Over the last decade, bilateral trade between Vietnam and India has increased by over 469% – from $1.78 billion in FY2008 to $10.13 billion in FY2017. The two fast growing economies are now targetting $15 billion in trade by 2020. In an exclusive interaction with The Dollar Business, H.E. Ton Sinh Thanh, Ambassador of Vietnam to India, discusses the ways and means to further strengthen bilateral ties.

INTERVIEW BY AHMAD SHARIQ KHAN  | September 2017 Issue | The Dollar Business

TDB: Over the years, Vietnam and India have become important trade partners for each other. How do you see the bilateral relationship developing?

H.E. Ton Sinh Thanh (TST): I am very pleased to tell you that bilateral ties between India and Vietnam have always been very cordial. History tells us that many people from India’s east coast have travelled to Vietnam by boat and settled down there. And today, the testimony to this is visible in the many Hindu relics found in Vietnam. Similarly, many Buddhists have also been visiting Vietnam for ages. There are also dozens of successful Indian companies in Vietnam. Additionally, India and Vietnam closely cooperate in various regional forums such as ASEAN, East Asia Summit, Mekong-Ganga Cooperation, Asia-Europe Meeting – other than UN and WTO. So, the two nations, though geographically distant, have always been very close.

TDB: Vietnam and India have set a target of crossing $15-billion mark in bilateral trade by 2020. How far have we progressed towards this goal?

TST: The cooperation level has strengthened ever since the new government in India came to power. In recent years, the Vietnam-India Comprehensive Strategic Partnership has progressed and led to greater economic cooperation. While I am quite satisfied with all the progresses made so far, I also believe that there is still a lot of potential for Indian investments in Vietnam in sectors such as oil and gas, textiles, pharmaceuticals, food processing, IT, infrastructure development and renewable energy. And to address this, I am glad to share that during the visit of PM Modi to Vietnam last year, the two countries have signed several important MoUs in the areas of economy, trade, science & technology, and defence & security among others. We are also trying to increase business-to-business associations between both large as well as small and medium enterprises from the two countries. And with all these endeavours, I believe that the two sides are very much on track to reach the target of $15 billion in trade.

TDB: Vietnam has applauded India’s ‘Look East Policy’. Has the policy given an impetus to bilateral ties?

TST: To start with, leaders from both the nations while expressing their satisfaction over the Strategic Partnership, that was developed over the years, felt that the ‘Look East Policy’ required us to do more. Both India and Vietnam therefore agreed to upgrade the relationship to a ‘Comprehensive Strategic Partnership’ which now encompasses many more areas of collaboration. And to me, this is a sign that both the countries are determined to take bilateral trade to the next level. The Vietnamese government has also reaffirmed its support for India’s ‘Look East Policy’ and welcomed a greater role for India in all regional and international fora – and that includes Vietnam’s support for India’s candidature for permanent membership of the United Nations Security Council. Prime Ministers of both our countries have also urged leaders of business and industry to explore new business opportunities in the identified areas for cooperation i.e. hydrocarbons, power generation, renewable energy, infrastructure, tourism, textiles, footwear, medical and pharmaceuticals, ICT, electronics, agriculture, agro-products, chemicals, machine tools and other supporting industries.

TDB: What sectors hold the biggest potential for Vietnam-India cooperation?

TST: Vietnam is a developing economy and to keep its factories and plants running it needs a lot of intermediary and raw materials. And this is where I believe the two economies have a lot of potential for cooperation. Firms in Vietnam are always exploring cost-effective destination to source these items. And because of the fact that they don’t want to depend on one source, and India offers many sourcing choices, makes India an ideal sourcing destination. Also, both India and Vietnam have very dynamic textile industries and both need each other’s support. Likewise, we need a lot of machinery and chemicals from India – opportunities are aplenty across sectors.

TDB: What facilities does Vietnam offer to Indian investors?

TST: Today, many India conglomerates and investment companies are household names across the globe. And, I urge them to also consider Vietnam as an investment destination. I can assure them that Vietnam has a pro-investment environment, which is evident from the fact that Vietnam now attracts around $20 billion inward investments every year. Today, countries like Korea and Japan have invested billions of dollars in Vietnam. Whereas, India’s investments that stand at $775 million is small in comparison. And this shows the enormous untapped potential for Indian investors.

