‘South Korean firms exiting China will look at India as an alternative destination’

Many South Korean companies are on an exit mode from China and India is definitely on the radar as an alternative destination, said a South Korean diplomat. However, to attract such investments, India has to remove some hurdles on the ground, he said.

According to Yoo Chang-Ho, Minister-Counsellor for Political Affairs, Korean Embassy in India, the country had reasonable relationship with China, which suffered over the “last three-four years” owing to security concerns.

The worsening relationship was a “wake-up call” to the Korean private sector and Covid-19 had put them on an exit mode, the Korean diplomat said, answering a query on how long such relocation would take.

He was responding to queries during a recent video conference, organised by the Delhi-based Dr Shyama Prasad Mookerjee Research Foundation.

“I always tell them (Korean business) that you come here. But we face at bit of difficulty (in India),” he said, but did not give any details of what the difficulty was.

Covid-19 diplomacy

According to Invest India portal, Korea is the 14th largest source of FDI in India. Between April 2000 and June 2019, Korean companies had $3.84 billion worth of direct investments in India. Hyundai, POSCO, Samsung, LG and KIA Motors are major investors.

Korean FDI in India could have been higher if POSCO was allowed to go ahead with its plan of setting up an integrated steel plant in Odisha. From India, Aditya Birla Group, Tata Motors and Mahindra and Mahindra are major investors in Korea.

The relationship between the two countries took a significant turn in the last couple of months, as Korean companies started playing a lead role in meeting India’s growing demand for Covid test kits.

According to Vishnu Prakash, former ambassador of India to South Korea and Canada, Chhattisgarh imported 75,000 rapid test kits from Korea at a landed price, inclusive of all taxes, of barely ₹337/kit. Prakash was a co-speaker in the meeting.

Early this week, the Indian Council of Medical Research (ICMR) entered into a contract with Humasis Co Ltd of Korea to import 5 lakh kits, to be made using Indian raw materials. The decision was taken at a time when Rajasthan stopped using China-made kits on alleged accuracy issues.

Most importantly, SD Biosensor, a South Korean company, was quick to set up a anti-body testing kit facility at Manesar in Haryana. The facility, which started production recently, will have an initial capacity of 5 lakh kits.

Chinese dumping

Prakash said the post-corona world would witness “major recalibration of geopolitical ties” and would have implications on business. There is already growing consensus among nations against value-chain concentration in China.

Under such situation, he said, India should depend on its trusted friends like Korea, Japan, Singapore, Indonesia, Vietnam, and others and focus on building domestic value chain. He was specific that “dumping (from China) must be prevented” to give Indian industry a chance.

“I think, India should bite the bullet,” Prakash said, hinting that the abnormally low price of some Chinese products — which led to concentration of value-chain — might have been a result of disguised State subsidies.

India may not be alone in taking a critical look at the existing trade practices governed by WTO. And, that raises questions about trade architecture in the post-Corona world.

While emphasising his country’s intentions to convert the crisis into an opportunity, Chang-Ho said it was not yet clear if the world would be going back to the old era of trade sanctions and closed economies or would reinvent new architecture.

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