India-Vietnam economic ties grow strongly hinh anh 1Chairman of the Vietnamese National Assembly Vuong Dinh Hue witnessed the exchange of cooperation deals at the Vietnam-India Business Forum in New Delhi on December 17, 2021. (Photo: VNA)

Hanoi (VNA) - The Times of India has recently published an article highlighting the strong development of economic relations between Vietnam and India.

S D Pradhan wrote in the article, entitled "Growing India-Vietnam economic relations", that 2022 is an important landmark in the diplomatic relations between the two countries.

While formal diplomatic relations were established in 1972, the history of relations between the two countries stretches back more than 2000-year-old. Historians point out that economic and cultural links can be traced back to the 2nd BC and that Buddhism reached Vietnam via Indian delegations in the 3rd or 2nd BC. 

As per legends, Chu Dong Tu (a famous Vietnamese divine being and a ruler) became a disciple of an Indian Buddhist monk and Luy Lau, in Bac Ninh province, became the centre of Buddhism. The Cham civilisation is yet another symbol of a long relationship.

The last fifty years have witnessed significant growth in the India-Vietnam bilateral relations, which have acquired new dimensions with common strategic, diplomatic, security and economic interests with a special focus on people-to-people linkages. As a result, India-Vietnam ties are one of India's most crucial bilateral relations in Southeast Asia. 

India and Vietnam have elevated their relations from Strategic Partnership in 2007 to a Comprehensive Strategic Partnership in 2016. This reflected the commitment of the two countries to become more invested in boosting their bilateral relations in a wide array of fields.

This year has witnessed high-level exchanges between the two countries to celebrate 50 years of diplomatic relations. At the end of 2021, Vuong Dinh Hue, Chairman of the powerful National Assembly of Vietnam, visited India along with a high-level delegation at the invitation of Vice President Sri Naidu and Sri Om Birla, Speaker of the Lok Sabha. 

This was the first high-level interaction to celebrate the 50th year of diplomatic relations between the two countries and spell out an action plan for further cooperation between the citizen representatives of the two countries.

This year, Sri Om Birla visited Vietnam in April 2022. During his visit, he stressed that India and Vietnam should further expand their cooperation in climate change, sustainable development, health care, and the digital economy. 

On April 15, Prime Minister Modi had a telephone conversation with General Secretary of the Communist Party of Vietnam Nguyen Phu Trong, who briefed the former over the targets of the 13th National Party Congress on socio-economic issues, including Vietnam's aim to emerge as a key manufacturing hub for global giants and to upgrade its economic profile from a low-cost labour industry, concentrated on labour-intensive manufacturing, into a high-tech centre for science and technology. 

Indian Defence Minister Sri Rajnath Singh visited Vietnam in June 2022. This visit was important both from the defence and economic dimensions.

Both countries emphasise the need for promoting trade and investment and cooperation in hi-tech for economic development, taking the economic relationship to a much higher level for mutual benefits. In pursuance of this objective, Vietnam's Ministry of Industry and Trade and Government of Vietnam sent to India a business delegation led by Do Quoc Hung, Deputy Director of the Asian – African Markets, and 20 businesses in multi-sectors to India from July 18-22, 2022. 

The leader of the delegation at the meeting with the Indian Importers Chamber of Commerce and Industry (IICCI) stated that 'the bilateral trade between the two countries registered a significant growth since 2000 when it was only 200 million USD to 13.2 billion USD in 2021. The bilateral trade between India and Vietnam posted a 27 % growth. 

Atul Kumar Saxena, President of IICCI, highlighted factors that made the country an attractive place for doing business, pointing out that 'Vietnam is providing necessary assistance to entrepreneurs and has a stable economic growth that was noticeable even during the pandemic period'.

Of late, Vietnam has taken several steps to accelerate its integration into the global market, like the signing of a Free Trade Agreement with Europe in 2019. It is also a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) RCEP and India-ASEAN Free Trade Agreement. Vietnam is emerging as a favourite destination for Japanese manufacturing firms. 

Internal reforms, which began with the introduction of Doi Moi in 1986 and aimed to shift away from a centrally planned economy towards a market one, are continuing. Vietnam has not only assured continued electricity supply to industrial houses but has also digitalised the registration process of firms and introduced transparency and freedom to foreign firms to have 100% ownership. In addition, its anti-corruption campaign assures the elimination of middlemen. Besides, it focuses on developing skilled labour needed for industrial growth.

Currently, India is Vietnam's 8th biggest trading partner, while Vietnam is India's 15th largest trading partner and the 4th in Southeast Asia. Vietnam is trying to diversify its trade and intends to use India's growing market. The key Vietnamese exported products to India are mobile phones and components, computers, electronic products and components, chemicals, plastics, rubber, coffee, pepper, and cashews. 

The main Indian exported products to Vietnam are iron and steel, textile, fishery, corn, pharmaceuticals and raw materials. 

Vietnam occupies a central position in India's Act East Policy and the Indo-Pacific strategy.

India has made positive contributions toward capacity building and the socio-economic development of Vietnam. India has also been assisting Vietnam within the ASEAN framework.

Under the Mekong Ganga Cooperation (MGC) framework, India has been taking up Quick Impact Projects (QIPs), each valued at 50,000 USD, in different provinces of Vietnam to develop community infrastructure. As a result, India has 317 valid projects worth over 1 billion USD in Vietnam, ranking 23rd out of the 129 countries and territories investing in that country.

India realises that Vietnam is a potential regional power in Southeast Asia with great political stability and substantial economic growth. Hence, its average 7% annual economic growth is very attractive. Moreover, even during the worst period of the pandemic, its economic growth remained commendable at 3%, while several other nations registered negative growth. Even more impressive is its growth, driven by a record trade surplus, despite the collapse in global trade.

The drivers for trade and commerce growth are strategic and economic. Both countries desire to do away from their dependence on China. The problem related to the supply chain emerging in recent years has also pushed them to consider an alternative supply line. Moreover, both nations desire a stable, open, free and inclusive Indo-Pacific Ocean region. Thus, both have common objectives.

What are the prospects for economic relations between the two countries in the unpredictable global environment? India is pursuing the Act East Policy and working to make the Indo-Pacific free and open, promoting Security and Growth for All in Region (SAGAR).

Vietnam has set the priorities at the 13th National Party Congress that include national digital transformation, development of a digital-based economy, greater stress on science and technology development and creating of a more conducive environment for business development and manufacturing concerns. These make the prospects for further growth of trade and commerce between India and Vietnam bright in the coming period./.