Ahead of PM Modi’s Visit, Vietnam Hopes for Economic Gains 
Vietnam is looking up to India as it expects significant economic gains from Modi’s forthcoming trip. (Photo: iStock)
Vietnam is looking up to India as it expects significant economic gains from Modi’s forthcoming trip. (Photo: iStock)

Ahead of PM Modi’s Visit, Vietnam Hopes for Economic Gains 

Prime Minister Narendra Modi’s Vietnam visit, his 4th to the ASEAN region, comes barely two months after the Hague PCA’s ruling on the South China Sea (12 July 2016), which was not favourable to China. The Prime Minister’s Vietnam visit will be followed by a visit to Hangzhou (China) for the G20 Summit and Vientiane (Laos) for the ASEAN-India Summit and East Asia Summit.

A discussion on the SCS is likely to be high on the agenda during the Indian Prime Minister’s visit, given that India’s ONGC Videsh has recently got an extension to continue exploration in Block 128 (Vietnam provided a fourth extension to India). Vietnam has been keen that India stays put in the hydrocarbon block.

Deliverables Expected

Strategic discussions between both sides are not likely to be restricted just to the SCS issue, strengthening defence ties between both countries is likely to be high on the agenda as well. India has provided a 100 Million USD line of credit which is being used for sourcing patrol boats from India, the contract for the same is likely to be signed during the PM’s visit.

Apart from this, it is likely that during the visit, cooperation in the context of training provided to the Vietnamese military and naval officials is increased, the sale of Indo-Russian cruise missile Brahmos is also likely to be high on the agenda. It is also likely that both sides will give high priority to space cooperation; ISRO has already assisted in setting up a satellite tracking and data reception centre at Ho Chi Minh City. Beijing has been keeping a close watch on this.



Prime Minister Narendra Modi looks on as President of Myanmar, Htin Kyaw signs the visitors book, at Hyderabad House, in New Delhi on 29 August 2016. (Photo: IANS/PIB)
Prime Minister Narendra Modi looks on as President of Myanmar, Htin Kyaw signs the visitors book, at Hyderabad House, in New Delhi on 29 August 2016. (Photo: IANS/PIB)

Strengthening Ties with CMLV Countries

It would also be important to note that Modi’s visit comes days after the visit of Myanmar President Htin Kyaw to India and Indian Foreign Minister Sushma Swaraj’s visit to Myanmar. This only reiterates the point that there is a growing realisation in India that it needs to deepen economic, strategic and people-to-people cooperation with Cambodia, Myanmar, Laos,Vietnam (CMLV) in the region – especially Myanmar and Vietnam. For long, the focus of India’s ties with Southeast Asia had been Singapore and Malaysia, the presence of a strong diaspora, amongst other factors, helped in cementing ties with these countries.

In the last decade-and-a-half, India has sensed a growing resentment against China in two of the important CMLV countries, not just due to strategic issues, but even against the increasing economic imprint of Beijing. In Vietnam for instance, while bilateral trade with China (66 Billion USD in 2015) is much higher than that with India, both India and Vietnam have set a target of raising the bilateral trade to 15 Billion USD by 2020.



Nguyen Xuan Phuc takes oath after being elected Prime Minister, in Hanoi, Vietnam, 7 April, 2016 (Photo: PTI)
Nguyen Xuan Phuc takes oath after being elected Prime Minister, in Hanoi, Vietnam, 7 April, 2016 (Photo: PTI)

Vietnam Looks Up to India

What is clearly evident in Vietnam is that there is a strong desire to not be excessively dependent on China. There is a strong desire for greater Indian investment in Vietnam. While the Indian government has been encouraging more investments by creating a fund for the CMLV countries, Indian investments in Vietnam have not crossed the 1 billion USD mark. Due to its investor-friendly policies, and the rising labour costs in China, Vietnam has managed to attract big ticket investments from Japan and Korea. In 2015, FDI received by the country was 14 Billion USD, a 15 percent jump from the previous years.

Samsung apart from making big ticket investments has set up a massive R&D centre.

It may take India a while to fill in China’s shoes, but one area where it has done reasonably well so far is in capacity building, while all attention is on the assistance training which is provided to military and naval personnel in Vietnam what is often forgotten is assistance in areas like English language and information technology centre which are important for a booming economy like Vietnam.

India should also try to give a stronger push to more student exchanges and people-to-people contact. Two important steps which need to be taken in this context are increasing the number of scholarships for the Vietnamese students, and commencing direct flights with Vietnam.

Focus on Economic Ties

Strategic presence needs to be matched by stronger economic links. Apart from increasing connectivity by air with Vietnam, it is important that India expedites the India-Myanmar-Thailand highway for greater access to Vietnam along with other ASEAN countries. India should also seek to strengthen economic links with ASEAN in general and Vietnam in particular, by becoming a part of the APEC.

In conclusion, it is time that the gains made in the strategic relationship between India and Vietnam are matched by similar progress in the economic sphere.

(The writer is a New Delhi based Policy Analyst associated with The Jindal School of International Affairs. This is a personal blog and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)