By Dr Sojin Shin
India has now become the most attractive investment destination for South Korean blue chip companies.
The South Korean entrepreneurs have taken a major lead in investing in India’s manufacturing sector. They carry a tremendous technological advantage and price-wise their goods are very competitive in the Indian market.
South Korean President Park Geun-Hye regards India as a very important partner for the mutual economic development and realizing the vision for global trade.
Heavyweight South Korean manufacturers who are active in the Indian market are already working in line with the vision of their President.
In January last year, the Export-Import Bank of Korea, or Korea Exim Bank, signed a Memorandum of Understanding with India Infrastructure Finance Company Ltd., or IIFCL, a wholly-owned Indian government subsidiary that specializes in providing long term finance for infrastructure projects.
The agreement includes a clause that allows the Exim Bank to provide loans of upto US$200 million to Indian domestic companies to import goods and services from South
Such financial funding would boost economic ties between the two countries as well as businesses. The South Korea-India Comprehensive Economic Partnership Agreement, or CEPA, signed in 2009, has given a significant boost to both bilateral imports and exports. The CEPA is expected to expand trade and investment further and enhance investment protection on bilateral basis.
Annual trade between the two countries, as in November 2014, was more than $20 billion, according to the Korea International Trade Association.
The National Democratic Alliance government at the center has invited investors from the world over to manufacture or make goods in India.
Interestingly, much before India launched its “Make in India” campaign last year, 85% of the South Korean investments in India were already in the manufacturing sector. This is because the South Korean investors see substantial value and high rate of returns in the medium term in the manufacturing sector.
South Korean companies have a firm belief in having manufacturing locations close to the expanding consumer base of India. In contrast, investors from other countries are mostly eyeing the services sector.
The strength of the South Koreans lie in the greenfield type of Foreign Direct Investment, or FDI, which requires acquisition of land to set up facilities from scratch, investment in supporting infrastructure including water and power and clearing environmental issues.
Leading the South Korean investments in India are the electronic goods giants, Samsung and LG, which have grabbed more than 40% of the market share in the mobile phone sales. Their products are manufactured in factories located at Greater Noida in Uttar Pradesh.
Hyundai Motor Company has automobiles manufacturing plant at Sriperumbudur in Tamil Nadu with an annual manufacturing capacity of 600,000 units. It has a 21% share in the fast growing Indian market for automobiles.
The automobiles sector has a close relationship with other industries such as steel and rubber and helps create both blue and white collar jobs, thus contributing to nation building.
Dr Shin is research associate in the Institute of South Asian Studies at the National University of Singapore. She focuses on Indian economy and politics.
fii-news.com
