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India and Vietnam: A partnership that is spreading its wings

India gives a patrol boat to Vietnam in 2021 (Photo: IANS)

The visit of President of the National Assembly of Vietnam, Vuong Dinh Hue last week to commemorate the 5th anniversary of the India-Vietnam Comprehensive Strategic Partnership (CSP), offers us an opportunity for making an assessment of the entire gamut of relations between the two important actors in the Asian scene.

Both sides used the occasion to exchange views on how best to strengthen our comprehensive cooperation in such fields as politics, defence and security, economics, trade and investment, labour, education, healthcare, production and transfer of vaccine-related technology. The last area is most significant as it would make meaningful contributions to pandemic control efforts and economic recovery amid and after the COVID-19 pandemic.

With Vuong Dinh Hue’s presence in New Delhi, another area that has assumed salience is the parliamentary cooperation between the two countries including building institutions and improving the legal system for the development of the digital economy and digital society. Both sides will also share experience in promulgating legal policies to promptly support the Government in pandemic response and post-pandemic recovery.

An Indian vessel with Covid-19 relief materials on its way to Vietnam (Photo: IANS)

India–Vietnam relations have been time-tested, and it is one of the most important pillars of New Delhi’s Act East Policy. It is characterised by extreme cordiality, a common approach on almost all important areas related to international relations, and a strategic perspective arising out of the rise of China and its recent assertiveness regarding territorial and maritime issues vis-à-vis most countries of South and Southeast Asia. It will not be wrong to suggest that among all the countries in Southeast Asia, Vietnam occupies a special place in India’s Act East Policy. Vietnam feels the same about India, seeing India as a natural ally; and it has emerged as one of India’s strongest partners. Both the countries are important stakeholders in ensuring the freedom of navigation and open sea-lanes of communication, which are an intrinsic part of world trade and movement of goods, and, in general, of peace and stability of the region.

In this respect, India and Vietnam are on the same page as the US. As China claims practically the whole of the South China Sea and becomes more assertive in its claims, the interests of India and Vietnam obviously converge and produce a mutually advantageous conjunction and compatibility. The need for India to secure its energy security and the prospect of oil and gas that Vietnam’s offshore areas offer is another driving force in their relationship. As a result, despite Beijing’s warnings that India’s actions are provocative and will attract punitive measures, New Delhi has made it clear that its state-owned firm, OVL will continue to explore in the South China Sea.

India-Vietnam relations were elevated to the level of ‘Strategic Partnership’ during the visit of Vietnam’s Prime Minister Nguyen Tan Dung to India in July 2007. In 2016, during Prime Minister Modi’s visit to Vietnam, bilateral relations were further elevated to a “Comprehensive Strategic Partnership”, a status that Vietnam shares with only two other countries – Russia and China.

Defence cooperation has emerged as the most important area in which the two countries have established a solid partnership, with a joint vision for Peace, Prosperity and people set at the virtual summit on 21 December 2020 between PM Modi and his Vietnamese counterpart Nguyem Xuan Phuc to guide the developments of the CSP. The Indian Armed Forces have been engaged in the capacity-building of the Vietnamese armed forces, particularly the navy, through training, repairs and maintenance support, exchange between think tanks, study tours, and ship visits.  It needs to be enhanced further to give greater substance to the strategic partnership.

ONGC Videsh Ltd at Vietnam (Photo: ONGC/Twitter)

To quote Vuong Dinh Hue,“It is necessary to step up the implementation of defence cooperation programmes between armies and forces of both sides, and promote cooperation in non-traditional security issues, combatting crimes and terrorism.”

He added: “Cooperation in economics, trade, and investment will be an area of great potential, as Vietnam is calling for new waves of investment from Indian corporations in fields such as information technology, innovation, and renewable energy. I am confident that India will soon become one of the most important partners of Vietnam in politics, economics, trade, investment, security and defense, science and technology, culture, and education and training”.

India’s relations with Vietnam are also marked by growing economic and commercial engagement. From a meagre $ 200 million in the year 2000, bilateral trade between India and Vietnam has seen steady growth over the years. According to Indian statistics, during the Financial Year (FY) April 2020 – March 2021, bilateral trade between India and Vietnam reached $ 11.12 billion, with Indian exports to Vietnam amounting to $ 4.99 billion and Indian imports from Vietnam at $ 6.12 billion.
In Financial Year 2020-21, for India, Vietnam was the 15th largest trading partner globally and the 4th largest within ASEAN following Singapore, Indonesia and Malaysia.

For Vietnam, on the other hand, India was the 10 largest trading power globally.  Regarding investment, India has more than 300 projects in Vietnam with the total registered capital of about US$ 1 billion, ranking the 26th out of 141 countries and territories investing in Vietnam. India’s projects mostly focus on processing and manufacturing industries with 60 projects amounting to US$ 459.67 million, and accounting for 50.5% of the total investment in Viet Nam.

Exponential growth, notwithstanding, it is still quite miniscule compared to Vietnam’s trade with China, which is currently Vietnam’s largest trading partner, with two-way trade turnover reaching $133 billion in 2020.

China is also the seventh largest foreign investor in Vietnam. With China projected to maintain robust economic growth in the coming years, bilateral trade and investment ties will continue to strengthen.

Vietnam’s economic dependence runs even deeper. The country relies on China for much of its electricity supply in the northern part, and many of the inputs for its critical exports of garments to the US and Europe. Moreover, trade with China has become a primary engine of economic growth, Such mutually beneficial economic ties tend to discourage the two sides from taking actions that may disrupt their economic exchanges. Quite naturally Vietnam’s economic dependence sometimes constrain it from taking stand on Beijing’s actions

The course of action that New Delhi and Hanoi need to pursue is to break away from China’s economic stranglehold. India and Vietnam are now hoping to expand their economic partnership riding on Vietnam’s economic success and market opportunities.

Officials from both sides are exploring new avenues of economic partnership. Vietnam is well positioned by the South China Sea, near developed markets like Japan and Singapore, as well as rapidly growing markets like Thailand. India is now among the top trading partners of Vietnam, but economic interactions are still quite weak in comparison to their political and defence cooperation, and they need further deepening and widening as the prospects are wide-ranging. India is also keen to further cement the bond between the two countries through cultural linkages and cooperation. 

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(Baladas Ghoshal is a former Professor and Chair in South & Southeast Asian Studies, Jawaharlal Nehru University, New Delhi. Views expressed are personal and exclusive to India Narrative)