Posted by: Ihlwan Moon on August 7, 2009
South Korea and India on August 7 signed an agreement, giving Korean companies better access to India’s 1.2 billion consumers and opening Korea’s job markets for Indian engineers and other workers. The pact, signed by India’s Commerce and Industry Minister Anand Sharma and his Korean counterpart Kim Jong Hoon in Seoul, will abolish or cut tariffs for 90% of Indian goods exported to Korea and 85% of Korean products shipped to India in terms of value.
One of the biggest Korean beneficiaries of the pact, called Comprehensive Economic Partnership Agreement, will be Hyundai Motor. The Korean automaker, which is India’s largest car exporter, assembled 489,000 vehicles in India in 2008, of which 245,000 were sold locally. The remaining 244,000 cars were shipped overseas, the bulk to Europe.
Once the deal takes effect, probably next January, the tariffs for car parts Hyundai’s Indian plant imports from Korea will be slashed gradually from 12.5% now to as low as 1% within 8 years. Car parts accounted for 12.6% of Korea’s $8.98 billion worth of exports to India last year. Other major Korean exports to India include jet fuel, mobile phones, ships and steel products.
For India, South Korea will immediately abolish its import duties of between 1% and 3% on Indian naphta, ferro-chrome steel and soy oil. They accounted for some 65% of India’s $6.6 billion exports to Korea last year. Among other Indian products benefiting from tariff cuts are non-alloy steel, cotton thread, corn and sesame seeds. But probably more importantly, the two countries agreed to open job markets for computer experts, engineers, business consultants and assistant English teachers.
The agreement between Asia’s third- and fourth-largest economies needs ratification by Korea’s parliament. India’s parliamentary government system doesn’t require ratification by its legislature for such agreements. Bilateral trade between India and South Korea rose 39% last year to $15.6 billion.