core sector communique

Interactive Session

with

H.E. Mr. Kim Joong-Keun

Ambassador of the Republic of Korea in India

on

‘India-Korea Bi-lateral Trade & Investments’

Monday, 06 February 2012 at 3.30 p.m.

Somany Conference Hall

MCC Chamber of Commerce & Industry

Welcome Address

by :  Shri Deepak Jalan

     Sr. Vice President, MCCI

H.E. Mr. Joong-Keun, Mr. Kaul,

Distinguished Guests & Friends,

          I have great pleasure in extending a warm and cordial welcome to H.E. Mr. Kim Joong-Keun, Ambassador of the Republic of Korea in India to our Chamber this afternoon. We are grateful to you, Sir for accepting our invitation to interact with the members and share your views and vision on enhancing trade and investment opportunities between our two countries. As you all know, Mr. Kim is a career diplomat and has served his country with great distinction at many high places in Korea and abroad like Geneva, USA, Czech Republic and UN Secretariat, Prior to Indian assignment, Mr. Kim was the Ambassador in Singapore from March 2007 until February 2010. We believe that this interaction with our Chamber will be mutually rewarding.

We are also happy to have with us Mr. Rajive Kaul, Honorary Consul General of Republic of Korea in West Bengal. He is the Chairman of Nicco Financial Services Ltd, a Director of Nicco Engineering Services Ltd and Non-Executive Chairman of Nicco Corporation Ltd. He is a front-ranking and well-known industrialist in the city. I welcome Mr. Kaul most heartily to this Interactive Session.

Sir, this being your first visit to our Chamber, I would like to say a few words about us. The MCCI has completed 111 years of its distinguished services to the Nation and the business community. Recently, it changed its name from the Merchants’ Chamber of Commerce to the ‘MCC Chamber of Commerce & Industry’ to reflect its new ethos, multiplicity of business ventures, and a balanced focus on economic and social growth. It is one of the most dynamic, pro-active and front-ranking Chambers of Commerce and Industry in Kolkata and covers a wide spectrum of Industries, Trades and Services. We have over 700 direct members and 20 Industry Associations engaged in Iron & Steel, Engineering, Textiles & Hosiery, Chemicals & Pharmaceuticals, Jute Products, Tea & Sugar, Paper & Writing Instruments, Food Processing etc., to name only a few. We interact closely with the State and Union Governments in all economic activities like planning, re-structuring of taxes, employment generation, regional development, improvement of linkages by roads, railways and airways etc.

            Sir, historical and cultural contacts between India and Korea date back to ancient times, when a Princess from Ayodhya reportedly travelled to Korea and married King Kim-Suro in the year 48 AD. Besides, the enduring philosophy of Buddha, which has influenced the lives and thoughts of the people of the two countries, has provided a strong linkage. The rationale for a close relationship between India and Korea has been reinforced in modern times by the political and economic imperatives. After the end of Japanese rule in 1945, India played an important role in Korean affairs such as, General Elections in 1948 and Korean War during 1950-53. Besides, Korea’s thrust towards democracy and open market policies found resonance in India’s policy of economic liberalisation and ‘Look East Policy’. Bilateral relations received a further boost from the consistent support India extended to facilitate peaceful re-unification process of the two Koreas.

            India-Korea relations have made great strides in recent years and become multi-dimensional, spurred by significant convergence of interests, mutual goodwill and high level exchanges. Smt. Pratibha Devisingh Patil, President of India visited Republic of Korea in July, 2011 when the Civil Nuclear Energy Cooperation Agreement was signed. Prime Minister, Dr. Manmohan Singh visited Seoul in November, 2010 for the G20 Summit and is scheduled to visit again for the Nuclear Security Summit in March 2012. The State Visit of Mr. Lee Myung Bak, President of Republic of Korea to India in January 2010 was an important milestone that elevated the relations to a ‘Strategic Partnership’.

            The signing of a bilateral Comprehensive Economic Partnership Agreement (CEPA) by India’s Commerce & Industry Minister, Shri Anand Sharma in August 2009, which took effect from 1st January 2010, provided a further impetus to bilateral trade and investment flows between the two nations. It is Korea’s first Free Trade Agreement with a member country of the ‘BRICS’ and for India, it is the first one with an OECD nation. The agreement classifies 11,261 tariff lines of Korea and 5227 tariff lines of India broadly into 6 categories for the purpose of reduction / elimination of tariffs. Under the CEPA, Korea has agreed to phase out or reduce tariffs on 90 percent of Indian goods over a period of 8 years, while India will phase out or cut tariffs on 85 percent of Korean goods.

During first year of CEPA in 2010, the bilateral trade between India and Korea increased by 40 p.c. to US$ 17.10 billion as compared to 2009. Over this period, Indian exports went up by 37 p.c. while Korean exports increased by 42 p.c. The CEPA is expected to boost bilateral trade by US$ 3.3 bn annually. If the two countries can cooperate effectively and build on each other’s strengths, India feels that India-Korea partnership can be a ‘win-win relationship’ and it would not be difficult to reach the target of US$ 30 bn by 2014 in bilateral trade, as envisaged by both the countries at a Summit Meeting in January 2010 at New Delhi.

The Korea-India CEPA also allows temporary movement of professional workers like computer programmers and engineers – 163 now from India, to access the Korean services market. This is the first time that Korea has agreed to such a commitment in its FTA. But in fact, while South Korea has allowed Indian professionals to practise in their country, the degree of liberalisation is still on the lower side.  Sir, we are interested to know your views in this respect.

