to forge partnership with India’s defence sector.

-                     Recently, a Korean firm has been selected by India to supply eight minesweepers and a number of other Korean firms are participating in various biddings under India’s defence acquisition program. If these firms become successful, it will mark the beginning of a long term defence cooperation between our two countries.

·                    Korea and India have huge potential for shipbuilding cooperation.

-                     Korea has the best technical knowhow in areas of ship design and assembly which commands a share of 36 per cent in the global shipbuilding market.

-                     India plans to increase its share in the global shipbuilding industry to 5 p.c. from the current level of little over than           2 p.c. and aims to achieve 10 p.c. share in the global ship repair market by 2020.

-                     To achieve this, India can access South Korea’s strong capabilities in ship building technology for its maritime industry.

Ladies and Gentlemen, now, I would like to shift my attention to the potentials for cooperation between Korea and West Bengal.

·                    There is a huge untapped trade and investment potential between Korea and West Bengal.

·                    West Bengal which is rich in agricultural and fisheries products, ores and minerals, textiles, chemical products etc can explore immense trade possibilities that exist in these items with Korea.

·                    As for the Korean investment in India, you are aware that Korean enterprises are mostly confined to Delhi and its adjoining areas in the north and Chennai, Bangalore and Hyderabad in the south. But there are a large number of Korean companies which are exploring business opportunities beyond those cities of India.

·                    Korean businessmen know that West Bengal has all it takes to become an attractive investment destination. The state has a good network of railways, road and port facilities, surplus power supplies, business and industry friendly environment and abundance of entrepreneurial and professional human capital.

·                    The state has a new government in place under the dynamic leadership of Honorable Mamata Banerjee who is supportive of business initiatives and encourages investment in the state.

·                    I have learnt that the state government has set up a core committee of business chamber representatives, ministers and government officials to promote industrialization in the state. Further, the government has created a single window clearance system and reduced the time taken for clearance of investment projects to just a few days. These business friendly measures will undoubtedly help West Bengal emerge as a major investment destination in the country.

·                    We see a lot of potential for Korean entrepreneurs to work with firms in West Bengal in sectors such as IT and IT Enabled Services, steel, power, petrochemical, food processing etc.

·                    As for the IT/ITES sector, I see great potential for cooperation between Korea and West Bengal.

-                     West Bengal government has identified IT/ITES sector as one of the priority focus centres and plans to turn the state into the IT hub of the East.

-                     Presently more than 250 IT companies are operating in the state, including many prominent national and international corporations such as Infosys, TCS, IBM, Cognizant, Accenture, etc.

-                     The state is trying to attract new investment and plans to develop major IT hubs in different parts of the state.

-                     An enormous pool of qualified manpower is available in the state at competitive rates.

-                     All these make West Bengal an attractive destination for Korean IT companies to set up their software development centre in the state.

·                    Steel is another sector where there is scope for cooperation between Korea and West Bengal.

-                     West Bengal is in close proximity to the source of key raw materials for steel making in Orissa and Jharkhand and also to the sea port at Haldia. It also has best manpower for steel industry with 100 years of steel manufacturing experience in the state. All this make the state one of the best sites for setting an integrated steel plant in the country.

-                     The state accounts for around 10 per cent of India’s steel production and is already home to major steel plants such as plants by SAIL, Bhushan Steel, and Stolhberg of Germany. The work to set up a new mega steel plant by Jindal group is also going to start soon. Many more such investment proposals are in the pipeline.

-                     Definitely there are opportunities for Korean steel maker, POSCO to expand its operation in the state.

·                    Another area for potential cooperation is the power sector.

-                     Bengal’s power sector is all set for major expansion with all major power companies in the state lining up major investment plans for setting new power projects to add up to their power generation capacity.

-                     This opens up opportunity for Korean companies in power sector like Doosan to enter into collaboration with these companies to supply power equipments such as boilers, turbines, power gear, etc.

·                    There are also opportunities for Korean companies in petro-chemical sector.

-                     West Bengal has a strong competitive position in petrochemical sector.

-                     Key players in the sector in the state are Mitsubishi Chemicals Corporation, Haldia Petrochemicals Ltd., Reliance Industries, Indian Oil Corporation, etc.

-                     The state’s petrochemical sector is in major expansion mode with the key players planning new units and poly parks and other players seeking to enter into strategic alliance with foreign partners to realize the full potential of the sector. This provides a vast scope to Korean companies for technology tie-up and process development.

·                    Last but not the least, food processing is another area where there is opportunity for cooperation between Korea and West Bengal.

-                     West Bengal is the largest producer of vegetables in India and an important producer of fruits which provides the state with a competitive advantage to attract investment in the food processing industry.

-                     It is looking for investment for the development of its food processing industry and to create infrastructural support like cold storage facilities.

-                     American company PepsiCo has its highly successful food processing plant in the state. Companies like Unilever and Nestle have expressed their interest to set up food processing units in the state. Korean companies can explore mutually beneficial cooperation in this sector as well.

Ladies and Gentlemen :

In my role as Ambassador, I would like to see Korean investment grow in West Bengal and encourage you all to get involved, and to explore opportunities for collaboration and engagement in the above sectors. On my part, I assure you of full cooperation and support in all your endeavors.

Thank you.