India Vietnam Relations: From Foundation to Superstructure
Ambassador Neeklakantan Ravi*
Both countries have a large working population involved in agriculture. In India nearly 60% of labour is directly or indirectly involved with agriculture. In Vietnam too, about the same i.e., 60 percent of the employed labor force is engaged in agriculture, forestry, and fishing. Thus the agriculture sector lends itself naturally for mutually beneficial cooperation.
Immediately after the re-unification of Vietnam, India supported Vietnam in establishing the Cuu Long Rice Research Institute (CLRRI) in Mekong delta under a line of credit (LOC) extended in Feb 1976. CLRRI contributed significantly in transforming Vietnam into the second largest rice exporter in the world today from a net importer of rice that it was in the late 1980s. A very large number of eminent scientists (more than 60 in number) at this institute have been trained in India under Indian Technical and Economic Cooperation programme (ITEC) and Cultural Exchange Programme. India has also supported Vietnam in training scientists at other agricultural research and training institutes including Post Harvest Technology Institute, Vietnam Water Resource University, Vietnam Agricultural University etc. Use of information technology and satellite based technology applications in agriculture, water resources and maritime management are now the areas where a new generation of scientists and technologists can be trained in the new century. Given current levels of expertise in India, the two countries could also think of using their respective efficiencies in the field of agriculture to contribute to respective food security. Further, preservation and maintenance of water bodies is an important area of expertise in Vietnam. Here too, bilateral cooperation can be focused upon to yield significant benefit to India.
As mentioned earlier, in the agriculture sector, agro-commodities and the output of food processing industries continue to be the key commodities in bilateral trade. Exports of three key broad areas of agricultural commodities from India, i.e. (i) Animal feed ingredient; (ii) food items of plant origin; and (iii) food items of animal origin have shown growth and promise amid significant fluctuations. These arise from violations of health regulations, low level of quality in some of the supplies, competition arising out of price and tariff levels in the background of entering into force of competing free trade agreements. Some instances are:
Animal feed ingredients
After the signing of phyto-sanitary arrangements agreement for animal feed ingredients with Vietnam in 2012 there have been no cases of non-compliance. However India’s exports have continued to decline in recent years, owing to price fall, severe competition from the USA, Latin America etc. Seafood is yet another item that has shown severe quality related problems from time to time.
Indian Investments in agri sector
Currently, many Indian companies have invested in Vietnam in the agricultural sector but their presence is not recognized since they are investing mainly through third countries. Till date, there are 29 Indian investment projects in agriculture with total invested capital of almost US$300 million. Indian companies are investing in agro & food processing sector such as sugar, tea, coffee, rubber, spices etc. As these projects employ a large number from among the local workforce, these moves simultaneously assist in the expansion of Vietnam agriculture processing sector.
Overall, Vietnam continues to be an attractive investment destination for Indian companies. Till date, according to Vietnamese figures, India has 118 projects with total registered capital of US$491.5 million, ranking 28 out of 110 countries and territories investing in Vietnam. During 2015, 23 fresh projects were proposed from India with total registered capital of US$138.99 million. If investments of Indian companies from third countries are included, India has 132 major projects with total investment of US$1.07 billion.
The two governments should try to constitute a task force to look at all the problems mentioned above in the context of the achievement of the target of US15 Billion in bilateral trade by 2020. It would require a coordinated effort both by the government and the private sector to tackle issues and also achieve a target that can really enhance the potential for exchange by both sides in various sectors.
Lines of Credit: India has offered several Lines of Credit to Vietnam over the years on concessional terms. So far, India has extended 17 LoCs worth more than US$165 million to Vietnam. The LoC extended by India in 2013 for USD 19.5 million for execution of a Nam Trai-IV hydropower project and Binh Bo Pumping station. India has also extended two more lines of credits of US$100 each for infrastructure and Defence procurement. During the visit of President of India to Vietnam in 2014, the LOC for Defence procurement of another US$100 million was signed.
During the visit of PM Nguyen Tan Dung to India in 2014, an LOC of US$300 million was announced to help Vietnam with its localization efforts and enable India’s participation in Vietnam’s value chain of the garment and textile sector, by establishing manufacturing hubs in Vietnam. This became particularly relevant after the Trans Pacific Partnership emerged as a possible game changer in international trade. With Vietnam as a major manufacturer of cotton garments and accessories, and India as the investor in the same sector for production of cotton textiles in Vietnam, the combination would have benefited both countries. Even though the advantages of the TPP may appear to have receded for the time being, the sector offers a win-win situation for the two countries. With India’s expertise in all areas from growing cotton to manufacture of textiles and that of Vietnam in being able to make garments at highly competitive rates, the field is open for intensive and mutually beneficial cooperation. If the line of credit requires a revised and more favourable terms to the Vietnamese side, India should extend a helping hand. This would only further strengthen bilateral ties in the textile sector – a strong point for both countries.
Healthcare and pharmaceuticals
Export of medicines and medical ingredients make up an important and growing component of bilateral trade between India and Vietnam. In 2015, over US$ 300 million worth of medicines and medical ingredients were exported from India to Vietnam (amounting to about 12% of Vietnam’s total imports of US$ 2.66 billion). According to Drug Administration of Vietnam, the number of companies and product registration from India is the highest among any countries present in Vietnam, accounting for 30% of registrations in Vietnam. This is an area of importance to both the countries. It offers an opportunity for a bilateral programme in the field of health care, medical research, medicine research, and extension of health at affordable rates to its citizens. Both countries have many years of experience in this area and thus possess a well-diversified data-base. From this vast amount of data, ideas for research, for new methods of therapy including use of traditional medicines in select areas, financing of health care and a variety of other initiatives can be formulated. The one area where Indian pharmaceutical companies should expand their efforts is in the area of quality control as many Indian companies frequently find themselves in the list of drug quality violators. Vietnam is a growing market that not only offers financial rewards in the short and medium term; it also offers the long-term benefit of joint research in a variety of areas. This is so especially in the context of comparable climatic conditions in the two countries and a strong living heritage in traditional systems of medical treatment. (Part 4)
* Ambassador Neelakantan Ravi, Fomer Ambassador to Vietnam and Former Secretary (East), Ministry of External Affairs of India; Indian Council of World Affair (ICWA)