India-Republic of Korea Trade and Economic Relations

The trade and economic relations between India and South Korea (ROK) have grown from strength to strength in recent years. Trade increased over two fold during 2006-2011.  India is now the 13th largest trading partner of ROK. A huge impetus was accorded to the ties with the operationalization of Comprehensive Economic Partnership Agreement (CEPA) with effect from 1 Jan 2010.

Joint Trade Committee

The first meeting of a Joint Trade Committee (JTC) at the ministerial level between India and ROK, to review trade ties, was held in September 1987 in New Delhi. The second meeting took place in November 1995 in Seoul, the third in May, 2000 in New Delhi and the fourth in Seoul in October 2003.

The first Joint Committee meeting (Post CEPA) at JS/DG level was held on 19 Jan 2011 in New Delhi. It was followed by a Ministerial India-ROK Joint Committee, to review the implementation of CEPA, on 20 January, 2011, co-chaired by by Shri Anand Sharma, Minister of Commerce and Industry and Mr. Kim Jong- hoon, Minister for Trade, ROK. It was agreed to formalize a Joint Committee at the JS/DG level, to assist the Ministerial Joint Committee. It was also decided to merge the erstwhile JTC into the Joint Committee under CEPA. The Second Custom Committee meeting under CEPA was held in Seoul on 21- 22 Sept 2011. The second Joint Committee at JS/DG level was held in Seoul on 29 September 2011

Joint Business Council (JBC)

The first meeting of the Joint Business Council (JBC) of the Federation of Indian Chamber of Commerce & Industry (FICCI) & the Korean Chamber of Commerce and Industry (KCCI) was held in Seoul in 1977 following an agreement between them in February, 1976. The objective is to exchange business missions and to share market information to promote economic, commercial and technological cooperation between the two countries. The last meeting of the JBC was held in New Delhi in December 2005.

Trade

Bilateral trade has been growing on an average at 20% annually over the last five years. Compared to US$2.52 billion in 2001 (Indian exports US$ 1.11 billion and Indian imports US$ 1.41 billion) total trade stood at US$ 20.57 in 2011.  A modest target of US$ 30 billion in bilateral trade was set for 2014, during the visit of President Lee Myung Bak to India in January 2010.

India became the 9th biggest source of imports for ROK in 2011. Main Indian exports were petroleum products (mainly naphtha, 53%), cotton yarn, ferro-alloys, unwrought aluminum, unwrought zinc, metal scrap , oil cakes, iron-ore, sesame seeds and marine products. Major Korean export items include - automobile parts and accessories, telecommunication equipment, ships, petroleum products, hot rolled products of iron. Trade figures in the last 10 years are as follows:

(US$ billions)

Source: Korea International Trade Association

 

Korean Investment in India

According to the Department of Industrial Policy and Promotion of India (DIPP), ROK is the 17th largest investor in India in terms of actual inflow of FDI (http://dipp.nic.in/fdi_statistics/india_FDI_April2011.pdf ).

The investment figures of ROK in India, as per the Export-Import Bank of Korea upto 2011 are as under:

Source: EXIM Bank Korea                                                         

 

Total Korean FDI in India (Major sectors)

(US$ billion)

 

Source: EXIM Bank Korea

 

Korea’s total investment in India constitutes 1.24% of its total investment worldwide. It is centered around Chennai, Pune, Noida and Gurgaon

Manufacturing accounted for about 84% of the Korean investments in India, wholesale and retail trade about 7%, and financial and insurance activities about 4%. Other areas include - agriculture, forestry and fishing, sewerage, waste management, materials recovery and remediation activities, transportation, accommodation and food services activities, Information and communications, scientific and technical activities, business facilities management and business support services, education, human health and social work activities. Major ROK companies active in India include Hyundai Motor, Samsung Electronics, LG Electronics, Hyundai Mobis, Wia Corporate, Lotte Group, and Doosan Heavy Industries

The Lotte Group acquired Parry’s Confectionery Limited and formed the Lotte India Corporation Limited in 2004. POSCO, one of the largest steel manufacturers in the world, is investing US$ 12 billion to construct an integrated steel plant at Paradeep in Jagatsinghpur District of Orissa with an estimated production capacity of 12 million tons of steel annually. This would be the single largest overseas investment by ROK and the single largest inward investment into India. The project obtained final environmental approval in early May, 2011 from the Ministry of Environment and Forests, and is in the process of fulfilling other requirements under the Indian law before actual execution.

In addition some 150 other Korean companies have businesses in India.