Sir, South Korea is the 12th largest trading partner of India. During the last five years, bilateral trade has witnessed a considerable growth – from US$ 7.3 bn to US$ 17.1 bn. The major items of India's exports to Korea are naptha, cotton yarn, ferro-alloys, unwrought zinc & aluminum, metal scrap, oil cakes, iron ore, marine products etc. The major items of India’s imports from Korea are automobile parts & accessories, telecom equipments, ships, petroleum products, H.R coils etc. In 2010-11, India could export around US$ 5.67 bn. worth of goods, while Korea’s exports to India stood at US$ 14.44 bn, showing a huge trade deficit for India. We would like to know, Sir, what is coming in the way of India’s steeping up exports to Korea and what are your suggestions for improvement quickly.  

            Investment between the two countries is also relatively low, compared to the size and structural complementarities of the two economies. From April 2000 to April 2011, FDI inflow from Korea stood at US $ 0.8 bn. accounting for 0.59 p.c. share in India’s total FDI inflow for the same period. Major South Korean companies active in India include Hyundai Motor, Samsung Electronics, LG Electronics, Hyundai Mobis, Wia Corporate, Lotte Group, and Doosan Heavy Industries. Korea’s total investment in India constitutes 1.24 p.c. of its total investment worldwide. South-Korean conglomerate POSCO, one of the largest steel manufacturers in the world, proposed to investing US$ 12 billion to build up an integrated steel plant at Paradeep, Orissa with an estimated production capacity of 12 mn. tons of steel annually. If this materialises, this would be the single largest overseas investment by Korea.

Korean investment in India is centred around Chennai, Pune, Noida and Gurgaon. Indian companies have also a sizeable presence in Korean market. Mahindra & Mahindra is the largest Indian investor in Korea, having acquired a majority stake in SsangYong Motors, the country’s 4th largest auto manufacturer, in March 2011, with an investment of about   US $ 470 million. Tata Motors acquired Daewoo Commercial Vehicle Company for US$ 102 million in March 2004. Other Indian companies with investment in South Korea are - Novelis Inc., a subsidiary of Hindalco Industries Ltd. and United Phosphorus Ltd producing aluminum and phosphorus respectively. Sir, we are interested to know whether Korea is planning to set up any facilities in the Eastern Region of India in the areas of agriculture, forestry and fishing, information and communication, automobile, food processing etc.

            South Korea is the fifth largest producer of nuclear energy in the World. As part of country’s ‘Look East Policy’ India-South Korea signed the ‘Civil Nuclear Cooperation Agreement’ on 26 July 2011. As India has been planning to set up some 30 Nuclear Reactors and get a quarter of its electricity from nuclear energy by 2050,we are looking forward to Korea as one of the major partners in the development of civil nuclear energy in India. With India’s rising demand and South Korea’s advantage in technology in energy infrastructure, both the countries can gain handsomely from effective cooperation in this field. Sir, we would like to know how you viewing the prospects.

            Sir, Indian economy has been growing a 8 p.c. or more for the last few years. It has a large consuming middle class of 300 mn. or more which could be an attractive market for Korea. The strength of Korean side is their ability to bring technology out of laboratory desks. India brings to table a large pool of world-class scientists and engineers and a large number of English speaking people. We hope that these basic factors will pave the way for greater collaboration between the two countries, making India a production-base with inexpensive skilled labor for Korean manufacturers. We also feel that by including the possibility of aggressively utilising the globally acknowledged IT manpower and Software technology of India, Korea will be able to improve competitiveness in its own manufacturing sector. We feel that there is much scope for cooperation between the two countries in pharmaceuticals, textiles, automobiles and infrastructure sectors. We are interested to know how the Korean business community is viewing the prospects and planning to strengthen the trade and investment ties with India, after CEPA and the chosen manufacturing sectors in which they are engaged.

As we understand, since 21 April 2008, nationals of the 26 countries including India, may apply for a Multiple Entry Visa to Korea provided that the person has travelled to Korea more than 4 times in the last two years, or has been to Korea regularly more than 10 times in the past without any records of immigration, offence or prohibition. This pre-condition is perceived to be inconvenient and somewhat stringent. We would like to know, Sir, whether you have any plans to further liberalise the issuance of Multiple Entry Visa for the prospective business community from India.

            Sir, you are aware that a new Government has been in power in West Bengal since May 2011. Within this short period, the State has emerged as one of the most dynamic and happening States in India. It offers great opportunities and incentives for trade and investment in the thrust areas like IT and Computers, Leather goods, Textiles, Garments & Hosiery, Engineering goods, Diamonds & Jewellery, Food processing and many other fields where Korea can well participate for mutual benefits. West Bengal has demonstrated a strong growth in Consulting, IT management & training and IT- enabled Services, earning international recognition. With its strategic location, commonly known as the ‘Gate Way to the East’, vast pool of skilled labour, West Bengal provides ample opportunities for investment in those core areas. We are interested to know, Sir, how you are viewing the new prospects of trade and investment opportunities in West Bengal and whether you have any specific plans and programmes to exploit them. We are sure that a Hyundai Automobile Plant could be an excellent starting point towards creating a meaningful co-operation with West Bengal.

            With these few observations, I would like to request Mr. Rajive Kaul, Hon. Consul General, to say a few words, before I invite His Excellency Kim Joong-Keun to address and enlighten our members about the prospects of stepping up bilateral relations between our two great nations.