Trade expansion likely to boost India-Vietnam ties

As part of the Comprehensive Strategic Partnership deal reached in 2016, the two countries have taken several measures to develop stakes in each other’s prosperity and security, writes PRITI PRAKASH

The Prime Minister, Shri Narendra Modi and the President of the Socialist Republic of Vietnam, Mr. Tran Dai Quang witnessing the exchange of agreements, at Hyderabad House, in New Delhi on March 03, 2018.

As India and Vietnam celebrate 45 years of bilateral relations by upgrading their Comprehensive Strategic Partnership, the future seems to hold a lot of potential for the two nations. The rising power of India, not just in South Asian region but with considerable clout in the Indo Pacific, will be more balanced than before, said Vietnamese envoy to India, Ton Sinh Thanh.

India is one of the three nations with which Vietnam has Comprehensive Strategic Partnership, the other two being China and Russia. It was during Prime Minister Narendra Modi’s visit two years ago that the partnership was elevated. Vietnam has Strategic Partnership with 11 countries. Vietnam boosts of US$2,100 per capita per annum.

This year will see more dialogues between India and Vietnam. Visits from India include a just concluded trip of Defence Minister of India, Nirmala Seetharaman. A Defence Dialogue will soon take place in Delhi. External Affairs Minister Sushma Swaraj will visit Vietnam to co-chair a joint meeting in the end of August. According to sources, the President of India is likely to visit Vietnam by the end of this year. 

Regarding India’s role in the Southeastern region and the Indo Pacific for establishing peace and stability, the Vietnamese Ambassador said, “India is moving fast. It is becoming a strong player in the region and will now look over a bigger space in the Indo Asia Pacific region. Its role will be played out in the extended neighbourhood. We welcome India’s new role and its engagement in the region, so does the Association of South East Asian Nations (ASEAN).” Thanh said, “India’s increasing role and growing power will act as a balancing element in the region.”

Trade between India and Vietnam has scope to expand further. Ambassador Thanh said, ‘’FTA between India and ASEAN should be upgraded and expanded for the pact to deliver desired results. ‘’Vietnam wants to diversify trade with different countries specially India which is a big market and a big investor.’’ There is need to expand the agreement to
include more products, the ambassador added.

Last year, the trade between India and Vietnam stood at US$7.56 billion, a very small amount compared to other countries of the world that stood at US$420 billion last year. In the year 2016-17 investment from India to Vietnam was a little more than US$800 million which is very small in comparison to the total of US$300 billion investment from the world. Indian companies are investing to the tune of US$40 billion a year in the world whereas in Vietnam it was merely US$100-150 million a year. Thanh said, ‘’There is a lot of potential for Indian companies to invest in Vietnam. Big groups like Mahindra and Adani are looking for investing in Vietnam.” Vietnam has a good foreign investment regime, labour cost is low. Bilateral trade with Vietnam is much lesser in trade with India even in the ASEAN countries. With Singapore it is US$20 billion and with Indonesia, Malaysia around US$18 billion. Vietnam has a 100 billion trade with China.

Elucidating the demand in Vietnam’s textile sector, the Ambassador informed that textile was one sector where Vietnam imported to a tune of around US $10 billion every year. He expressed that India has the capacity of meeting Vietnam’s demands for textile inputs. ‘’If trade was opened up, we could be importing a lot of items from India’’, he said. ‘’There a potential of 20 billion trade in textile to Vietnam from India which is a possibility waiting to be explored. Vietnam needs it and this is the time’’. Presently investment from India is merely US$1 billion, there is scope for much more like in energy, especially in solar energy and tourism.

India and Vietnam commonalities are abound as both countries are rapidly growing economies. Vietnam’s growth rate last year was at 6.8 per cent and in the previous years, it has even touched 9 per cent. The Ambassador said that while the defence ties were robust, the economic relation could still be taken much forward. And the cultural ties needed to be tapped. He informed Vietnam exports are more than the country’s GDP. The South eastern country is trading with more than 200 countries presently.

India, although, has objections to China’s ambitious Belt and Road Initiative (BRI), Vietnam is still studying the various aspects of the initiative. “We have to figure out if it is good for us or not. If it is good, we will join it, if not, we will stay away from it,” he said. Unlike India, however, Vietnam had attended the big BRI meet that China organised last summer.

Thanh did not mince words on the Indo Pacific saying India’s vision on the Indo-Pacific, which was revealed in Modi’s address at the Shangri-La Dialogue recently, was similar to Vietnam’s approach, which is about inclusiveness, openness and engagement rather than confrontation. “We, in fact, refer to the area as Indo Asia Pacific,” he said.

Vietnam has issues with the growing Chinese footprint in the South China Sea and it wants a rules based order to prevail (like India does). “Vietnam will raise its voice, asking for support from other countries, including those outside the region because so many vessels pass through the seas (which makes other nations also stakeholders).”

In the absence of direct flight from New Delhi to Hanoi tourist traffic to Vietnam and India is considerably poor. It is a roadblock that the two governments are working upon. The
Ambassador informed that connectivity between the two capitals is being worked out and talks are being held. Currently, only Jet Airways operates flights to Ho Chi Minh City from New Delhi and Mumbai via Bangkok.

Last year 110,000 tourists visited Vietnam while 22 million Indians travelled abroad. 3.5 million Indians went to South Asia out of them 1.6 million went to Thailand alone. Vietnamese come to India for pilgrim.

Vietnam is expecting 1,70,000 visitors this year, as per reports. The number of Indian tourists to Vietnam has risen from 16,000 in 2010 to an estimated 1,10,000 last year, Thanh informed and called for promoting India as a destination for Vietnamese. As per the embassy figures 20 million Indians travel overseas every year, while only 90,000 of them go to visit Vietnam. Thanh said the first direct air service between Vietnam’s most populous city Ho Chi Minh City and New Delhi is likely to commence by the last quarter of this financial year.