India, Vietnam see rapid take-off in ties post-covid

In 2019, only Kolkata had direct flights to Vietnam from India, with occasional flights from three other Indian cities, a McKinsey report said this month.

Now, there are 49 direct flights weekly between India and Vietnam. VietJet, a Vietnamese airline, operates 35 of these, connecting cities like Mumbai, New Delhi, Ahmedabad, Kochi, and Tiruchirappalli to various destinations in the southeast Asian country.

This increase in direct flights, analysts said, not only reflects growing economic and cultural ties but is also making travel easier and strengthening the relationship between the two countries.

The increase in number of direct flights signals growing economic and cultural ties, analysts said.

In fiscal year 2023, bilateral trade neared the $15 billion mark, as the value of India’s exports climbed $5.90 billion and imports amounted to $8.7 billion.

Today, India is among Vietnam’s top 10 trading partners, while Hanoi is New Delhi’s fourth largest trading partner in the Association of Southeast Asian Nations (Asean). Asean comprises 10 Southeast Asian countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

Hanoi views New Delhi as an emerging power, and engages in a robust trade exchange, importing goods such as iron and steel, buffalo meat, and auto-components, while exporting telecom instruments, electronics, and chemicals.

In calendar year 2022, Vietnam’s overall trade value surged to $730.2 billion, a 9.1% increase from the previous year, propelling the country into the top 20 global economies for international trade.

Business focus

The Adani group, along with other large Indian companies, has been gradually stepping up investments in Vietnam over the past few years.

In 2021, the Adani group had invested in two renewable energy projects in Vietnam: a wind project with a capacity of 27.3 megawatts (MW) at the Phuoc Minh commune in Thuan Nam district of Vietnam’s southeast Ninh Thuan province, and a 50MW solar project in the same province.

In June last year, Adani announced plans to invest about $10 billion in Vietnam over the next few years, with the Lien Chieu port project in Danang, among others, on its radar.

In May this year, the Vietnamese government said Adani is looking to invest up to $3 billion in the country’s seaport and renewable energy projects.

This month, Indian billionaire Gautam Adani met Pham Nhat Vuong, the chairman of Vietnam’s largest conglomerate Vingroup, to discuss potential trade opportunities between India and Vietnam.

India’s state-run companies have also been vying for investment opportunities in the Southeast Asian nation.

ONGC Videsh, the overseas arm of state-owned energy explorer Oil and Natural Gas Corp. Ltd (ONGC), has invested in two oil and gas blocks in Vietnam and has a strategic partnership with PetroVietnam. It holds stakes in Vietnam’s oil and gas blocks 06.1 and 128. The former produces condensate and gas, while the latter is still under exploration.

ONGC Videsh in August received a three-year extension for Block 128, which is situated in the contentious South China Sea region, till June 2026.

Tata Power, part of the Tata conglomerate, is developing a $2.2 billion thermal power project in southern Vietnam’s Soc Trang province, set to meet 2% of that country’s power demands by 2030. The Tata group had also embarked on a 49MW solar park project in Binh Phuoc province in 2017.

The monthly Vietnam Briefing magazine reported that Tata International had partnered with Agribank, Vietnam’s largest bank, in 2017 to aid farmers’ cooperatives. In 2019, Tata Coffee had launched a $50 million freeze-dried coffee facility in Binh Duong, while India’s state-owned Bank of India inaugurated its first branch in Ho Chi Minh City, focusing on financial support for small businesses.

“As the fifth-largest global economy, Indian investment represents just 0.2% of Vietnam’s $420 billion foreign investment, primarily in manufacturing and energy sectors,” Dinh Vinh Cuong, president of the Vietnam International Entrepreneur Networking Club, told Press Insider.

Indian firms are involved in over 300 projects in Vietnam, amounting to $1 billion.

Rupa Naik, director of the World Trade Centre in Mumbai, said, “Indian firms are involved in over 300 projects in Vietnam, amounting to $1 billion in sectors such as energy, mineral exploration, and agro-processing. Vietnam’s investment in India spans pharma, IT, and chemicals, with six projects worth about $28.55 million.”

Pointing to other opportunities for collaboration and emphasizing its extensive coastline, Naik highlighted the significance of maritime transport and shipbuilding for Vietnam, while adding: “The pharmaceutical and electronics sectors also offer substantial opportunities for collaboration, leveraging India’s strength in pharmaceuticals and Vietnam’s abundant chemical ingredient resources.”

Security ties

Last month, Indian external affairs minister S. Jaishankar visited Vietnam with a focus on bolstering economic and trade collaboration. The foreign minister’s visit coincided with the docking of the INS Sudarshini, a sail training ship, in Ho Chi Minh City.

This alignment of diplomatic and naval presence reinforced the importance of Vietnam in India’s foreign policy and maritime strategy.

“The Indian Navy’s visits to Vietnam go beyond just bolstering naval cooperation; they are key to forging stronger ties between our governments and peoples, playing a crucial role in fostering regional and global peace, security, and stability,” Ngo Minh Chau, Ho Chi Minh City people’s committee vice-chairman, said at the docking of the ship.

