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Vietnam and India have a longstanding and resilient relationship, stemming from over 2,000 years of cultural exchange, which was established and nurtured by the leaders of both countries, including President Ho Chi Minh, spiritual leader Mahatma Gandhi, and Prime Minister Jawaharlal Nehru. The people and leaders of both nations have continuously worked to develop this relationship.
Vietnam – India diplomatic relations
India is one of the countries with which Vietnam has established a comprehensive strategic partnership since September 2016. India is an important partner in Vietnam’s priority policy for the South Asian region and a reliable traditional friend of Vietnam. In Southeast Asia, Vietnam is a crucial pillar in India’s Act East Policy and the Indo-Pacific vision, which emphasize openness and inclusivity. Vietnam is one of India’s key partners and closest friends in ASEAN. The India-Vietnam relationship is one of India’s most important bilateral relationships in Southeast Asia.
On December 21, 2020, the governments of Vietnam and India approved the “Vietnam-India Joint Vision for Peace, Prosperity and People” to guide the comprehensive strategic partnership between the two countries. This partnership covers traditional areas of cooperation such as politics, trade, investment, energy, defense, security, and people-to-people exchanges, as well as new areas of cooperation such as space cooperation, civilian nuclear cooperation, information technology, and marine science.
In 2022, at the invitation of the Chairman of the National Assembly of Vietnam, Vuong Dinh Hue, the Speaker of the House of the Republic of India, Om Birla, and the delegation of the Indian Parliament visited Vietnam from April 19 to 21. This visit was an important highlight for the comprehensive strategic partnership between Vietnam and India, especially as the two countries celebrate the 50th anniversary of diplomatic relations in 2022.
During the visit, through the activities of the Speaker of the House of the Indian Parliament meeting with high-level leaders of the Vietnamese Party and State, as well as the activities of the Secretary General of the Parliaments of the two countries, both sides discussed and agreed on many issues related to the bilateral relationship and legislative bodies of the two countries.
Strong economic & trade partnership between Vietnam – India
In South Asian countries, India is Vietnam’s most important market, accounting for 80% of Vietnam’s total trade turnover in the region. In 2017, bilateral trade between the two countries reached $7.5 billion, an increase of nearly 38% compared to 2016. By 2022, India had become Vietnam’s eighth largest trading partner.
Bilateral trade between Vietnam and India has increased rapidly from $200 million in 2000 to $13.2 billion in 2021. This is the first time that two-way trade between Vietnam and India has exceeded $13 billion. In particular, only five years after the two countries upgraded their relationship to a comprehensive strategic partnership, bilateral trade turnover doubled and reached $15.05 billion in 2022.
In the first eight months of 2021, Vietnam-India bilateral trade showed positive growth. Exports to India reached $3.955 billion, up 26.7% compared to the same period in 2020, with key export items including phones and components (20.7%), computers, electronic products and components (13.8%), and machinery, equipment, tools, and spare parts (10.5%). Compared to the same period in 2020, chemical exports to India increased significantly (126.5%), metal and product exports increased by 45.2%, plastic raw materials increased by 432%, rubber increased by 121.2%, textile, garment, leather and shoe raw materials increased by 86.9%, and agricultural products such as pepper increased by 58.5% and vegetables and fruits increased by 51%.
Vietnam’s imports from India in the first eight months of 2021 reached $4.689 billion, up 60.7% compared to the same period in 2020. The main imported items were iron and steel (16%), corn (6.5%), and machinery, equipment, tools, and spare parts (6.2%). Corn imports increased sharply, with a total value of $306 million. Imports of animal feed and raw materials were $203 million, up 219.4%.
As of the end of the first quarter of 2022, total trade turnover between the two countries reached $4.09 billion. The main export items from Vietnam to India in this quarter were phones and components ($464.6 million), computers, electronic products and components ($223.4 million), and other common metals and products ($180.5 million). The main import items from India to Vietnam in this quarter were various types of iron and steel ($306.5 million), corn ($155.8 million), and various types of cotton ($152.2 million).
Robust investment cooperation between Vietnam – India
India and Vietnam have not only established an important trade partnership but also a cooperative investment relationship with the participation of numerous Indian corporations and Vietnamese enterprises.
