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The Peninsula

Modi to Korea: Enhanced Partnership but Adjustments Needed in Korea – India Ties

Published May 29, 2015
Category: South Korea

By Nicholas Hamisevicz

Indian Prime Minister Narendra Modi’s trip to Korea last week marks the fourth time in the last six years where either the Prime Minister of India has visited Korea or the President of Korea has traveled to India. These recent visits have helped create a solid structure and format for steadily increasing Korea – India ties. However, some of the big projects and opportunities that were publicized to propel Korea – India relations forward to another level have not materialized. Prime Minister Modi is trying to use the momentum and mandate from his election to change the dynamics in India in order to make it more appealing for foreign investment. Modi’s efforts, along with the meetings and arrangements stemming from this visit, may provide the space and opportunities to move on from past deficiencies and create new possibilities for Korea – India relations.

Business and economic relations were always going to be the major focus on this visit. In the lead up to the visit, the Indian Foreign Minister and Defense Minister both traveled to Korea and promoted Modi’s “Make in India” initiative. Prime Minister Modi did the same, talking about the initiative at every opportunity and explaining how his government was trying to make it easier to do business in India.

While some Korean businesses have had decent success in India, the trouble is that South Korea has tried to make things in India, but it hasn’t had much luck with projects that were publicized as important milestones for the bilateral relationship. The most recognizable example, and the one most absent from the meetings last week, is POSCO’s steel plant and investment in Odisha. The project, which began in 2005, was the biggest foreign investment in India at the time; however, delays in securing federal and local approvals, court rulings, local protests, and environmental concerns have prevented the project from getting started in a meaningful way. South Korea also thought it won a deal to make eight minesweepers for India, but that was rejected when it was ruled that middle men were used to help secure the deal, a practice that is technically illegal for Indian defense procurement. South Korea also fell short trying to sell fighter trainers to India.

In addition to the lack of success with these big projects, the relatively small amount of bilateral trade is also a concern. The two countries were originally hoping to be at the $40 billion mark for total trade by this year, but they are way short, and the goal hasn’t been mentioned in recent meetings. Both sides have issues with the Comprehensive Economic Partnership Agreement (CEPA) that entered into force in 2010. Economics should be the main connector between India and Korea from which other projects could emerge, but it just hasn’t been that impactful.

Fortunately, both sides realize that adjustments need to be made. Prime Minister Modi has been vocal and active in trying to make it easier for countries to do business with India. In his speech at the India-Korea CEO forum in Seoul, Prime Minister Modi said that his government is “working day and night to create conditions for faster and inclusive growth.” In the press briefing with Park Geun-hye, Modi mentioned there will be a new “Korea Plus” channel to help Korean companies that want to work with India. Also during the visit, Korea and India created a Joint Group for Shipbuilding to try to bring about more collaboration in a sector that would be mutually beneficial but hasn’t occurred. Lastly, the two sides promised to begin working toward negotiations for upgrading the CEPA.

Encapsulating the effort by Korea and India during Modi’s visit to enhance their relations, the two sides agreed to upgrade their “Strategic Partnership” to a “Special Strategic Partnership.” Korea and India set up a Foreign and Defense 2+2 format for the Vice Minister level and will have more “consultations between the National Security Council structures of the two countries on security, defense, and cyber related issues.” The emphasis by the two leaders on their particular regional plans, “Act East” for Modi and the “Northeast Asia Peace and Cooperation Initiative for Park Geun-hye, will help lead to a broader understanding between Korea and India on regional interests and strategic calculations.

Over the past decade, Korea and India have done more to enhance their economic, political, and strategic interactions. The structures in place allow for a steady improvement of bilateral relations; however, certain economic and strategic setbacks, along with living in the dynamic Asia-Pacific region, make it important for Korea and India to readjust their relations to get the maximum benefit of their partnership in order to be successful in the Asia-Pacific century. Modi’s visit to Korea, his attempted adjustments in India, and the agreements and arrangements made last week, are a good way for Korea and India to reestablish ties and move forward as special strategic partners However, even if there are suggestions that the minesweeper deal or the fighter trainer deal could be back in play, the two countries should really look for other opportunities from this point forward for a big win to showcase their partnership and desire to be strong players in Asia and in the world.

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

Photo from Narendra Modi’s photostream on flickr Creative Commons.

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