India-Vietnam trade is aiming toward $15bn target

On the occasion of the 45th anniversary of Vietnam-India diplomatic relations, and the 10th anniversary of the two countries’ strategic partnership, India’s Ambassador to Vietnam P. Harish spoke to the Vietnam Investment Review on the two countries' bilateral trade goal.

Vietnam - India maritime industry business meeting in September (source: Indian Embassy in Vietnam)

According to the diplomat, two countries are entering their economic primes, and Indian firms are starting to consider Vietnam a good target for their investments.

Vietnam and India forged their strategic partnership in July 2007. What achievements, especially in trade and investment ties, have been made since that time?

India and Vietnam have a strong historic relationship which has weathered the tests of time. Full diplomatic relations were established in 1972, and ever since, the ties between the two countries have been marked by mutual trust and a convergence of views on major international issues. The strategic partnership between the two nations was established in 2007, and our bilateral relations have greatly improved since then.

The partnership was elevated to the ‘Comprehensive Strategic Partnership’ during the official visit of Indian Prime Minister Narendra Modi to Vietnam in September 2016, covering co-operation in defence and security, economic engagement, cultural outreach, high level exchanges, and people-to-people linkages.

Regarding trade, we have shown a 10-fold increase in our bilateral trade, from $1.15 billion in the fiscal year 2006-2007 to $10.1 billion in the fiscal year 2016-2017. Our leaders have established a trade target of $15 billion by 2020 and both counties are determined to achieve it. India is one of Vietnam’s top 10 trading partners, whereas Vietnam is India’s fifth-largest trading partner in ASEAN. The importance of Vietnam as an economic partner for India cannot be underestimated.

In terms of investment, India’s investment in Vietnam totals about $1.28 billion in 136 projects, including those routed through third countries. Major sectors of investment include oil and gas, renewable energy, mineral exploration, agri-processing, sugar manufacturing, agri-chemicals, IT, and auto components. The latest addition is the $63 million freeze-dried coffee project of Tata Coffee in Binh Duong province. Tata Power is also working to set up the Long Phu II $2.2 billion, 1,320-megawatt thermal power plant in Soc Trang province. We believe that the successful implementation of this project will go a long way in encouraging further Indian investments in Vietnam.

Vietnam and India have agreed to explore measures to achieve the trade target of $15 billion by 2020. What has been done to achieve this target so far?

In order to realise this target, we need to actively collaborate to enhance exchange of trade delegations, reach out to business and industry, and encourage mutual investments which will boost trade.

Tariff and non-tariff barriers, including some technical barriers to trade, remain significant impediments to development of bilateral trade, and they are being addressed by both sides. India and Vietnam have agreed to facilitate bilateral trade flows by minimising the application of trade barriers, and step-by-step removal of trade barriers in accordance with the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and India. We believe that bilateral trade will receive a strong boost when tariffs for many commodities are eliminated or significantly reduced under this agreement.

Chairman of the Hanoi city people's committee Nguyen Duc Chung (R) talking to Indian Ambassador to Vietnam on cooperation between India and Hanoi on information technology (source: Indian Embassy in Vietnam)

Over the past few years, the oil and gas sector has become one of the co-operational pillars in the two countries’ economic relations. What is your expectation for this co-operation’s prospects in the future?

India’s interest in the energy sector, especially in oil and gas exploration, is nearly three decades old, and ONGC Videsh Limited has had a strong presence in Vietnam contributing to its energy security. Over the years, many Indian firms have also implemented some hydroelectric power projects in Vietnam.

We look forward to investments in Vietnam from Indian companies not only in the renewable energy sector but also in energy conservation. Energy Efficiency Services Limited from India is already collaborating with some provinces in Vietnam to drastically reduce their electricity consumption – especially in the areas of street lighting through use of LED bulbs – thereby contributing to the overall sustainable development of Vietnam by reducing its reliance on hydrocarbons.

Vietnam and India have had a strategic partnership for 10 years. What are your thoughts on the partnership’s outlook for the next 10 years?

The elevation of the strategic partnership between the two countries to that of a comprehensive strategic partnership is a clear indication of the goodwill, trust, and importance the two countries place on their relationship. It is also an acknowledgment of the existing strong bilateral defence and security ties, and our mutual desires to contribute to regional peace, stability, co-operation, and prosperity.

An action plan to operationalise this partnership in all our areas of engagement has also been signed by India’s External Affairs Minister Sushma Swaraj and Vietnam’s Deputy Prime Minister and Foreign Minister Pham Binh Minh during his official visit to India in July 2017.

The two countries would benefit immensely by having direct flight and shipping connectivity. It is encouraging that in late 2017, Vietjet will open direct flights to India. The banking and financial sector links are being enhanced to facilitate more intensive economic engagement. 2016 witnessed the opening of a branch of Bank of India in Ho Chi Minh City.

India has an active portfolio of human resource development and capacity building in Vietnam in IT, entrepreneurship development, English-language training, high- performance computing, and other areas of science and technology.

It is only with such a multi-pronged approach that we can actualise the Comprehensive Strategic Partnership between the two countries and harness the true potential of our countries and peoples./.

( VNF/VIR )