We need Make in India, Korean style

Tina Edwin
Tina EdwinMay 19, 2015 | 20:48

We need Make in India, Korean style

Until the mid-1990s, Samsung was just another foreign brand of television just like a Sony or a Panasonic televisions and music systems, Indians would bring back from their stay in the Gulf nations. Not too many people in India had heard of Korean brands such as Samsung, Lucky Goldstar (now LG), Hyundai or Daewoo. Cut to 2015; almost every home in India has at least one gadget that bears a Korean brand name, most of which are made in factories in India. Korean brands now command a lion's share of household goods market with televisions, air-conditioners, refrigerators, washing machines and microwaves. And not to forget, in the mobile phones and passenger vehicles markets. Their success in India is unprecedented and they penetrated markets that were traditionally occupied by the Japanese. It would not be out of place to say that the post-liberalisation period belongs to the Korean brands, with Japanese brands playing catch up in high visibility consumer oriented sectors other than passenger vehicles business.


Korean companies were late starters in India. Yet, more than 1,000 Korean companies have invested in India so far and together they have invested about three point nine billion dollars between 1990 and 2014, according to estimates of Korea EximBank. Many others have opened representative offices. Significantly, more than 80 per cent that investment is in the manufacturing sector, with Hyundai Motors as the largest investor. Large enterprises account for nearly 73 per cent of Korean investments flowing into India while small and medium enterprises (SMEs) account for about 24 per cent of the investment. Many of these SMEs are original equipment manufacturers and vendors of the larger enterprises who followed the big companies into India to be part of the supply chain.

Korean investment into India was not led by the large enterprises. On the contrary, it was initially led by SMEs, and it as only after 1993, following the visit of then PM PV Narasimha Rao to that nation, did large enterprises such as Samsung Electronics, LG, Hyundai Motors and Daewoo Motors see India as an opportunity. In fact, prior to 1995, more than 80 per cent of Korean investments came from its SME sector. These small enterprises continue to consider India a prominent investment destination, Korea EximBank chief representative in India Soonki Kang told a business meet organised by industry lobby Federation of Indian Chambers of Commerce and Industry (FICCI) in Delhi recently.


Korean companies' interest in India peaked between 2006-08, when a total of 218 companies set up business here, and investment peaked in 2007, when $510 million was infused into operations in a single year. Over the years, Korean companies have also considered India as one of its global hubs to manufacture not just for the domestic market but for exports. So far, Hyundai has been most successful in that attempt, while others such as Samsung and LG are exporting a small part of its production. Hyundai Motors is now not just the second largest carmaker in India, but also the largest exporter of passenger vehicles from India. It ships cars to 123 countries across Europe, Asia, Africa and Latin America as also Australia from its Chennai plant.

For Make in India to be truly successful, India needs many more companies such as Hyundai to manufacture hi-tech products for both domestic and export market. Tapping more Korean investments for the purpose may help India in that mission. Secretary to department of industrial policy and promotion (DIPP) Amitabh Kant told the same meeting at FICCI that the future of Korean companies is not in Korea but in India. And, that moment to expand their presence was now, when there were plenty of opportunities, and rather than three-four years hence when most of those opportunities would have been taken.


For all the visibility that Korean companies have in India, their total investment in India is still very small, by their own estimates - just one point three per cent of the Korea's cumulative direct overseas investment of $282 billion, according to Korea EximBank. India ranks 14th as the destination of Korean direct investment. More investments and companies are expected to come when an industrial park being developed by South Korea in Rajasthan is ready.

Among investors in India, South Korea has a lot of catching up to do with its arch-rival Japan. According to DIPP data for period beginning April 2000 to February 2015, South Korea lags behind countries such as UAE, Spain and Italy with direct investment of one point five billion dollars. During the same period Japan invested $18 billion in India.

An area where Korean investment and expertise would be welcome is shipbuilding and port development, according to Kant. Prime Minister Narendra Modi is likely to highlight opportunities for Korean companies in these sectors, given his government's intentions to develop Sagarmala, a port-led development of infrastructure for goods transportation. Korean companies are among the largest in shipbuilding and the nation about the size of Bihar, with coastline of 2,413km, equivalent to combined length of the coastline of Gujarat, Maharashtra and Goa, has 16 ports. Power sector is another area that Modi is expected to invite Korean companies to invest. Doosan Heavy Industry is currently manufactures turbines for thermal power plants.

When PM Modi woos Korean companies to step up their investment in India, he would also need to allay some of their fears and misgivings about doing business in India. Korean companies complain of difficulty in getting information on prominent sectors, ambiguity of government policy, insufficient information of market trends, land acquisition problems lack of infrastructure, difficulty finding suitable joint venture partners. The experience of POSCO, which ran into rough weather with environmental clearance and land acquisition for its $12 billion steel plant in Odisha, may also create some apprehensions about investing in India.

India needs Korean companies to invest in India and Make in India as a counterbalance to the unfavourable terms of trade. In 2014-15, India imported goods worth $13.5 billion from South Korea but exported goods worth four point six billion billion only.

Last updated: May 19, 2015 | 20:48
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