Prime Minister Narendra Modi has been vigorously promoting his "Act East Policy' ever since he came to power. His recent three-nation trip to China, Mongolia and South Korea was part of that drive towards the east. The media has understandably focussed a great deal of attention on his visit to China, but his sojourn to South Korea, is also a key component of his 'Act East Policy', has not received as much publicity as it deserves.
Modi is no stranger to South Korea having visited that country even in 2007 when he was the Chief Minister of Gujarat. He took a big delegation of industrialists and business people to Seoul to explore the prospects of attracting Korean private investment to Gujarat. Second, as Prime Minister, he also had an opportunity to meet President Park Geun hye at the time of the East Asia Summit in Myanmar in November 2014 and this provided a very useful platform for them to familiarise themselves with the evolving bilateral partnership.
India's engagements with the Republic of Korea (ROK) have witnessed some significant milestones in recent years and their economic and security interests converge across a wide range of subjects including counter terrorism, maritime security, UN reforms, nuclear non-proliferation and energy cooperation. Both are interested in an open, balanced and inclusive regional architecture in the Asia-Pacific. In particular, since both depend on sea-borne trade for their economic prosperity, they share a common commitment to the need for ensuring freedom of navigation and unimpeded commerce in the high seas. They also signed an agreement in 2006 for cooperative measures against transnational crimes, piracy, etc. They were subsequently joined by Japan and China to undertake anti-piracy operations in the Gulf of Aden.
As for their bilateral relations, they forged a strategic partnership in 2010 and followed it up by signing a Comprehensive Economic Partnership Agreement. In 2011 their trade volume reached a high $20 billion, but tended to decrease to reach around $17 billion in 2012. South Korea's private investment too quickly picked up and reached a total of $3 billion. Today, South Korean companies have made a great impact in the automobile and electronics sectors of the Indian economy.
The joint statement made by Prime Minister Modi and President Park eloquently testifies to the expanding dimensions of the partnership. First and foremost, they upgraded the bilateral engagement to a "special strategic partnership" and decided to add "new substance, speed and content" in such areas as foreign affairs, defence, trade and investment. They have agreed to hold annual summit meetings of their top leaders alternately in New Delhi or Seoul or on the sidelines of multilateral events. Further, the foreign ministers of the two countries, who have been meeting regularly to conduct their dialogue, will be meeting annually in a structured framework. They have also agreed to strengthen consultations between the two respective National Security Councils on security, defence and cyber related issues. In addition, Korea will be the second country with which India will have Joint Vice-Ministerial level defence and foreign affairs dialogue in the 2+2 format.
One of Modi's abiding interests is to invite foreign investment to India for bolstering his "Make in India" programme. Last year, when he went to Japan, he carried the same message to Japanese business leaders and secured $35 billion investment at public-private base covering the next five years. In his latest visit to China, he impressed on the Chinese to be partners in India's bid to boost its manufacturing skills. He met with Korean business leaders and industrialists and explained his government's policies on comprehensive programme of economic modernisation that covers all sectors of the economy. He told them, "We have a special focus on infrastructure and developing a world class manufacturing sector. Korea can be a leading partner in this enterprise." Impressed by Modi's economic vision, the EXIM Bank of Korea has agreed to provide $10 billion for mutual cooperation in manufacture for priority sectors including smart cities, railways, power generation and transmission. Soon the two sides will prepare a roadmap on how to implement it.
India is also deeply interested in using Korea's advanced expertise in its plan to modernise its shipbuilding industry. Since Korea is a global leader in shipbuilding, it can help India in the construction of vessels like LNG carriers. Both countries have decided to constitute a Joint Working Group including government and private sectors to work out measures for cooperation in this sphere.
Defence and civil nuclear power are some of the other areas that offer bright prospects for cooperation. The defence ministers of both countries visit each other and hold regular dialogues on many aspects of possible cooperation. India's Defence Minister Manohar Parrikar made a visit to Seoul in April 2015 and highlighted that the defence industry in India was well poised to offer $250 billion worth of business over the next decade. Further, since the Modi government has welcomed foreign investment in the defence field in a big way, he urged the Korean defence firms to take advantage of this opportunity to enter the Indian market as long term partners.
As for civilian nuclear cooperation, both countries signed an agreement in 2011, but nothing positive has emerged from the accord so far even as Seoul is very keen to sell its reactors to India. Korea's interest in the subject has become deeper now as it is competing with Japan in trying to supply its reactors in many parts of the world. A new bilateral CEO's Forum was launched at the time of Modi's visit and this could play a critical role in expanding investment and trade.
As noted earlier, India-Korea trade has not expanded despite the signing of the Comprehensive Economic Partnership Agreement. It is believed that the two way trade has the potential of reaching $100 billion by 2020. But many want the CEPA to be upgraded to realise that goal. It is found that only about 40 percent of the trade agreement's capacity is probably being used because the tariff concessions under the CEPA are not competitive. This creates discouragement for companies to use the CEPA. Many Koreans want India to make its tariff line more attractive and liberal.
(K.V. Kesavan is a Distinguished Fellow and Vindu Mai Chotani is a Research Assistant at ORF)
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