South Korea Seeks More Investments In India As Seoul Pivots Away From China

The gas leak in a town in southeastern India that killed at least 13 people and sickened hundreds of others emanated at a polystyrene factory owned by South Korea.

The tragedy occurred near the coastal city of Visakhapatnam, in Andhra Pradesh state, at a facility operated by LG Polymers, a unit of South Korea’s largest petrochemical maker, LG Chem Ltd.

The plant had just been reopened after the Indian government ordered a nationwide lockdown of businesses in late March to prevent the spread of coronavirus.

LG Chem acquired the Visakhapatnam plant in 1997 and formed a subsidiary called LG Polymers India Private Ltd.

“LG Polymers is a multinational, reputed company, and it is sad that the incident has happened in their plant,” said the Chief Minister of Andhra Pradesh, Jaganmohan Reddy.

In Seoul, LG Chem said it was making sure that victims receive medical treatment quickly.

“I pray for everyone’s safety and well-being in Visakhapatnam,” Indian Prime Minister Narendra Modi tweeted.

The incident underscores how South Korea has increasingly been making investments in India in recent years.

Rajat Prakash and Siddharth Mahajan, attorneys at Athena Legal, a New Delhi-based law firm, wrote that more than 500 South Korean companies are currently operating in India. Some of the major South Korean investors include automakers Hyundai and KIA Motors, steel giant POSCO and the Samsung conglomerate.

“India has immensely benefitted from Korean technology particularly in automobiles and electronics,” they wrote.

Total foreign direct investment from South Korea to India amounted to more than $6.29 billion as of 2019. “Both countries have actively shown interest in extending their trade through South Korea’s New Southern policy and India’s Act East policy,” they wrote.

South Korea is now the 14th biggest source of foreign direct investment in India.

Now some South Korean companies have been eyeing India as an investment destination as they gradually pull out of China.

Yoo Chang-Ho, Minister-Counsellor for Political Affairs at the Korean Embassy in India, said worsening relations between Seoul and Beijing – and now the emergence of Covid-19 – has prompted some South Korean firms to exit China.

The relationship between South Korea and India warmed when Seoul sent tens of thousands of virus testing kits to India. These kits were apparently more accurate than the ones sent by the Chinese,

In addition, SD Biosensor, a South Korean bio-diagnostic company, established an anti-body testing kit facility in Haryana in northern India.

Vishnu Prakash, India’s former ambassador of India to South Korea, said that after the pandemic is over, India should form closer business ties with countries like South Korea, Japan, Singapore, Indonesia, Vietnam, and move away from China, which has been accused of dumping cheap products into the Indian market.

In February 2019, during a state visit to South Korea, Prime Minister Modi urged more South Korean companies to invest in India.

"I wish to see more and more Korean businesses turning their attention to India," Modi said. "Negotiations to upgrade the comprehensive economic partnership agreement have been fast-tracked to achieve the bilateral trade target of $50 billion."

In 2018, South Korean exports to India totaled $21.5 billion. India is one of South Korea’s top ten trade partners.

Meanwhile, South Korea’s push into India continues.

“We have requests from two [South Korean] iron and steel companies, some startups and one from the hospitality sector which wants to come to India [and away] from China,” said Yup Lee, the deputy consul general for the Consulate General of South Korea.

Several small tech companies based in South Korea are also eager to invest in India.

“There are a number of companies which want to come to India. But with Covid, there might be some delays,” Yup added.

Deepak Parekh, chairman of Indian mortgage lender HDFC said the Indian government should encourage both South Korea and Japan to build more factories in India.

“We should make it easy for the Japanese to come to India rather than them going to Malaysia, Vietnam or Thailand. [Indian] states have to take the initiative and offer them 2,000 to 5,000 acres in some special zone where they do not have to look for land or building approvals,” said Parekh.