Indian Investment in Korea

Indian investment in ROK up to 2011 is estimated to be about $1billion. Details of major ones are as follows:

• Novelis Inc., a subsidiary of Hindalco Industries Limited, the flagship company of Aditya Birla Group, acquired Alcan Taihan Aluminum Limited in January 2005. Novelis Inc. holds 68% of total capital investment of US$600 million in Novelis Korea Limited. Novelis Korea is Asia’s number one manufacturer of aluminum rolled products with state of art production facilities in Yeongju, and Ulsan and employs more than 1,200 employees.
• Tata Motors Limited, acquired Daewoo Commercial Vehicle (DWCV), Gunsan, Korea for a total price of KRW 120 billion (approximately US$ 102 million) in March 2004.
• Mahindra and Mahindra, acquired a 70% stake in the ailing Ssangyong Motors with an investment of $458 million including corporate bonds worth $80 million approx. The deal was approved by major creditors in Jan 2011 and the acquisition was completed in March, 2011.
• Nakhoda Ltd., one of large Indian producers of yarn, has acquired Kyunghan Industry Company which has a capacity for 150 tons per day of partially oriented yarn (POY), 90 tons daily for fully drawn yarn and 60 tons of polyester chips. The investment is estimated of $40 million.
• M/s Creative Plastic with an investment of [US$ 2 million] set up a 100% investment company, Alchemy Mold &Plastic Ltd. on Pyeongtaek.

Comprehensive Economic Partnership Agreement (CEPA)

Prime Minister Dr. Singh and then President of ROK Roh Moo-hyun, in their meeting in New Delhi on 6 October 2004, agreed to establish a joint study group (JSG) composed of officials, economists and representatives of the business community, to take a comprehensive view of the potential of bilateral business and economic linkages. In particular, it was mandated to examine the feasibility of having a CEPA between the two countries. JSG submitted its report to the two governments in February 2006.

During the State Visit to ROK by President of India Dr. A.P.J. Abdul Kalam from 6-9 February, 2006, it was agreed to set-up a Joint Task Force (JTF) to develop a CEPA. Seven Working Groups were set up for examining the issues arising in the CEPA, namely, Trade in goods, Trade in services, Investment, Regulations and Economic Cooperation, General provisions and Dispute settlement, Rules of Origin, Customs Administration & procedures.

ROK and India signed the CEPA in Seoul on August 7, 2009, after more than three years and twelve rounds of negotiations, committing the two countries to lowering or eliminating import tariffs on a wide range of goods over the next 8 years and to facilitate expansion or opportunities for investments and exchange or services.

ROK is 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. Most of South Korea’s major export items to India which are finished products such as automobiles parts, electronics including home appliances, with pre-CEPA tariffs of 5-15%, will enjoy further reduction of duties. Tariffs on auto parts will be lowered to 1-5%, tariffs on refrigerators and color TVs will be eliminated by 50% within 8 years. Similarly Indian exports which mostly comprise raw materials including steel will stand to gain. The agreement came into effect from 1 January 2010.

The CEPA is ROK’s first FTA  with a ‘BRICS nation. It 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. The categories include those: which eliminate tariffs completely from the day of implementation of the agreement; having annual tariff reductions of 20% and 12.5%; others under which final tariffs will be reduced to 1-5% and 50% of base tariffs after 8 years; and an exclusion category which will enjoy no tariff reduction. Mostly agricultural products and some textiles etc figure in exclusion category. CEPA also allows temporary movement of professional such as computer programmers and engineers etc. Under CEPA 163 such professionals would be allowed access to Korean service market. Export Inspection Council of India and Korea Chamber of Commerce & Industry (KCCI) are mandated to issue Certificate of Origin (COO) for availing tariff concessions under CEPA.

Post CEPA, bilateral trade increased by 40% to USD 17.10 billion in 2010 and a further 20% in 2011 to an estimated $ 20.5 billion.

Double Taxation Avoidance Convention (DTAC)

India and ROK are negotiating a revision of the Double Taxation Avoidance Convention (DATC) signed in 1996. The fifth round of negotiations was held in New Delhi from 6-8th September, 2010.

 

Recent Trade Promotion Activities:

 

Indian Chamber of Commerce in Korea (ICCK)

Consequent to the signing of CEPA, and given the conducive atmosphere for boosting bilateral commercial ties, business and industry circles in two countries set up ICCK in January, 2010 in Seoul, with the support of Embassy of India, to better serve the business community. Since 2011, ICCK has been holding a monthly meeting called “ICCK Speakers Forum” where experts from diverse fields speak on trade and commercial relationship between the two countries. ICCK is trying to actively network with the Industrial Associations, Indian and Korean companies and government organizations. (webpage: www.indochamkorea.org).