Since 2022, this was the third time that an Indian maritime ship had come calling at a Vietnamese port. On an earlier occasion, during peak covid in August 2021, an Indian ship carrying 100 metric tons of liquid oxygen and 300 ventilators had docked at the Nha Rong port.

Vietnam has been looking to boost strategic ties with India even as China and the US scramble for influence in Southeast Asia. The country had raised its ties with the US to a comprehensive strategic partnership during President Joe Biden’s visit in September, and is aiming to similarly upgrade its relations with Japan.

Bilateral relations between India and Vietnam were elevated to the comprehensive strategic partnership level in 2016 during Prime Minister Narendra Modi’s visit. Vietnam earlier shared a similar partnership with only two other countries: Russia and China.

Jaishankar said solid bilateral defense cooperation between both countries is one of the most robust pillars of the comprehensive strategic partnership.

The China factor

Concerned about China’s growing military presence and territorial assertions in the South China Sea, known in Vietnam as the East Sea, Vietnam is diversifying its global alliances for security and national interests, analysts said.

While no Asean member wants to antagonize China, given its military strength and status as the primary trade partner in Southeast Asia, Hanoi is not yielding to Chinese pressure and instead views India as a vital strategic ally.

Vietnam, meanwhile, has also shown interest in joining Quad-plus meetings with South Korea and New Zealand.

The Quadrilateral Security Dialogue, commonly known as the Quad, is a strategic forum comprising the US, India, Japan, and Australia, focused on promoting a free, open, and inclusive Indo-Pacific region.

The Quad-plus extends this dialogue by including other like-minded countries such as South Korea and New Zealand, aiming to enhance regional cooperation and address shared challenges.

In June this year, Indian defense minister Rajnath Singh announced the transfer of INS Kripan, a fully operational missile corvette, to Vietnam in a gesture underscoring the special relationship shared by the two nations.

“This is an expression of the great trust both countries have for each other. Vietnam is the only nation to which India has gifted a fully operational missile corvette,” Singh said following bilateral talks with Vietnamese General Phan Van Gang.

In 2016, India had extended a $500 million defense credit line to Vietnam, offering BrahMos cruise missiles, Akash air defense systems, Varunastra anti-submarine torpedoes, and coastal radars.

In June 2022, India and Vietnam inked a memorandum of understanding for mutual logistics support, allowing armed forces of both nations to use each other’s bases for resupply, apart from a deal to broaden defense collaboration.

Look East and Act East

India’s strategic outreach to Vietnam, notably in bolstering naval capabilities and increasing investments, aligns with its broader regional policy objectives.

In 1991, India introduced the ‘Look East Policy’, aimed at enhancing political, economic, and security cooperation with Southeast Asian countries. This policy focused on regional economic integration with Asean and East Asian countries, shifting India’s trade focus from the West to the emerging Southeast Asian markets.

It also positioned India as a regional counterbalance to China’s strategic influence, fostering economic ties with South Asian nations and spurring development in India’s Northeast.

Building on this foundation, India’s ‘Act East Policy’ was launched in 2014, marking a shift from bilateral to strategic and multilateral engagement with Asean and key East Asian nations such as Japan, South Korea, and Pacific countries, including Australia.

This policy expansion sought to strengthen economic, cultural, and strategic ties, emphasizing India’s role in the broader Indo-Pacific region.

India’s commitment to this policy was highlighted last April when Prime Minister Modi commemorated 50 years of diplomatic relations with Vietnam, underscoring its significance in the Act East Policy and Indo-Pacific Vision.

Vietnam’s balancing act

Professor Reena Marwah, author of India–Vietnam Relations: Development Dynamics and Strategic Alignment, said, “India-Vietnam relations should be viewed in light of Vietnam’s historical kinship with China, once its obedient vassal state.”

A faculty member at Jesus and Mary College, University of Delhi, Marwah emphasizes situating India-Vietnam ties within this historical context.

Vietnam, like other Asean members, employs a dual strategy in its foreign policy, cautiously managing relations with China while exploring alliances with other major powers.

“Vietnamese academia and think tanks, often influenced by Communist Party affiliations, are generally hesitant to openly criticize China,” Marwah said.

The Communist Party of Vietnam (CPV), which has been in power since 1975, has navigated a complex diplomatic landscape, striving to maintain a cordial relationship with China alongside engagement with global powers.

Elucidating Hanoi’s strategic balancing act of fostering ties with China while considering participation in initiatives such as the Quad Plus, Marwah said, “There is a lot of sensitivity involved when it comes to signing on the dotted line.”

Marwah also underscored the ongoing territorial disputes in the South China Sea, with a specific focus on the contentious Spratly and Paracel Islands.

Amid China’s growing assertiveness in the South China Sea, tensions have escalated, Marwah said, adding that while China aims to establish a significant, lasting regional influence, Vietnam actively seeks India’s support in enhancing its naval capabilities.

Vietnam, leveraging its free trade agreements (FTAs) with the EU, UK, and its role in the Regional Comprehensive Economic Partnership (RCEP), positions itself as a strategic gateway for India to the region. However, the sustainability of this partnership in the shadow of Chinese assertiveness remains to be seen.

This is the first of a series exploring India’s ties with Southeast Asian nations.