After Japan decided to put its foot down and shift its manufacturing units out of China–another country is looking to jump the sinking ship of China. South Korea is considering moving some of the factories from China to India, according to a report in the Times of India. The rising trade wars between China and the USA had already led South Korea to mull its options and given the economic slump that has come in the wake of the Wuhan virus pandemic, it might very well have been the last straw that broke the camel’s back. Interestingly, India and South Korea have already pledged to take bilateral trade from the current US$ 21 billion to US$ 50 billion by the year 2030.
The Korean consulate in Chennai has been working with a number of requests, some in preliminary stages, while others in advanced stages. “We have requests from two iron and steel companies, some startups and one from the hospitality sector which wants to come to India from China,” said Yup Lee, the deputy consul general for the Consulate General of The Republic of Korea. The majority of Korean companies are not doing well in China and, therefore, are pulling out of its ‘controlled economy’.
The ever-evolving global geopolitical equations have seen a new dawn with the major East-Asian countries looking to shift their manufacturing bases to India. With an alluring business ecosystem being developed by Prime Minister Narendra Modi since he came to power in 2014–a huge amount of foreign investment is destined to come to India in the coming decade.
The Indian government is keen to see the steel-giant Posco and Hyundai Steel, set up their factories in Andhra Pradesh. “They are looking for 5,000 acres of land and port connectivity,” said sources. Besides, these two giants, a number of small tech companies are also keen to invest in India.
The step by the South Korean regime is a rather courageous one as it had started investing in China from the 1990s but off late it has realized that it was a big mistake and consequently companies like Lotte, Kia and Hyundai are gradually winding down their China business due to political risks, tariffs and losing market share. The low-cost Chinese companies that have emerged as stiff competitors have spelled doom on these companies whose revenues have gone down over the years.
Meanwhile, Japan, out of the 108.2 trillion yen stimulus package has earmarked 220 billion yen to help its manufacturers shift production out of China. And India is eyeing this lucrative opportunity as well to bring Japanese companies to its shores.
Now, it is the right time for India to build consensus among states & centre on important legislations and welcome both Japan and South Korea with open hands. By removing red tape, giving one window clearances, easing land acquisition norms and revamping labor laws—we can be best prepared to welcome these companies. But India needs to be wary of Vietnam as the trade relations between Korea and Vietnam has increased manifolds in the recent years. It has become Korea’s 4th largest trade partner.
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With these recent developments, the central government has also ramped its operations to attract investments in electronics manufacturing, the government last month notified three schemes with incentives totaling ₹48,000 crore to boost mobile phone manufacturing in the country. The dominant production-linked incentive (PLI) scheme has the lion’s share of close to ₹41,000 crore with sops to be spread over three years.
Like Japan, Korea is also in tune with the PM Modi’s call of ‘Make in India’ and the President Moon Jae-in on several fronts has said that South Korea will actively cooperate to make India’s flagship initiative a success. The quick cross visits made by both the state heads to each other’s countries further cements the fact. India is all set to gain big from the mass exodus of companies from mainland China—exciting times ahead.