India Vietnam Relations: From Foundation to Superstructure (Part 2)


India Vietnam Relations: From Foundation to Superstructure (Part 2)

(Part 1)

India Vietnam Relations: From Foundation to Superstructure

Ambassador Neeklakantan Ravi*


Economic and commercial relations

India's relations with Vietnam have always been characterized by growing economic and commercial engagement. India is now among the top ten trading partners of Vietnam. During the visit of General Secretary Nguyen Phu Trong to to India in October 2013, the two sides agreed to set the target of bilateral trade at USD 15 billion by 2020. In subsequent developments, five key sectors have been identified as the thrust areas. These include garments and textiles, pharmaceuticals, agro-commodities, leather & footwear and engineering.

However, to enhance cooperation in these areas, the basic framework that has been guiding relations in these areas needs to be re-assessed. For instance, to achieve the mutually agreed target for bilateral trade of USD 15 billion by 2020, there has to be agreement about the prevailing figures that define the quantum of trade between the two countries. The table and the graphs that follow convey the divergent situation clearly and this is an issue that has to be taken into account while taking appropriate measures to enhance bilateral trade. Intensive discussions are necessary to understand the issues involved.

Note: The calendar year figures have been sourced from the Government Statistics Office of Vietnam while the financial year figures covering parts of two years have been sourced from the Trade Data put out by the Ministry of Commerce of the government of India. 

Apart from enabling the data to be examined on a mutually agreed basis, these discussions would also enable an examination of commodities for inclusion as new items for trade; identify those items which can be processed in either country for value addition, for domestic consumption or for export further afield; focus on items whose value of export / import vary greatly from year to year, thus giving both sides an idea on where to lay the emphasis to trade and where possible, investment diversification. India’s exports of meat and edible meat offal, seafood, cotton, cattle feed ingredients, maize, oilseed compares well with Vietnam’s exports of coffee, rubber, pepper, wood & wooden products etc. in their respective contexts of trade expansion and investment diversification.

Another area to be addressed is the state of primary services that smoothens the bilateral trade machinery. Some of the principal weaknesses are the lack of branches of both countries’ banking facilities, absence of direct maritime and air links and the need for an effective mechanism for settlement of trade disputes. No Indian or Vietnamese bank has established its full-fledged operational presence in either country. All the commercial banking transactions are made through banking intermediaries from Singapore, Hong Kong, Indonesia, and sometimes even via the USA!

The Bank of India and the Indian Overseas Bank opened representative offices in Ho Chi Minh City in February 2003 and March 2008 respectively. However, their desire to have full-fledged operational branches in Vietnam is still awaited, even though the signing of MoU on banking supervision between Reserve Bank of India and the State Bank of Vietnam took place on 16th November 2012. A determined support for overcoming delays should be made to help bilateral trade to grow further.

Maritime Links

The India Vietnam Maritime Shipping Agreement was signed in May 2013 and the first meeting of the Joint Maritime Liaison Committee was held on April 15, 2016 on the sidelines of the Martime India Summit (MIS 2016) in Mumbai. During the meeting, both sides agreed that Shipping Corporation of India Limited and Vietnam Shipping Lines should hold talks to explore the possibility of opening direct Sea routes between the two countries and starting direct container ship operation. Deficiency in direct maritime links results in higher cost transportation as well as the cost imposed by the extra time needed for transporting goods. The Indian and Vietnamese governments need to focus on this aspect to take advantage of the healthy growth rates of their respective economies.

To ease the process for the settling of trade disputes both sides should establish a framework for mutual legal assistance to help the trading community on either side to deal with problems related to anti-dumping, and other cases dealing with fraud etc.

Direct Air Linka

The Air Services Agreement between India and Vietnam was signed during the visit of General Secretary Nguyen Phu Trong to India in November 2013 and the Code Sharing Agreement was signed between Jet Airways and Vietnam Airlines during the visit of President Pranab Mukherjee to Vietnam in September 2014. The formal announcement was made during Vietnamese PM’s visit to India in October 2014. Till date, however, Direct Air Connectivity between India and Vietnam has not been established. The question arises: What needs to be done?

For Indian carriers, a flight from Kolkata/Delhi/Mumbai/Bodh Gaya to Hanoi/Ho Chi Minh city appears feasible given the gradual increase in tourism traffic. For Vietnamese carriers especially Vietnam Airlines, a flight from Hanoi to New Delhi via Myanmar also appears feasible since Vietnam Airlines are faced with losses in maintaining direct flights from Hanoi to Yangon. There is no denying the fact that national flag carriers should fly between capitals to establish presence and connectivity. In the prevailing circumstances, the Indian government has an opportunity to use the intrinsic character of the “Act East Policy” to show how India can meet some of Vietnam’s concerns in this regard by going more than half way.

Specifically, the flight from Hanoi to Yangon, which is currently a daily flight can be extended to Gaya on two or three days a week and similarly to Kolkata on other days of the week. With this, the pilgrims from Vietnam and Myanmar can reach Gaya without much of a hassle. Simultaneously the flights returning to Hanoi from Gaya / Kolkata can be used by tourists from India who wish to see the sights not only in Vietnam but also in neigbouring Laos and Cambodia. Since Vietnam Airlines operates flights to both neighbours, Indian tourists will have the opportunity to visit all the countries in the Indo-China region, many for tourism and many others for business too. Vietnam Airlines could be given some favourable terms for some of the financial obligations in Gaya and Kolkata as an incentive for two or three years to help stabilize operational requirements.

Given that the private sector is quite active in the tourism sector in all the countries concerned, the Mekong Ganga Cooperation platform can be used to get the tourism sector to work together. They in turn could work out a financially attractive package for all concerned, i.e., tourists going both ways. A fortnight long tourist package can be worked out for Indian tourists covering, Hanoi – Da Nang – Nha Trang – Ho Chi Minh City – Phnom Penh – Siem Reap – Vientiane – Luang Prabang – Hanoi. This is but an indicative itinerary and an appropriate one can be crafted with inputs from tourist operators. The potential for this sector is indeed very high. Similarly for tourists and pilgrims from Vietnam a package covering Buddhist sites in India, starting with Gaya, can be offered to start with and later on expanding it to other historical sites in eastern, central and southern India.  (Part 3)

* Ambassador Neelakantan Ravi, Fomer Ambassador to Vietnam and Former Secretary (East), Ministry of External Affairs of India; Indian Council of World Affair (ICWA)

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