As of August 2022, Vietnamese enterprises had invested in 10 projects in India with a total capital of $6.2 million, ranking 44th out of 79 countries investing in India. India ranked 24th out of 139 countries and territories investing in Vietnam with 334 projects and a total investment capital of around $1 billion.
The average scale of Indian projects is $2.9 million per project, lower than the national average of $11.8 million per project. Indian projects focus mostly on the processing and manufacturing industry with 60 projects and a total investment capital of $459.6 million, accounting for 50.5% of the total investment capital. The electricity production and distribution sector has six projects with a total investment capital of $236.3 million, accounting for 26% of the total investment capital. The mining sector has five projects with a total investment capital of $96.5 million, while the remaining projects are in other sectors.
Excluding three oil and gas exploration projects, India has invested in 28 localities. Ninh Thuan province leads with four projects and a total investment capital of $195.1 million, of which the INFRA 1 solar power plant project has a total investment capital of $71.9 million. Phu Yen province has eight projects with a total investment capital of $189.64 million, of which the Son Hoa sugar factory project is the largest Indian project with a total registered capital of $94.5 million. Binh Duong province ranks third with 10 projects and a total investment capital of $116.26 million, including the TAT Coffee Vietnam Co., Ltd project with a total investment capital of $67.5 million. The remaining projects are located in Ho Chi Minh City, Nghe An, Long An, and other provinces.
Prospects and trends in future bilateral relations
Vietnam and India share a common desire for peace, stability, and security in the region, as well as a similar foreign policy approach based on multilateralism. Both countries share a vision for the Indian Ocean – Pacific Ocean region. They always support each other in regional and global issues through ASEAN-led mechanisms or the Mekong-Ganges Cooperation. In 2021, as non-permanent members of the United Nations Security Council, Vietnam and India collaborated closely to achieve consensus on many important documents such as resolutions or statements of the Council’s President.
India has been and is promoting economic integration with CLMV countries (Cambodia, Laos, Myanmar, Vietnam) and the Mekong-Ganges Cooperation initiative. Recently, at the ASEAN-India Ministerial Meeting, the parties reviewed the ASEAN-India Free Trade Agreement, upgrading it to enhance economic connectivity with India. Meanwhile, Vietnam holds a central position in India’s Look East Policy and its vision for the Indian Ocean – Pacific Ocean region. Under the framework of the Mekong-Ganges Cooperation, India has sponsored 37 Quick Impact Projects (QIPs) worth $50,000 each, which have been completed and brought positive results to people in difficult areas of Vietnam.
These are the premises and favorable conditions for developing trade and investment cooperation between the two countries. To leverage these advantages and promote economic cooperation between Vietnam and India, the following issues need to be addressed:
- Firstly, each side needs to leverage their strengths. India is leading in areas that Vietnam can learn from, such as science and technology, especially digital technology, energy, and nuclear technology. On December 15, 2021, the Indian Ministry of Technology announced a $10 billion plan to attract screen and semiconductor manufacturers with the ambition of making India a global electronic manufacturing hub. India also approved a plan to support 100 domestic companies in the field of chipset and IC design. Additionally, Vietnam can share its experience in social management, poverty reduction, and other social policies with India.
- Secondly, it is necessary to leverage the similarity in policy and the spirit of self-reliance of the two nations to unlock the potential for trade and investment cooperation. India is expected to be the fastest-growing major economy in the world, with some bold reforms to be implemented in agriculture, manufacturing, education, and labor. Vietnam aims to become a high middle-income country by 2030 and a high-income country by 2045.
- Thirdly, create a platform for strategic interests, economic interests, and emotional ties between the two nations.
- Fourthly, strengthen the connection and cooperation between small and medium-sized business communities in Vietnam and India to support each other’s development.
- Fifthly, continue to enhance exchanges at all levels, fields, and strengthen people-to-people exchanges to constantly reinforce trust, sharing, and cooperation.
Vietnam and India are two rapidly developing economies in the region. The economic relationship between India and Vietnam is a pillar of the comprehensive strategic partnership between the two countries. In the coming time, the pillar of Vietnam-India development cooperation in the economic field will be further developed.
Conclusion
In the coming years, investment relations between the two countries will have new breakthroughs, focusing on the fields of seaports, energy, infrastructure, oil and gas, information technology, digital transformation, digital economy, marine science, processing and manufacturing technology, automotive supporting industries, and more.
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