Opportunities for Investment & Growth: 5th Foreign Policy and Security Dialogue between India and South Korea

The present year i.e., 2023 marks the 50^th year of the diplomatic and bilateral ties between the Republic of Korea and India. Since the introduction of President Moon Jae-in’s “New Southern Policy (NSP)” in 2017, there have been considerable developments in the economic and strategic relationship between the two countries. Over the years, both countries have been able to establish a multifaceted collaboration that spans over a variety of sectors including energy, economy, and security.

5^th Foreign Policy and Security Dialogue between the Republic of India and the Republic of South Korea: The 5^th “Foreign Policy and Security Dialogue” between India and South Korea was held in Seoul on 16^th and 17^th day of January 2023. The Ministry of External Affairs (MEA) Secretary (East), Mr. Saurabh Kumar, who was the co-chair of the two-day dialogue, visited Seoul, South Korea to lead the discussions, on behalf of India, with Mr. Cho Hyundong, the co-chair representing the Republic of Korea.

During this two-day dialogue, both countries emphasised the importance of working together to develop the “Special Strategic Partnership” through robust high-level exchanges this year. The countries further agreed to enhance their cooperation in various sectors including trade and investment, security and defence, science and technology, as well as cultural and people-to-people exchanges.

The two countries resolved to take strategic steps to realize the vision of taking the annual bilateral trade to 50 billion US dollars by 2030 from the current 28 billion US dollars. The two countries also reinforced the importance of the Indo-Pacific Strategy (the strategy for a free, peaceful, and prosperous Indo-Pacific region). This was announced by the Republic of South Korea in December last year.  The ‘Indo-Pacific strategy’ has emerged as an important vocabulary in geopolitics in recent years. This strategy aims to expand the geostrategic significance of the Asia-Pacific region, spanning the Indian Ocean and highlights the pivotal role of India in the scheme of things.

Investment and Growth Opportunities in India:

The thrust on Indo-Pacific strategy, the bilateral defence deals, and the recently held Korea-India Foreign Policy & Security Dialogue, all point towards the convergence between India and South Korea highlighting the importance of India as a major investment hub.

South Korea is the 13th largest foreign direct investment (FDI) source in India, investing US$ 5.4 billion between April 2000 to December 2022, as per the data available on the website of Invest India, National Investment Promotion & Facilitation Agency. It is noteworthy that even amidst the pandemic, 66 new Korean companies entered India. India is seen as an untapped market especially since the “K-Wave (Hallyu)” has influenced consumer tastes and preferences worldwide, including India, thereby opening up opportunities for South Korean investments in personal care, food, entertainment and the fashion industry.

Certain major sectors have ample scope and opportunity for investment in India such as:

Mobility and battery technology: India currently depends on imports to meet the growing domestic demand for high-tech electric vehicle (EV) components and batteries. The Government of India now intends to reduce the reliance and dependence on imports and is moving towards localizing the production of EVs. In this regard, most Indian states have also published policies to incentivize EV manufacturers and consumers to boost demand. This area, therefore, has huge potential for FDI from countries and companies having expertise in this sector.

Electronics manufacturing: India is one of the world’s largest markets for consumer electronics. Korean Companies such as Samsung and LG are common household names in India. With India’s favourable demography, the demand for electronic consumables is not going to get satiated anytime in the near future. This offers lucrative growth opportunities for the companies and investors from South Korea.

Specialty steel: Despite being one of the biggest steel producers, India is still dependent on imports for its specialty steel needs. The government has floated a production-linked incentive scheme for this sector with a USD 848.9 million budget for 2024-2025. This offers exciting investment opportunities for South Korean firms including market leaders like POSCO.

Healthcare: The healthcare sector is another area that offers ample opportunity for investment to foreign investors and companies. There are various branches in this sector that provide opportunity for investment such as hospitals, medical appliances, diagnostic appliances, online pharmacies and pharmaceuticals and the like. Certain investors form the Republic of Korea have already started exploring this industry. For instance, NF Healthcare has entered this market with its medical-grade oxygen generators.

Logistics: Announcement of National Logistics Policy in September, 2022 by the Government of India will directly impact the logistics sector which is growing exponentially with the application of high-grade technology for efficient supply-chain visibility, route planning and optimizing operations. The growth trajectory in this sector is lucrative for South Korean giants such as CJ Logistics which has adopted its automated distribution system for warehouses for various countries.

There is no dearth of investment avenues in India’s rapidly growing economy. The Indian potential is globally recognized and bilateral dialogues, and schemes, help unlock the opportunities.

(Views are personal)

About the Authors: Neetika Bajaj, Managing Associate and Kopal Mittal, Associate, ZEUS Law Associates

Ms. Neetika Bajaj leads the Disputes Practice at ZEUS Law Associates. The ZEUS Disputes Practice has developed into a niche and specialised practice group consisting of members with expertise and experience in handling all stages of complex commercial domestic and international including relating court litigation.

ZEUS Law Associates is an ISO certified full service corporate commercial law firm with a team of dedicated and experienced lawyers well versed in handling domestic and cross border transactions across sectors, jurisdictions and regulatory landscapes. The firm’s distinct practice areas include Corporate & Commercial Law, Real Estate & Infrastructure, Litigation, Alternate Dispute Resolution, Indirect Tax and NRI Services.”