Vietnam-India Strategic Partnership: Spaces and Gaps

23 Jul, 2013    ·   4047

Shresht Jain highlights areas of convergence in bilateral ties and the way forward

Shresht Jain
Shresht Jain
Research Intern

Except few stints, one of which being Vietnam supporting its ideological partner China during the Indo-China war of 1962, the India-Vietnam relationship has remained exceptionally cordial since its foundation was laid by Prime Minister Nehru and Ho Chi Minh more than five decades ago. The relationship has nurtured more since the inception of the Joint Commission Meeting at the Ministerial and Strategic level in 2007, which provided a larger framework for bilateral cooperation in areas such as trade, economics, security, and science and technology. What are the spaces of convergence between India and Vietnam; and the strategic gaps to achieve those spaces? What can be done to realise the potential?

Indo-Pacific: A Shared Interest
Strategically, India holds a geopolitical location that straddles the land and maritime space between the East and the West. The interaction between Asia-Pacific and South Asia in areas such as economic corporation and security initiatives can be clubbed together to form a broader view of Indo-Pacific, wherein India could play a larger role in maintaining peace and security.

India along with the US is committed to reject the use of force and support freedom of navigation. With Hanoi under relentless pressure from Beijing over the South China Sea, the Vietnamese foreign minister might have pressed India to play a more proactive role in defusing tensions and to let Indian companies like ONGC Videsh Limited (OVL), the overseas arm of the country’s oil conglomerate, continue with the exploration of two oil blocks that have been allocated to it in the disputed water body. Moreover, a shared common interest with the ASEAN and the US will allow India to engage in conducting offshore exploration and create a balance vis-à-vis China.

Trade and Investments: Strengthening Partnership
Currently, India-Vietnam bilateral trade is around USD4 billion and is expected to exceed USD5 billion by the end of the year. The two sides have decided to scale up trade to USD7 billion by 2015, a relatively modest target compared to the USD60 billion trade target set by China in relation to Vietnam. Clearly, there remains huge potential, both in terms of trade and investment, between the two countries.

Vietnam is greatly impressed by the IT sector in India. India has set up a USD2 million worth Vietnam-India Advanced Resource Centre in ICT (ARC-ICT) in Hanoi and is providing a PARAM Supercomputer. Investments by Indian companies totals approximately USD936 million in 86 projects in sectors such as oil and gas exploration, mineral exploration and processing, sugar manufacturing, agro-chemicals, IT, and agricultural processing.

Recently, Vietnam has chosen Tata Power as developer for a USD1.8 billion 2X660 MW Long  Phu 2 Thermal Power Project in Soc Trang Province in southern Vietnam, despite strong competition from Korean and Russian companies. It will be the single largest Indian investment in Vietnam when it comes through and will give a strong boost to economic cooperation and the strategic partnership.

Road Blocks to Success
In terms of trade, India still stands tenth as a trading partner to Vietnam. Fundamentally, Indian firms can only perform well on foreign soil if the regulatory climate in that country is conducive enough for it to sustain. India has some problems related to land acquisition in Vietnam, which is hampering the pace with which manufacturing industries can set up their bases in Vietnam.

In terms of India’s energy security, Vietnam’s offshore deposit offers opportunities for exploration and eventual supply, but the fragility in the UNCLOS allows China to put pressure on Vietnam. Though India has shown stern determination to ensure freedom of navigation, cases like the Chinese warning to Indian Navy stating that ’you are entering Chinese Water’ when Indian Naval Vessel, INS Arihant while sailing at a distance of 45 nautical mile from the Vietnamese Coast drop a hint that the India-Vietnam relationship will be best served if International laws are universally adhered to.

With respect to the strategic alliance, a major shortcoming has been the lack of infrastructure in Vietnam. ONGC did face a few problems in regard to the interpretation of the oil and gas reserves in its study area and so, relinquished a few of the blocks. Subsequently, there have been diplomatic rows between China and Vietnam on the issue of exploration of gas by PetroVietnam and British Petroleum (BP) on the planned USD2 billion gas field and pipeline project off Vung Tau in the southern coast, which is close to the Lan lay-Lan Do project where ONGC is a partner.

Realising the Potential
As a traditional partner of India, Vietnam has been recognised as an important factor in India’s Look East Policy (LEP). The coincidence of India’s LEP and Vietnam’s policy of cementing its relationship with traditional friends and multi-lateralising and diversifying its international relations lead to the establishment of Vietnam-India Strategic Partnership. A coincidence like this is appropriate to sort differences at the bilateral level.

An improved trade relation with Vietnam will have positive externalities. Given the leverage that India has on Information and Technology, Vietnam could well be the starting point in the region for such advancement and also to impress its neighbours further down the line. As for Vietnam, working in full capacity with India will fetch it economic and strategic benefit and also empower Vietnam to generate better sync with its ASEAN counterparts.