India will sign a Comprehensive Economic Partnership Agreement (Cepa) with South Korea at Seoul on Friday, which will not only allow Hyundai, Samsung, Mahindra and Tata Motors to get additional access in each others markets, but also lead to easier visa norms for country?s English teachers, engineering professionals and technicians.
This is the first free-trade deal that the UPA-II government will sign, while nearly 10 other similar agreements are being negotiated by the country.
The Cepa will be inked by commerce minister Anand Sharma and his South Korean counterpart Kim Jong Hoon. The deal is being signed in the backdrop of the global financial crisis, which has led many developed economies including US to become protectionist. India has also approved a similar pact involving free trade of goods with the 10-member Asean.
The trade pact will lead to complete slashing of duties in 70% of the 5,000 goods that get broadly traded by India. These include some auto parts, electronics, capital goods and machinery, industrial robots as well as raw material for labour intensive sectors like leather industry, which are not manufactured in the country.
In addition, about 500 items will see duties being reduced to levels below 5%. Also, about 700 goods will see no duty cuts so as to protect small and medium enterprises, as well as manufacturers of nylon and polyester, certain textile related goods, fisheries, wines and spirits.
From the Korean side, about 90% of the total goods trades will see elimination or reduction of duties, which will enable Indian exporters from sectors like petroleum products, chemical items, finished leather goods and some categories of animal fodder to gain preferential market access over competitors from other countries.
This is expected to add to the bilateral trade between the Asian nations. At the moment, South Korea accounts for nearly 2% of India?s exports and 3% of its total imports.
The highlight of the deal is that South Korea has allowed Indian professionals to work in Korea for a period of up to one year, subject to certain conditions. About 163 different service related sectors have been identified where professionals will be allowed to work temporarily in South Korea, which includes English teachers, IT professionals and even lawyers. South Korea only allows tutors from countries with English as a native language to teach its population. However, it has made a relaxation for India. The movement of professionals will however to subject to conditions and domestic laws. For example, a contract with a South Korean company will be mandatory.
The trade deal also envisages easier investment norms for companies of both the countries. India already has presence of South Korean companies in consumer electronics and vehicles sector like Samsung and Hyundai. South Korea is being seen as a emerging destination for Indian companies in the auto-component sector as it is the home country for auto majors like Hyundai, the second largest car manufacturer in Asia.
Top goods exported by India to South Korea include naphtha, ferro-chrome steel and soya oil while major imports from South Korea are auto-components, jet fuel and wireless phones.