New Delhi: Bilateral trade is expected to be a major area of focus when Prime Minister Narendra Modi will host his visiting Vietnamese counterpart Pham Minh Chinh for a bilateral summit here on Thursday.
This became evident when Chinh addressed the Vietnam-India Business Forum organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Embassy of Vietnam here on Wednesday ahead of the summit. Speaking on the occasion, Chinh called for stronger economic cooperation between Vietnam and India, setting an ambitious target of $20 billion in bilateral trade. He invited Indian businesses to invest in strategic sectors such as infrastructure, digital technology, and pharmaceuticals.
India-Vietnam bilateral trade and investments
In the fiscal year 2023-2024, India-Vietnam trade stood at $14.82 billion where India's exports to Vietnam amounted to $5.47 billion and Vietnam's exports to India were $9.35 billion. Main Indian exports to Vietnam include engineering goods, agricultural products (including meat and fishery products), chemicals and pharmaceuticals, electronic goods, minerals, cotton and textiles and plastics.
India's imports from Vietnam mainly comprise computer and electronic goods, mobile phones and accessories, machinery and equipment, steel and other metals, chemicals, footwear, garments, rubber, and wooden products. The Association of Southeast Asian Nations (ASEAN)-India Trade in Goods Agreement concluded in 2009 provides a preferential trade regime between India and Vietnam and that Agreement is currently under review.
India's investments in Vietnam are estimated at around $2 billion including investments routed through third countries. According to Vietnam’s Foreign Investment Agency, India has 378 projects with a total invested capital of over $1.1 billion in Vietnam. Major sectors of Indian investments are energy, mineral processing, agro-processing (coffee, tea, sugar), information technology, auto components, pharmaceuticals, hospitality and infrastructure. According to the Department for Promotion of Industry and Internal Trade of India, as of 2022, Vietnam has invested about $28.55 million in India in sectors like consumer goods, electronics, constructions, IT and pharmaceuticals.
There are regular exchanges of visits by business delegations and participation in trade fairs and exhibitions apart from business meets that support trade and business ties between the two countries. In April 2024, Indian businesses participated in the 33rd Vietnam International Trade Fair, Vietnam Expo, hosted by the Ministry of Industry and Trade of Vietnam where India was the 'Guest of Honour' country with participation coordinated by the Indian Trade Promotion Organisation. The Indian Business Chambers (INCHAM) in Vietnam provides a platform for cooperation among Indian businesses through its presence in Hanoi and Ho Chi Minh City.
During his address at the Vietnam-India Business Forum, Prime Minister Chinh invited Indian businesses to invest more in Vietnam, particularly in semiconductors, science and technology, innovation, digital transformation, green hydrogen, pharmaceuticals, renewables, and biotechnology sectors. He noted that Vietnam currently sources 33 per cent of its pharmaceuticals from India and expressed interest in establishing "a proper pharmaceutical ecosystem in Vietnam to help protect the health and life of our people".
"The Prime Minister also called for Indian businesses to facilitate Vietnamese companies’ integration into their supply chains and urged Indian businesses to consider Vietnam to be a strategic destination," a statement issued by FICCI reads. "Chinh revealed that he had met with several Indian companies that have pledged to invest in Vietnam. He welcomed these commitments and expressed hope for continued investment and cooperation."
India-Vietnam defence cooperation
Apart from trade, defence cooperation is expected to be another area of focus during the bilateral summit on Thursday. Defence is a major pillar of cooperation between India and Vietnam. India and Vietnam signed a formal agreement for defence cooperation in 1994. Relations between the two countries were elevated to the level of 'Strategic Partnership' during the visit of then Vietnamese Prime Minister Nguyen Tan Dung to India in July 2007. In 2016, during Prime Minister Modi's visit to Vietnam, bilateral relations were further elevated to a 'Comprehensive Strategic Partnership'.
Then again, during Defence Minister Rajnath Singh's visit to Vietnam in June 2022, the two sides signed the 'Joint Vision Statement on India-Vietnam Defence Partnership towards 2030', which will significantly enhance the scope and scale of existing defence cooperation. A Memorandum of Understanding on Mutual Logistics Support was also inked in the presence of the Defence Ministers of the two countries.
Chinh's visit is also a manifestation of India’s increasing engagements with countries of Southeast Asia under New Delhi's Act East Policy during Modi's third term as Prime Minister. The Vietnamese Prime Minister’s trip to India comes close on the heels of External Affairs Minister S Jaishankar’s visit to Laos where he participated in this year’s Foreign Ministers’ Meetings under the ASEAN framework in the format of ASEAN-India, East Asia Summit (EAS) and the ASEAN Regional Forum (ARF).
Vietnam is a key pillar of India’s Act East Policy. This is because both countries face common challenges in security, both traditional and non-traditional. These include maritime security, piracy, terrorism and natural disasters and relief.
During his speech at the Vietnam-India Business Forum, Prime Minister Chinh emphasised Vietnam’s foreign policy of independence, self-reliance, and multilateralism, stating that the country aims to be "a good friend and reliable partner of all countries around the world, and a responsible member of the international community".
Apart from the cooperation between the Ministries of Defence of India and Vietnam, this engagement has diversified into wider military-to-military dialogue and exchanges, training programmes and bilateral exercises. Given China’s aggression in the South China Sea, maritime security has emerged as a critical area of cooperation between India and Vietnam.
China is locked in disputes over the Spratly and Paracel groups of islands in the South China Sea with other countries in the region. While the other claimants over the Spratly islands are Vietnam, Brunei, Malaysia, the Philippines and Taiwan, the Paracel islands are also claimed by Vietnam.
Among the Southeast Asian nations, Vietnam has one of the strongest voices against China's assertiveness in the South China Sea. While India and China are involved in a border conflict east of Ladakh, Hanoi and Beijing are also involved in a bilateral conflict over claims to the Paracel islands. Both India and Vietnam are directly affected by China’s territorial claims and activities.
Maritime cooperation enables them to collaborate, strengthen their positions, and collectively address disputes while upholding international law. By joining forces, India and Vietnam aim to counterbalance Chinese influence and maintain stability, security, freedom of navigation, and a rules-based order in the Indo-Pacific region.
Vietnam had earlier used a $100-million Indian defence line of credit (LoC) to buy 12 high-speed offshore patrol boats for its navy. India has also activated a satellite tracking and imaging centre in southern Vietnam that will give Hanoi access to pictures from Indian earth observation satellites that would cover China and the South China Sea. In July last year, then Indian Chief of Naval Staff Admiral R. Hari Kumar, during an official visit to Vietnam handed over an indigenously-built in-service missile corvette INS Kirpan to Vietnam Peoples’ Navy.
Development aid partnership
India is also an important development aid partner of Vietnam and has contributed over several decades towards training, capacity building, socio-economic development and industrial growth. Currently, about 150 Vietnamese nationals attend sponsored training and educational courses in India annually and institutional cooperation is extended in areas such as information technology and heritage conservation. Vietnam is also a partner country within the ASEAN framework and Mekong Ganga Cooperation mechanism, particularly Quick Impact Projects (QIPs) for local communities.
Under the Mekong Ganga Cooperation framework, India has been undertaking QIPs in different provinces of Vietnam to develop community facilities at the grassroot level. Since 2017, about 45 QIPs have been completed in over 35 provinces of Vietnam.
It is in view of all these that Thursday's India-Vietnam bilateral summit assumes significance. Chinh's is the first bilateral state visit by a Vietnamese Prime Minister to India in nearly a decade.
