Why India-Vietnam ties are important

Indo-Vietnam relations have been on the upswing in recent times with a flurry of high profile visits. These started in November 2013, with the visit of the general secretary of the Vietnamese Communist Party Nguyen Phu Trong.

His visit resulted in a number of initiatives laying the foundation for taking bilateral relations to a new level, after the NDA government took office in India post the General Elections this year.

The Modi government has maintained the momentum. Foreign minister Sushma Swaraj visited Vietnam in August, making it one of her first foreign visits. The visit signalled India’s intent to shift gears from the "Look East" policy to an "Act East" policy.

Strategic

Swaraj’s visit came almost immediately after Vietnam had renewed India's lease of two oil blocks in South China Sea for another year, a move which had led to strong protests from China. The areas of cooperation that figured in the talks were in the sectors of defence, agriculture, pharmaceuticals and textiles. In addition, the foreign minister chaired a meeting of the heads of Indian Missions in the region besides inaugurating the 3rd round table of the ASEAN-India Network of think tanks.

Following the foreign minister’s visit, President Pranab Mukherjee also paid a state visit to Vietnam in September. His visit coincided with the visit of Chinese President Xi Jinping to India, a fact that has been noticed for its geostrategic connotations. A number of agreements and MoUs were signed between the two countries that will widen the range of cooperation. In this backdrop of deepening bilateral relations, the visit of the Vietnam’s Prime Minister Nguyen Tan Dung aroused great interest.

This visit came at a time when India had demonstrated it will deal with each country in the ASEAN region based on their bilateral, mutual and strategic interests. India has made it clear it is not interested in reacting to Sino-ASEAN developments by designing its own relations with countries in the region.

The deepening of strategic ties with Vietnam has signalled that India will be a big player in the emerging Asian security architecture and will pursue its relations with China and other Asian countries with equal vigour. India should be ready to grab all opportunities for economic and security cooperation Vietnam has to offer. Hitherto, defence and security cooperation had been the focus. This visit by Prime Minister Nguyen Tan Dung was focussed on economic ties.

The Vietnamese PM made it known he will attempt to build more economic and commercial bridges with India, to try and and reduce Vietnam’s economic dependence on China. The fact that a delegation of nearly 50 top Vietnamese corporate leaders, accompanied the prime minister, was testimony to his effort at improving economic and commercial relations between India and Vietnam.

Trade

Bilateral trade between India and Vietnam has been growing steadily. In 2013-14, the total Indo-Vietnam bilateral trade was 8 billion dollars, more than three times the bilateral trade between India and Pakistan. Growth in trade volumes have witnessed a jump of 30 per cent from the previous year. India’s tariff structure is equally liberal when compared to Vietnam for the manufacturing sector.

Within manufacturing, expansion of intra-industry trade in the textile sector could be a huge win-win for both countries. Vietnam could replace its imports of fabric and yarn from China, with imports from India while exporting its lower priced garments to the expanding Indian market. This would be a classic example of mutual benefits from intra-industry trade.

However, in the case of the agricultural sector, India still has high levels of protection relative to levels of tariff imposed by Vietnam. India could consider lowering these tariffs to provide better market access to agro-exports from Vietnam which needs to diversify its export basket to India, to gain advantages of the expanding market.

Currently, four product groups contribute to almost 80 per cent of Vietnam’s exports to India. They are mineral products (45 per cent), chemical products (12 per cent), vegetable products (10 per cent), machinery and mechanical appliances (10 per cent). The emerging sectors which Vietnam should be focusing for competitively introducing products in the Indian market, are agro-products, machinery, base metals, plastics, chemicals, textiles and clothing.

PM Nguyen landed at Bodh Gaya in Bihar first before proceeding to New Delhi for formal talks. This symbolic act followed the joint planting of the "bodhi tree" gifted by President Mukherjee, in the Presidential palace in Hanoi by the two heads of state. This signified the strength and long-lasting friendship and the centuries old cultural and religious ties between the two nations.

Friendship

The Indian government, together with the private sector, will have to take steps to ensure that these civilisational and cultural ties are strengthened further. Ramping up bilateral trade and increasing private investment flows between the two countries could contribute towards reinforcing a relationship that is already beginning achieve a new dynamism.

India has to exhibit boldness, pragmatism and imagination to cement ties with Vietnam and turn the relationship as former Vietnamese President Ho Chi Minh had remarked, into a “cloudless sky”. Vietnam has inspired and continues to inspire generations of Indians with its commitment to the national cause. Under Modi, India is also focusing on its national interests. The two countries can therefore come closer together in their quest for designing the emerging geoeconomic environment in Asia.