That said, the Tata Group is doing remarkably well in Vietnam (the group is executing a $1.8 billion thermal power project in Sóc Trang province). This is a success story that should inspire other Indian investors. We have reduced the corporate tax to 20% from 30%, offer a very attractive tax holiday scheme for five years and have many other incentives for investors. Additionally, we have simplified the procedure for getting licenses and the ease of doing business has improved vastly over the years.

TDB: Since CY2012, Vietnam has become a trade surplus economy. What are the major factors behind this enormous achievement?

TST: Vietnam’s development record over the last 25 years has been both remarkable and satisfying. Economic and political reforms under the aegis of Ð?i M?i have spurred rapid economic growth – making Vietnam’s GDP per capita growth amongst the fastest in the world since 1990 – averaging at 6.4% during 2000s. And even at present, despite uncertainties in many world markets, Vietnam’s economy remains resilient and the country is globally regarded as a very competitive economy. This is evident from the fact that our total trade stands at somewhere about $350 billion, of which around $176 billion is from exports. Worth noting here is that though India’s total merchandise trade stands at $600 billion, imports still outpace and outperform exports by a large margin.

TDB: Vietnam currently has 12 FTAs. To what extent have they helped in boosting exports from the country. Are there anymore FTAs in the pipeline?

TST: We are very proud of our 12 free trade agreements (FTAs). These agreements have resulted in win-win propositions for our country and our partners and we are always ready for more agreements. For Vietnam, an FTA is not just a tool to enhance trade but is a means for actualising a greater developmental-centric goal for our country. Because of its FTAs, Vietnam is considered a major gateway for exports into markets like US, Japan and EU.

Currently, we are negotiating some more FTAs like Regional Comprehensive Economic Partnership (RCEP), Hong Kong-ASEAN FTA, an FTA with Israel and an FTA with the European Free Trade Association (EFTA). In fact, we have also recently concluded negotiations over an FTA with EU and have a lot of hope from the Trans-Pacific Partnership (TPP). I must add that despite US withdrawing we are still determined to make TPP a success with the help of the remaining member countries.

TDB: Talking of US President Trump and TPP, what ramification does Trump’s decision have on Vietnam’s exports?

TST: Trump’s decision definitely will have ramifications on us. Vietnam is an export-driven economy in which manufactured goods have always had a significant share. And since US is the biggest market for us, US pulling out of the TPP is not a good development for Vietnam. Our manufacturing sector, especially the apparels and textiles, electronics, furniture and footwear, would have enjoyed low tariffs in US had the country not withdrawn from the pact. But there are opportunities waiting to be tapped across the world and beyond the TPP.

"USA is the biggest market for us. USA exiting TPP will hurt our exports"

TDB: What is your view on India’s initiatives such as ‘Make in India’, ‘Start Up India’, etc.? Does Vietnam have anything similar in place? 

TST: These are inspiring initiatives and there are valuable lessons to be drawn from them. Since Vietnam is a manufacturing-led economy such initiatives can be helpful for us and we are pro-actively developing policies that encourage manufacturing. Just like in India, many startups are booming in our country. But, without proper support from the government, the chance of failing is 70-80%. So to boost both manufacturing and the start-up ecosystem, our Socio-Economic Development Strategy 2011-2020, not only outlines the key issues related to the need for structural reforms and emerging issues of macroeconomic stability, but also suggests measures aimed at course correction. Going forward, I think India and Vietnam can learn a lot from each other on such aspects.

TDB: Would you have a message for Indian policymakers to bolster trade from the northeastern part of India which is in close proximity to Vietnam?

TST: The northeast region of India definitely has its advantages because of the proximity to Southeast Asian countries. If developed well, the region could turn out to be an attractive investment and tourism destination. But I must mention that I have been to northeast India many times and the region is very underdeveloped – compared to not only many Indian regions but also to many South East Asian regions.

I do not doubt the huge opportunities in the region, but connectivity and infrastructure need to be improved first. PM Modi rightly talks about India’s ‘Look East Policy’, and we value the idea. But, to actually translate that idea into a reality, I believe that Indian companies have to take up the challenge and set up bases in the north-east and only then foreign firms would follow.