 

India-Korea Information Technology Partnership for Global Success

The Embassy of India, Seoul, in association with the Indian Chamber of Commerce in Korea (ICCK), organized a Forum on India-Korea Information Technology Partnership for Global Success on 14 March 2011 in Seoul. Mr. Som Mittal, President, National Association of Software and Service Companies (NASSCOM), was the key note speaker. There were thematic presentations by TCS on BPOs, Wipro on ICT, L&T Info Tech and Mahindra Satyam on Manufacturing, Design and Engineering, and a presentation from M/S Nielsen, a $5.1 billion company sourcing IT services from Indian software companies. The Forum provided an opportunity to showcase Indian IT Industry and refocus and energize India-Korea IT collaboration. As part of pre-publicity for the Forum, the Embassy brought out a publication on Indian IT success stories and a special supplement on Indian Software Industry including an interview with NASSCOM President in Korea IT Times, a popular monthly publication on IT. The Form received an enthusiastic response from the Korean industry and business.

 

Korean Pharmaceutical & Generic Drugs Industry

The Embassy commissioned a market survey on “Korean Pharmaceutical & Generic Drugs Industry” in December 2010, which can be made available on request by the Embassy (com.seoul@mea.gov.in). The Embassy also organized a Buyer-Seller Meet in the Pharma sector in March 2009 and Oct 2011 in association with Pharmexcil which were well attended.

 

Important Organizations

 

Korea Desk

The Department of Industrial Policy & Promotion in the Indian Ministry of Commerce and Industry, has set up desk to facilitate Korean investors in India. Contact details as follows:

·        Development Officer (Korea Desk)

Investment Promotion & Infrastructure Development Cell
Department of Industrial Policy & Promotion
Ministry of Commerce & Industry
Government of India
368 Udyog Bhawan
New Delhi - 110 011
Telephone: + 91 11 2306 2221      
Fax: + 91 11 2306 2626
E-mail:  
Website: http://dipp.gov.in/English/Investor/Korea_Desk/KoreaDesk.aspx

 

Indian Overseas Bank in ROK

The Indian Overseas Bank (IOB) has a branch in Seoul since 1977. Contact particulars as follows:

2431 Bldg., 9th Floor, 24-31, 1-ka, Chungmu-ro, Chung-ku, 
Seoul 100-011, Republic of Korea
Tel: +82-2-753-0742, +82-2-753-0743      
Fax: +82-2-756-0279
E-mail:  
SWIFT CODE: IOBAKRSE 

 

ROK Banks in India

Shinhan Bank - has three branches in India, which are as follows:

Mumbai Branch

42, Jolly Maker Chambers II, Nariman Point, Mumbai, 400-021,India.
Phone: +91 22-2282-2200      
Fax: +91-22-2288-4277
E-mail:  

New Delhi Branch

Upper Ground Floor, Mercantile House, 15 Kasturba Gandhi Marg,
New Delhi, 110001,India.
Phone: +91 11-2370-6040      
Fax: +91-11-2370-6044 
E-mail:  

Vellore Branch

No.8 Thirumalai Mudali Street, Walajpet
632 513, Vellore District, Tamilnadu, India
Phone No: 91-41-7227-8200      
Fax No: 91-41-7223-2378
E-mail:  

 

Woori Bank (New Delhi Branch)

806, Narain manzil
23 ,.Barakhamba Road, New Delhi 110001,India.
Phone No.: 91-11-4351-5651,2
Fax No: 91-11-4351-5654
E-mail:  
Website: http://in.wooribank.com

 

Hana Bank (New Delhi Representative Office)

501/503/505, Statesman House,B-148, Barakhamba Road, New Delhi-110001,India.
Phone No: 91-11-4352-3111      
Fax No: 91-11-4352-3176
E-mail:  
Website: http://www.hanabank.com

 

KEB Bank (New Delhi Representative Office)

Flat No.511 Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi 110 001, India.
Tel No.: 91-11-4354-8960      
Fax No.: 91-11-4354-8964 

 

Korea Business Development Centre in India (KBDC)

The Small Business Corporation of Korea has established a KBDC in New Delhi, to assist Korean small and medium enterprises in the expansion of their business and investments in India. Their contact details in India are as follows:

Korea Business Development Centre,
Mohan Co-operative Industrial Estate, New Delhi-110044
Tel: +91-11-4167 8601      
E-mail: 

 

Useful Addresses for Trade Enquiries in Korea

i. Korea Importers Association: http://www.koima.or.kr

ii. The Korea Chamber of Commerce & Industry: http://english.korcham.net

iii. Korea International Trade Association: http://www.kita.org 

iv. The Federation of Korean Industries: www.fki.or.kr

v. Korea Trade Investment Promotion Agency (KOTRA): http://english.kotra.or.kr

vi. BuyKorea (KOTRA): http://www.buykorea.org

vii. Korean Marketplace: http://www.gobizkorea.com

viii. EC21:http://www.ec21.com

ix. Ecplaza Korea: http://www.eckorea.net

x. Trade Korea: http://www.tradekorea.com 

xi. Seoul Business Agency (SBA): http://www.sba.seoul.kr

xii. Small Business Corporation(SBC) : http://www.sbc.or.kr

 

February 2012