Seoul: South Korea and India signed an ambitious free trade agreement on Friday that slashes tariffs, encourages investment and promotes exchange of skills in a bid to double fast growing commerce over the next decade between two of Asia’s biggest economies.
South Korean trade minister Kim Jong-hoon and India’s minister for commerce and industry Anand Sharma signed what the two sides formally called a Comprehensive Economic Partnership Agreement, but which in reality is a free trade deal.
“This is a historic occasion,” Sharma said at a joint press conference with Kim.
Cementing deal: Minister for commerce and industry Anand Sharma (left) with his South Korean counterpart Kim Jong-hoon. Lee Jin-man / AP
Kim said it was South Korea’s first free trade accord with one of the fast growing Bric countries—Brazil, Russia, India and China. Sharma said it was India’s first comprehensive trade agreement with a major economy.
Bilateral trade between the two countries reached $15.6 billion (Rs74,724 crore) last year, according to South Korea, and has been steadily growing. In 2002, it amounted to just $2.6 billion.
“We will be able to have access to one-sixth of the global market,” Kim said, adding the agreement “will open a significant opportunity as well as strengthen our relationship with India into the future”.
Sharma said the economic relationship between the two countries “has enormous potential to grow” and could double over the next 10 years.
“That’s what we will be aiming at,” he said. “This is just the beginning.”
The deal calls for abolishing or cutting tariffs for 90% of Indian goods in terms of value and 85% of South Korean products and increases investment opportunities, Seoul’s ministry of strategy and finance said in a statement.
Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry, expressed the hope that the deal would lead to more access for Indian exports and improve India’s trade deficit with South Korea which, he said, amounted to $4.6 billion for the period from April 2008 to February 2009.
The agreement also allows for greater personnel exchanges between the countries, the ministry said, paving the way for Indian computer and software experts as well as English teachers to gain access to the South Korean market.
“India has great competitiveness in terms of its IT (information technology) professionals and so they will be able to come to Korea to contribute to the growth of the national economy in Korea,” Kim said. “English teachers from India will be able to contribute to the development of education in Korea as well.”
Major South Korean companies such as Samsung Electronics Co. Ltd, Hyundai Motor Co., LG Electronics Inc. and steel maker Posco are already active investors in India.
Negotiations for the deal began in February 2006.
Though the agreement has been signed, several steps remain on the South Korean side for it to take effect, such as ratification by the national assembly, according to the ministry. India, however, has completed all necessary procedures for the deal to take effect, the ministry said.
India’s largest trading partners were the US and China in 2007-08, according to data the ministry of commerce and industry submitted to Parliament last month. South Korea’s biggest trade partners in 2008 were China and the European Union (EU), according to government data.
Seoul signed a free trade deal with the US in 2007, though it has yet to be ratified by legislatures in both countries amid political sensitivities and suspicions regarding free trade among some lawmakers. Seoul also has a free trade agreement with the Association of Southeast Asian Nations and said last month it has concluded negotiations with the EU. Other major South Korean trading partners include the US and Japan.
The agreement is India’s second, following a similar one with Singapore in 2005.
Erika Kinetz contributed to this story.