For more than 45 years, India and its one of the “most trusted friend and ally” Vietnam, have consistently promoted the expansion of trade and economy. The Government of India’s resolutions to elevate the Look East Policy to an Act East Policy, to endorse economic growth with South East Asian markets, and to heighten the place India has on regional platform, has given the impression of encouraging economic ties between Vietnam and India as well.
The economic ties between India and Vietnam originated as back as in the 2nd century. The Hindu Kingdom of Champa that existed along the southern and central coast of Vietnam from the 2nd to 18th century had substantial trade with India. The initial economic exchanges between India and Vietnam took place serenely through trading on the sea, tempted by the fascination of Suvarnnabhumi and spices in Southeast Asia.
After the establishment formal diplomatic relations in 1972, India granted ‘Most Favoured Nation’ status to Vietnam in 1975. India and Vietnam signed a bilateral trade agreement in 1978, a revised version of which came into being on March 8, 1997. A Bilateral Investment Promotion and Protection Agreement was also signed between the two countries in 1997 in New Delhi. The Indo-Vietnam Joint Business Council has worked to stimulate trade and investment since 1993. In 2003, both nations publicised a Joint Declaration on Comprehensive Cooperation when the General Secretary of the Communist Party of Vietnam Nong Duc Manh visited India and both nations negotiated for a free trade agreement, which was later revised in 2007.
Bilateral trade between India and Vietnam has seen an incessant growth over the past many years. India is now among the top ten trading partners of Vietnam. According to GOI data, total trade between the two countries during April – Nov of fiscal year 2016-2017 was US$ 6244.92 million. The two sides fixed to set the target of bilateral trade at USD 15 billion by 2020. Both countries are at present working on key trade and investment enablers which consist of banking branches in each other’s countries, direct containerisation, and air connectivity.
One of the most imperative prospects of bilateral economic partnership is business to business relationships. In his recent state visit to India in March 2018, President of Vietnam Mr. Tran Dai Quang welcomed Indian companies to invest in Vietnam and acknowledged Vietnam’s commitment to create sympathetic environments and assistance for Indian investments in synchronisation with Vietnamese laws. He also re-emphasized that economic and trade cooperation is the core aspect of the bilateral relations, and that the two countries will try to strengthen bilateral trade. Thus, the two sides always hope for the most optimistic circumstances to have more Indian companies invest in Vietnam, as well as reassure Vietnamese companies look for business opportunities in India.
Despite the fact that the economic cooperation between Vietnam and India was not utterly apparent in terms of trade and investment in the 20th century, things are visibly changing in 21st century with the Vietnamese economy getting higher swiftly and becoming another tiger economy in Asia. In Southeast Asia, Vietnam has ascended as the 2nd largest market, and there has been a sturdy upsurge in Indian investments contrasting to infinitesimal in the mid-1990s. If the contemporary development endures, there will be abundant opportunities for investment in Vietnam for India in plentiful areas such as oil exploration, steel, minerals, railways, power projects, food processing, etc.
The fact that Indian development assistance is eye-catching to other emerging countries such as Vietnam, could consent for further strengthening of the economic relationship between India and Vietnam. This could help both nations more competently to address China’s intensifying quest for economic and strategic dominance in the region. It may perhaps also help India to promote its own economic and security interests in the region, which are not restricted to checking tactics of China.
The trilateral highway developed by India and ASEAN has been anticipated to get extended to Cambodia, Laos and Vietnam. The proposed 3200 km route from India to Vietnam is known as East West Economic Corridor. It is predicted that the connectivity will generate annually US$70 billion in incremental GDP and 20 million in incremental aggregate employment by 2025.
India is an observer of Asia Pacific Economic Cooperation since 2011. Vietnam, which is considered as an important country in India’s Act East Policy can play an important role to facilitate India’s entry into Asia Pacific Economic Cooperation. Vietnam President Tran Dai Quang during his recent visit to India reassured Vietnam’s support to inclusion of India into APEC.
Vietnam today is better linked with global value chains and has backward linkages exclusively with East Asian countries which accounts for top foreign input suppliers for increasing Vietnamese exports. India has forward linkages with global value chains due to Indian dominance in providing business services. In this scenario, India and Vietnam need to take the advantage and strengthen their regional value chain.
In the 21st century, the South East Asian region has prompted far more attention and far more assumptions about its future than any other part of the world. It is the heart of trade and international economy and is also the rapidly developing region of the world. Keeping this in view, India and Vietnam as partners are of economic prominence in the fast approaching Asian century. India-Vietnam economic partnership is the key for upholding economic prosperity not only in South East Asia but in the entire Asian region as the two countries share surplus common interests.
*Abhishek Mohanty is studying M.A Politics: International and Area Studies at Jamia Millia Islamia, New Delhi. He is a Junior Research Associate at German Southeast Asian Center of Excellence for Public Policy and Good Governance- Bangkok, Junior Researcher at Center for Southeast Asian Studies- Jakarta, and Research Intern at Centre for Vietnam Studies- New Delhi. He is a member of Kalinga-Lanka Foundation. Research interests include critical analysis of foreign policies, regional and global issues of Southeast Asian and Pacific countries.