India-Vietnam relations reflect mutual interest in SE Asia

India-Vietnam relations reflect mutual interest in SE Asia
India-Vietnam relations reflect mutual interest in SE Asia

A relationship that germinated from the days of the Vietnam War and stood the test of time has now been cemented by the coronavirus crisis and emerged as a bedrock of counterbalance in the South China Sea region including the setting up of platforms to grow trade ties further.

When Indian External Affairs Minister Dr S. Jaishankar met Vietnam's Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh via video conference last week, it was much more than a courtesy call or a distress meeting about Covid-19.

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India's relations with Vietnam have thus emerged as one of the most crucial bilateral ties in Southeast Asia, whose dimensions have soared beyond the CSP and the dynamics of ASEAN to a long-term strategic investment in a wide array of fields.

At the heart of the agenda was a little-known acronym called IPOI - the Indo-Pacific Oceans Initiative. An initiative launched by Indian Prime Minister Narendra Modi at the East Asia Summit in Thailand in November 2019, IPOI centers around critical commercial and geopolitical pillars such as trade connectivity, maritime security, disaster risk reduction and management, capacity building and resource sharing.

While Indian investors are involved in Vietnam's energy, mineral exploration and agro-processing sectors, India is also involved in 255 projects in Vietnam with investments crossing $900 million.

But apart from the IPOI, also in focus were a host of recent bilateral developments - from India's robust oil and gas exploration tie-ups with Vietnam in Vietnamese waters in the South China Sea, to recent tensions following China's deployment of an H-6J bomber to Woody Island and India's solid support for Vietnam on the South China Sea issue, to boosting the bilateral Comprehensive Strategic Partnership, to defence cooperation and India's willingness to significantly augment Vietnam's military capability.

Crucial bilateral ties in SE Asia

External Affairs Minister Dr. S. Jaishankar had chaired the 17th Meeting of Flag of Vietnam, Flag of India Joint Commission with his Vietnamese counterpart Pham Binh Minh. Ties between the two nations are crucial to SE Asia.
External Affairs Minister Dr. S. Jaishankar had chaired the 17th Meeting of Flag of Vietnam, Flag of India Joint Commission with his Vietnamese counterpart Pham Binh Minh. Ties between the two nations are crucial to SE Asia.Credit: Getty Images

Despite the spread of the coronavirus and a rapidly shifting geopolitical scenario, India's relations with Vietnam have thus emerged as one of the most crucial bilateral ties in Southeast Asia, whose dimensions have soared beyond the CSP and the dynamics of ASEAN to a long-term strategic investment in a wide array of fields.

Oil exploration and oil blocks are a case in point.

Lt General Rajeev Sabherwal with a delegation of Vietnamese army officers. Common interests between the two countries extends to military and security issues with an emphasis on curbing China's ambitions in south east Asia and the Indo-Pacific.
Lt General Rajeev Sabherwal with a delegation of Vietnamese army officers. Common interests between the two countries extends to military and security issues with an emphasis on curbing China's ambitions in south east Asia and the Indo-Pacific.Credit: Getty Images

Vietnam has not only widely welcomed India's involvement in the South China Sea on numerous occasions, but has also granted Indian oil giant ONGC VideshLtd (OVL) extensions to explore oil block 128 - which is an area of dispute between China and Vietnam in the South China Sea. In 2019, OVL was granted another two-year extension to explore the Vietnamese oil block.

In addition, the Indian Navy has secured the rights to use Vietnam's southern port of NhaTrang for rest and recuperation (R&R), even in times of crisis. Considering that the oil block does not reap any significant economic benefit for India, the entire exercise should therefore be seen against New Delhi's calculated keenness to maintain a strong presence vis-à-vis China's assertive manoeuvres in contested waters.

Even though Vietnam is trying to facilitate Indian pharma majors to manufacture in Vietnam, increasing purchase from India and acceptance of generic drugs would completely transform this sector.

Freedom of navigation, overflight and commerce

As articulated by India's Ministry of External Affairs spokesperson Anurag Srivastava, India stands for the freedom of navigation and lawful commerce in the international waterways. “South China Sea is a part of global commons. India has an abiding interest in peace and stability in the region,” Srivastava said. “We firmly stand for the freedom of navigation, overflight, and unimpeded lawful commerce in these international waterways, in accordance with international law, notably UNCLOS,” he added.

