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Economy

Moon heads for India to cultivate markets beyond China, US

South Korean President to drop by Samsung's new smartphone factory

South Korean President Moon Jae-in
South Korean President Moon Jae-in is pushing the "New Southern Policy" to deepen ties with southeast Asia and reduce dependence on China and the U.S.    © Reuters

SEOUL -- South Korean President Moon Jae-in embarks on a six-day state visit to India and Singapore on Sunday, seeking to expand the country's economic influence in southern and southeastern Asia through exports and local production amid the growing trade war between the U.S. and China.

Moon will be accompanied by some 100 business people, including Samsung Electronics Vice Chairman Lee Jae-yong, who will brief the president on the group's new smartphone factory near New Delhi on Monday, the presidential Blue House said. Samsung has invested 49.15 billion rupees ($713 million) in the project, which adds capacity to the company's Noida plant, which makes smartphones, refrigerators and flat-panel televisions.

"[The president] will take part in the launching ceremony of the second factory [of Samsung Electronics]. It is in line with his participation in other launching ceremonies when [South Korean companies] made investments in overseas markets," said Kim Eui-keum, presidential spokesperson, in a briefing on Friday.

The South Korean leader's visit comes as the U.S.'s 25% tariffs on Chinese goods worth $34 billion take effect, triggering a trade war between the world's two largest economies. Export-driven South Korea needs to find new markets to cut reliance on its two biggest trade partners. China was the biggest export destination of South Korea for the first five months this year, accounting for 26.5% of exports, followed by the U.S. which had 11.4%, according to data from the Korea International Trade Association.

For Seoul, going beyond China is also important because Beijing can suddenly turn against South Korean businesses. Companies suffered setbacks in China after Beijing's angry reaction to South Korea's installation of the Terminal High Altitude Area Defense anti-missile system, known as THAAD, in 2017.

The launch ceremony for the Samsung Electronics plant will also be the first encounter between company leader Lee and President Moon. It is also Lee's first official event since he was released from jail earlier this year after the Seoul appeals court suspended his two-and-half year prison term over bribery and embezzlement charges.

Hanwha Defense Systems Chief Executive Lee Sung-soo will also play a key role in the tour as South Korea aggressively seeks to export its arms to India, according to sources in the presidential Blue House and Seoul's Chamber of Commerce.

India is the largest arms importer in the world, accounting for 13% of global market share between 2012 and 2016, the state-run Korea Institute for Industrial Economics & Trade (KIET) said. The country is flexing its military muscles by expanding its defense budget amid its conflicts with China and as its economy grows quickly. India plans to buy military assets worth more than 7 trillion won ($6.2 billion), including naval vessels.

"Deepening tensions between China and India will increase defense budgets globally," said Ahn Young-soo and Kim Mi-jung, researchers at KIET, in a report. "Our government and corporations need to set up advanced strategies to cope with the growing defense market. It is time to approach [this issue] with strategic and long-term perspectives."

Moon will meet Indian Prime Minister Narendra Modi on Tuesday, asking his help for South Korean companies doing business in the country. Hyundai Motor also operates in India, running production lines in Chennai.

Analysts say that South Korean companies need to pay attention to India, where consumers' spending power is increasing fast. India is the world's third-largest consumer market by purchasing power, only behind the U.S. and China.

"Western-style retail and consumption culture are spreading in India. Consumers pay more in restaurants, [and for] movies, books and music, while cutting portions on groceries and savings," said Lee Myung-moo, a professor at Sungkyunkwan University in Seoul. "More than 10 million Indian people go for overseas trips, while one million white-collar workers land jobs in foreign countries."

In his attempt to reduce reliance on the U.S. and China, Moon has also been pushing the so-called New Southern Policy, a diplomatic agenda which seeks to strengthen Seoul's relations with members of the Association of Southeast Asian Nations.

In Singapore, Moon will have a summit with Prime Minister Lee Hsien Loong, and offer appreciation for his successful mediation over the unprecedented meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un last month. Moon and Lee also will discuss the so-called Fourth Industrial Revolution, seeking cooperation in the technology and finance sectors.

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