South Korean companies increasingly see India as a viable alternative to China
- Sustained US-China tensions and other internal and external challenges have pushed South Korea to speed up diversifying its trade and investment
- Despite significant hurdles to doing business, India has emerged as an attractive destination for Korean firms such as Samsung, LG and Hyundai
Amid such circumstances, a series of legislative measures initiated by the Biden administration to deter China’s growth at the expense of relations with its allies has prompted Seoul to accelerate its pivot from Beijing.
Additionally, despite China’s reopening after the pandemic, South Korea’s trade deficit with China in the first quarter of this year amounted to US$7.8 billion – the first such deficit since the two countries normalised diplomatic relations in 1992 – causing Korean businesses to reconsider the importance of maintaining a China focus.
Motivated by such incentives and other factors, major Korean and global companies have relocated or enhanced their manufacturing facilities in India. Samsung, beyond building the world’s largest mobile phone factory in Noida, Uttar Pradesh, announced in February that it would manufacture its entire Galaxy S23 smartphone series in India instead of importing them from its factory in Vietnam.
In January, the company touted the launch of its top-of-the-line fridge range that is “100 per cent made in India, with features made for India”. Another Korean electronics giant, LG, revealed in February it would invest US$24 million to establish a new manufacturing line at its Pune-based facility, where it will produce premium side-by-side fridges in addition to those at its existing facility in Greater Noida.
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Not surprisingly, the Hyundai Motor factory was one of the main stops for Korean Foreign Minister Park Jin during his visit to India last month to celebrate the 50th anniversary of the establishment of diplomatic relations between the two countries. He also underlined the contributions of Korean companies to “Make in India”.
Meanwhile, the World Bank’s Doing Business 2020 report showed India ranked poorly in several key areas, including 136th in ease of starting a business, 154th in registering property and 163rd in enforcing contracts.
In response, they are willing to tap into the opportunities India presents. As Modi has said, “The whole world is saying that India’s time has arrived.” With South Korea seeking to reduce its reliance on China, we will see an increase in its investments in India, leveraging shared democratic and market systems, and a special strategic partnership.
Haeyoon Kim is a senior programme officer at the Asia Society Policy Institute in Washington, DC