South Korea President Moon Jae-in pitches for higher FDI into India
Business Standard , Jul 09, 2018
South Korean companies are willing to invest in diverse sectors including infrastructure in India, South Korean President Moon Jae-in has said. But he also pitched for growing bilateral trade based on greater liberalisation, possibly hinting at South Korea's current standoff with India on expanding of the existing Comprehensive Economic Partnership Agreement (CEPA).
Speaking at the India-Korea Business Forum on Monday, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), Moon also said South Korean companies needed to boost investments in India beyond the existing $2.7 billion. This is expected to see South Korea stake a larger portion of India's infrastructure pie as Moon referred to large-scale spending by government and multilateral bodies in building roads, bridges and ports.
Adding that South Korea is already involved in various on-ground projects, the President listed out the Nagpur-Mumbai Super communication Expressway, Kalyan-Dombivali Smart City and Redevelopment of Bandra Government Colony as examples where South Korea's expertise in creating high-class infrastructure can help India.
Senior diplomatic sources said the President is expected to visit Maharashtra over the next two days and tour the projects for which Seoul has agreed to provide a $10 billion line of credit.
In attendance were the major ‘chaebols’ or large family-owned mega-conglomerates from Korea such as Samsung, Hyundai and LG which command large chunks of Korea's exports as well as the domestic consumer and industrial markets.
The meet will be the second one of its kind in less than five months.
However, India may have a tough time adding to the list of 600 Korean companies that already have operations here owing to investors’ reservations about capital availability and complications regarding the goods and services tax (GST).
On Monday, firms said that their local partners find it difficult to receive loans from banks, while the new GST structure is too complicated.
Commerce and Industry Minister Suresh Prabhu said plans are afoot to locate and open a special economic zone for Korean companies in India. He added that Korean firms can take advantage of the large demand for marine food processing in the country.
Updated CEPA to be signed on Tuesday
On Tuesday, Prime Minister Narendra Modi and South Korean President Moon Jae-in are expected to sign the updated Comprehensive Economic Partnership Agreement (CEPA), talks on which had come to a head over the addition of new tariff lines from both sides as well as India's demand to be recognized as a ‘Native English Speaking' nation.
The implementation of the latter demand would simplify visa and employment rules for Indian professionals, a senior Commerce Department official said.
However, after a lengthy discussion on the matter between trade ministers from both nations on Monday, three broad issues have been agreed upon. This includes an early harvest agreement that was signed on Monday and identifies the broad areas for expanding the pact later.
Also, forming of a future strategies group to harness fourth generation industrial technology, as well as work on a separate agreement for trade remedies is expected.
In place since 2009, India now wants to amend the CEPA to allow exporters greater incentive to ship out goods to the East Asian nation. This involves a focus on not expanding the pact beyond its current conditions, enhancing of market access and strengthening of the Rules of Origin clauses, the official added. This has been met with opposition by Seoul, which greater liberalisation on India's part.
After deciding to expand the pact in September last year, the Centre has been under pressure from domestic business. The latter contend our export lacks enough room to succeed in Korea in major sectors, while import continues to rise at a fast clip.
While the deal is one of India's oldest free trade agreements, trade has historically favoured Korea, with India's import growing much faster than export.
Currently, 78 per cent of items from India’s list of goods and 88 per cent of the Korean list is placed in the zero-duty category.
India’s export to South Korea was $4.4 billion in 2017-18, while imports stood at a much larger $16.4 billion.
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