Korea-India Strategic Partnership in South Korea's Indo-Pacific Construct: A Korean Perspective

By Ahn Choong-yong

In its recently released global pivotal state initiative, South Korea declared it will actively promote "freedom, peace and prosperity" in the Indo-Pacific, adding the "prosperity" component to the U.S.-led drive for a "Free and Open Indo-Pacific." Regarding the de facto diplomatic manifesto of the Yoon Suk Yeol government, Jagannath Panda and I pointed out that the Yoon administration has shifted from the "structural ambiguity" of the previous Moon Jae-in administration to "strategic clarity" (see The Diplomat on Jan. 16, and Jan. 27) in navigating the increasingly intensifying U.S.-China rivalry. The Yoon government has clearly aligned with the U.S.-initiated Indo-Pacific construct but does not intend to decouple completely from China.

While implementing strategic clarity, we also suggested that Korea and India pursue "strategic autonomy" by taking middle power coalitions with like-minded countries to ensure a rules-based inclusive regional order free of the unilaterally assertive and protectionist trade and investment policies of the U.S. and China at the expense of smaller economies. India is well known for balancing diplomacy in dealing with superpowers.

In Korea's quest for the new Indo-Pacific construct, India has emerged as a key strategic partner in driving its global diplomatic ambition. Surely, India and Korea have no remorseful legacies involving the other and share the values of a democratic political system and market economy, as well as a rules-based, open and inclusive world system. India is now the most populous state with the youngest population structure in the world. It is expected to become the third-largest economy this decade ― and is currently the fifth largest, having successfully weathered the COVID-19 pandemic and registering the highest growth rate in the world, at 8.7 percent and 6.8 percent in 2021 and 2022, respectively.

At the recent India Republic Day parade, Korean K-9 self-propelled artillery appeared as depicted on the front page of the Chosun Ilbo, symbolizing a great deal of security cooperation already in the works between the two countries. Given India's projected high economic profile, how has India been viewed by Koreans, what are the specific deliverables of an economic partnership and what challenges lie ahead toward South Korea's ambitious Indo-Pacific frame?

Simply put, the two countries have not pushed bilateral cooperation to its full potential. Although some Korean companies invested early in India's automobile and electronic sectors, Korea's outbound foreign direct investment (FDI) has not progressed to the level of India's recent economic rise.

Over the period of 2000-2021, Korea's cumulative outbound FDI to India reached $5.1 billion, sharing only 0.9 percent of the total FDI India has received, while Japan registered $36.3 billion, occupying 6.3 percent of the total, according to Indian government sources. Japan has been very active, initiating the Indo-Pacific concept and a key proponent of the Quad. Japan is using its massive Official Development Assistance (ODA) resource to construct a Japanese-type bullet train to connect Mumbai and Ahmedabad and a highway linking Mumbai and New Delhi. Along the high-speed railway and highway, Japan has been fostering a variety of industrial parks for Japanese companies. Regular bilateral summits and numerous high-level ministerial meetings between the two countries have established a high-trust relationship.

India is a country of diversity, consisting of polarized income brackets, early, middle and late industries including a still-huge agricultural sector, self-employed micro service businesses, small and medium enterprises, modern sophisticated industries including top-notch generic pharmaceutical industries, IT, and space technologies. India also needs to develop a variety of SOCs. Its huge population is its greatest asset; Prime Minister Modi claims that "India's big data due to its massive population is national wealth." India has a large cadre of world-class scientists and engineers, IT powerhouses and many available workers at cheaper wages than in China.

However, challenging issues remain. India still has some import substitution legacies in liberalizing its trade and investment regime. Its business environment should be upgraded, as it ranks 62nd globally on a World Bank index. A more investment-friendly environment with much-required reform in market regulations are urgently needed in India. Korea ranks fifth.

And opaque regulatory regimes must be upgraded to global standards. That is also true for Korea, for mutual FDI flows. India opted out last minute at the conclusion of the Regional Comprehensive Economic Partnership (RCEP). All RCEP members are bound to take advantage of accumulated rules of origin for deepening intra-regional trade. To compensate for non-membership in RCEP, Korea and India should upgrade the Comprehensive Economic Partnership Agreement to increase their bilateral trade and investment.

True, Korea has registered a consistent trade surplus against India. It should then augment its outbound FDI to India. Korea learned hard lessons of supply chain resilience to diversify its trade structure and cross-border investment, after being excessively tilted to China. In this context, Korea should put its eggs in different baskets.

Mutual trust can be cultivated through the formidable investments of SOCs and joint future-oriented R&D beyond bilateral trade. Joint productions related to K-pop and Bollywood movies could be effective channels for improving mutual understanding. Student exchanges between India and Korea are also desirable, as we've seen in the student exchanges between China and Korea.

This year marks the 50th anniversary of the establishment of diplomatic relations between India and Korea. India is also hosting the G20 meeting this year. This is a good opportunity for the two countries to advance to a new plateau of cooperation. Regular summits and 2+2 ministerial meetings between Korea and India need to be institutionalized for action-oriented collaborations. To close the lingering psychological distance between the two countries, mutual trust should be further enhanced via tangible SOC projects and lively business contacts in a sustainable fashion.

Ahn Choong-yong is distinguished professor of Graduate School of International Studies, Chung-Ang University and former co-chair of the Korea―India Strategic Dialogue of the Seoul Forum for International Affairs.