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The Peninsula

After Trouble with Minesweeper Deal South Korea – India Relations Need a Win

Published September 15, 2014
Category: South Korea

By Nicholas Hamisevicz

Recently, there was a big setback in Korea-India relations. The deal that was made back in 2011 for India to purchase eight minesweepers from South Korea is currently on hold and may soon be scuttled. It was announced that India’s Ministry of Defense launched an inquiry into the claim that the Kangnam Corporation, the South Korean company that won the deal, used middle men to help facilitate the winning contract. Using middle men for defense deals is prohibited by India’s military procurement laws. This is another high profile interaction that has had problems, diminishing the larger potential impact for Korea-India relations. In general, bilateral ties between South Korea and India are improving at a solid pace, yet the two sides still need a significant achievement to help push the relationship to a new level and sustain the advancement of interactions.

South Korea’s Kangnam Corporation concluded the deal with India back in October 2011; however, an Italian company that lost out complained about the South Korean bid and the use of middle men. A BJP lawmaker also inquired about the deal to then defense minister AK Antony. The Indian Ministry of Defense tried to quietly put the agreement on hold. The case came up again after Park Geun-hye’s visit to India in January where she raised the issue with then Prime Minister Manmohan Singh. This made the Indian defense ministry look further into the arrangement, and it ultimately found “deviations in procedure.” Moreover, the defense ministry cashed the check of 30 million Indian rupees the Kangnam Corporation had to provide as part of an “Integrity Pact” saying the Kangnam Corporation would not offer bribes to win the bid. The Indian defense ministry also kicked the case to India’s new Attorney General Mukul Rohatgi.

If it sounds complicated, that’s because it is. Complicated is often a word used when working with India. Unfortunately, complications and setbacks have arisen in the higher profiles cases in Korea -India relations. POSCO was supposed to have the one of the largest investments in India, which should have been a big success to catapult South Korea-India ties, especially in the economic realm. However, nine years of delays in providing permits, disputes with the federal and state governments, and local protests have all contributed to POSCO still being unable to fully implement its desired and agreed upon goals for its investment work in Odisha, India.

On the military side, South Korea was close to getting a contract before. Its KT-1 fighter trainers were finalists for a bid but lost out to a Swiss company; the South Korean company was unsuccessful with its appeal as well. Moreover, while it wasn’t part of a bilateral deal, the Indian Supreme Court decision to call for Samsung’s chairman to come to India to face charges for a complex dispute between a Samsung subsidiary and a small Indian firm doesn’t help the relationship or bilateral business environment either.

At a Brookings event last week on India in the Asia-Pacific, I stated that South Korea-India relations need a big win to drive their relationship forward. Korea and India have appropriate structures to steadily improve their strategic partnership. However, to keep up with a fast-paced region and to more permanently and consistently strengthen ties, a high profile success story is essential. Unfortunately, the delays in POSCO’s facilities in Odisha, losing out on the KT-1 fighter contract, and the current uncertainty with the minesweeper deal means that these connections can’t provide the needed boost to a new level for Korea and India. The momentum and immediate impact that could have been gained from these interactions is lost. Now, with Prime Minister Narendra Modi’s strong personal connection with Japan’s Prime Minister Shinzo Abe, greater focus and activity between India and Japan will likely occur. For South Korea and India, a new bilateral project will be necessary to propel the South Korea-India strategic partnership to a higher intensity of relations.

Nicholas Hamisevicz is the Director of Research and Academic Affairs for the Korea Economic Institute. The views represented here are his own.

Photo from Thomas  McDonald’s photostream on flickr Creative Commons.

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