The fragile comradeship, fading diplomatic goodwill and growing sense of competition between Hanoi and Beijing has also added a dimension of opportunity for India to forge closer strategic relations with Vietnam. India had earlier extended a $100 million Line of Credit (LOC) to Vietnam to help acquire patrol boats, and announced another $500 million LOC for Hanoi to help it procure military equipment from India.

But India's deepening ties with Vietnam also point to a wider and long-term benefit: by significantly developing cooperation with Hanoi, New Delhi could be able to attract other Southeast Asian states to boost their partnership amid an increasingly assertive Chinese foreign policy.

Economic ties on the upswing

Economic relations between India and Vietnam have risen steadily over the past two decades, with bilateral trade growing from $200 million in 2000 to a target of $15 billion for the fiscal 2020.

Economic relations between India and Vietnam have risen steadily over the past two decades, with bilateral trade growing from $200 million in 2000 to a target of $15 billion for the fiscal 2020.

While Indian investors are involved in Vietnam's energy, mineral exploration and agro-processing sectors, India is also involved in 255 projects in Vietnam with investments crossing $900 million. Vietnam's investments in India, meanwhile, hover around $30 million, with pharmaceuticals and information technology (IT) taking the lion's share and overall investment climate in India showing a great scope for more investments from Vietnam.

India is also involved in 255 projects in Vietnam with investments crossing $900 million. With India allowing 100 percent FDI Vietnamese companies could invest more in India as well.
India is also involved in 255 projects in Vietnam with investments crossing $900 million. With India allowing 100 percent FDI Vietnamese companies could invest more in India as well.

With the Indian government allowing 100% foreign direct investment in the food and beverage sector and e-commerce industry, it might just be the incentive Vietnamese companies were looking for to invest more in India. Tourism, e-commerce and food manufacturing are the other sectors with the highest potential to boost economic cooperation between the two countries - with the launch of direct flights between India and Vietnam expected to help the development of a thriving cross-border tourism sector.

But in order to fully realise the economic potential of both nations and set up a platform to deepen economic engagement with ASEAN, both India and Vietnam have work to do.

Boost for the pharma market

The impact of Indian pharmaceuticals. Even though Vietnam is trying to facilitate Indian pharma majors to manufacture in Vietnam, increasing purchase from India and acceptance of generic drugs would completely transform this sector.
The impact of Indian pharmaceuticals. Even though Vietnam is trying to facilitate Indian pharma majors to manufacture in Vietnam, increasing purchase from India and acceptance of generic drugs would completely transform this sector.

Opening up of Vietnam's pharmaceutical market to generic drugs would prove to be a massive boost for Indian generic drug makers - especially in the backdrop of Covid-19. The pharmaceutical sector is one of India's fastest-growing sectors and pharma exports account for more than 6% of India's total merchandise exports. Vietnam's domestic pharmaceutical industry, on the other hand, is able to meet only 53% of its domestic demand. Even though Vietnam is trying to facilitate Indian pharma majors to manufacture in Vietnam, increasing purchase from India and acceptance of generic drugs would completely transform this sector.

A cashew processing unit operating in India. If India considers lifting restrictions on imports of key items such as black pepper and cashew nuts, Vietnamese agricultural exporters could unlock a new regional market.
A cashew processing unit operating in India. If India considers lifting restrictions on imports of key items such as black pepper and cashew nuts, Vietnamese agricultural exporters could unlock a new regional market.Credit: Getty Images

Conversely, Vietnam has urged India to ease its trade barriers on agricultural products since the coronavirus outbreak. Since Vietnam's agri-exports are heavily reliant on demand from China, a shocking plunge in orders due to coronavirus has left the Vietnamese government scrambling for alternative regional buyers. If India considers lifting restrictions on imports of key items such as black pepper and cashew nuts, Vietnamese agricultural exporters could unlock a new regional market.

A relation that germinated from the days of the Non-Aligned Movement and the Vietnam War and stood the test of time has now been further cemented by a crisis - and the coronavirus pandemic has not only acted as a catalyst for bolstering Indian-Vietnamese ties but also boosted New Delhi's greater commitment and strategic position in South-East Asia.

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