The Effect of Opening ICT industry and Cooperation by the KoreaㆍIndia CEPA

Hankyoung Sung, Sang-Joon Lee, Soon Cheul Lee, and Sung-Gul Hong

This study aims to identify development plans and to explore their application in the ICT industry related to utilization of the Korea-India CEPA. The Indian economy was under the danger of financial crisis during the recession but still has maintained its position as a major emerging market. After Korea-India CEPA entered into force in January 2010, trade between the two countries rapidly increased. However, bilateral trade has declined due to the recent global economic crisis. In addition, while Indian investment to Korea is being expanded, Korean investment to India among small and medium enterprises has been shrinking.

In terms of competitiveness, Korea has comparative strengths in the ICT manufacturing sectors, and also in banking and finance. Since the Ministry of Science, ICT and Future Planning was established, Korea views the ICT as a pivotal sectors in its quest for a creative economy. India’s policy goal on ICT involves making India a global hub and destinations for IT-ITeS. There are obstacles in this regard as Korea suffers from the shortage of ICT expertises and India is weighed down by potential IPR issues. The Korea-India CEPA could strengthen the complementary cooperation in ICT between Korea and India. According to the dynamic CGE model analysis, both economies would have benefit if the Korea-India CEPA succeeds in increasing the productivity of ICT manufacturing and ICT service sectors in both economies.

Korea has increased cooperation in ICT with the US., the EU, as well a inemerging markets through its FTAs. The expansion of the CEPA concession, enhancement of the CEPA utililization rate and the movement of ICT expertise would be implemented by regular job fairs, which not only provide information on Indian IT-related firms, universities and the market but also provide ‘practice’ projects on ICT for small and medium enterprises. In addition, it is necessary to figure out problems on a fundamental level regarding mismatches of HS codes and certification of the origin. Lastly, we should pursue long-term performance to bolster relations between the two countries by adopting a careful and gradual approach.