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Ao Dai to Gao Lut: India meets Vietnam for stronger trade cooperation

Update: August, 25/2014 - 15:21

India and Viet Nam has shared cherished friendship for last five decades or so. With tradition of frequent high level visits between two countries, the bilateral relation between two countries have time tested with a strong political relationship. The Indian External Affairs Minister Ms Sushma Swaraj's visit to Viet Nam on August 24-26 is expected to forge robust links on strategic, defence, textile, pharmaceuticals, agriculture with Viet Nam.

The visit is expected to pave the way for several bilateral deals between two countries in the coming months. As the new government in India has anchored its foreign policy on robust economic growth, the forthcoming high level exchanges would see the light of several defence, trade and commerce deals. The Indian government has focused on engaging South Asia and South East region under its immediate foreign policy strategy. While Prime Minister is engaging South Asian countries, the Foreign Minister has been consolidating bilateral relation with South East Asian countries. After Singapore, Viet Nam is her second visit to the potential region falls under India's Look East Policy.

The visit is strategically important as India has initiated in accelerating, reshaping, reformulating bilateral relations with countries which are bordering China. Is this a design or mere coincidence? After the May crisis in East Sea, this is India's first high level visit to Viet Nam. However, there would be no change of Indian unequivocal stance on East Sea which strongly promotes peaceful resolution of dispute.

India would be staying in East Sea till end of 2015 to unearth prospects of oil and gas in Viet Nam territorial waters. Despite Chinese objections to India-Viet Nam energy cooperation in the East Sea, the two nations entered into an agreement in 2011 to expand their partnership in oil and gas exploration, refining, transportation and supply. Indian major firms like ONGC Videsh Limited (OVL), ESSAR Exploration and Production Ltd, shall continue to explore two oilfields for 'technical and commercial' reasons. The second extension given by Viet Nam has been clarified with utmost caution by the Ministry of External Affairs (MEA) during its routine briefing in Delhi.

The economic and commercial relations have been increasing between two emerging economies. Indian companies are investing in oil and gas exploration, mineral exploration and processing, thermal power, sugar manufacturing, agro-chemicals, IT, and agricultural processing. The investment from Indian firms is $ 2.2 billion in Viet Nam including two thermal power plants by Tata. The bilateral trade stands at $ 8 billion, of which Indian exports to the country is about $ 5.4 billion. The two countries have decided to reach bilateral trade target $7 billion by 2015 and $ 15 billion by 2020.

Vietnam would be discussing rice export import concerns with India during this Ministerial visit. Off late, India and Vietnam has been unintentionally undeclared competitors of rice export in the world market. It is reported that Viet Nam has downsized its rice export amount for this year due to heavy competition between Thailand and India. The emerging health conscious middle class in India would like to have the opportunity to choose among sticky rice (Gao Nep), brown rice (Gao Lut), or traditional rice (Gao Nang Thom) from Viet Nam and vice versa. In fact, India has extended a grant amounting $ 5 million for improving rice seed project in Da Nang. This visit would like to resolve such issues between two friendly rice producing countries.

The textile is another major area for greater cooperation between two countries. Viet Nam's textile industry is a major contributor to its economy. The country exported textile products to nearly fifty countries around the world. However, India's exports of raw cotton accounted for less than 2 percent of Vietnamese cotton imports.

Under the Textile and Garment Industry Development Plan for 2020, the Vietnam's Ministry of Industry and Trade sets export goal between 19 and 21 percent annual growth during 2016-2020. As there is a high demand for textile raw material imports in Viet Nam, India is best to offer these with a competitive price. Early this month, TEXPROCIL- second biggest textile producers of world-led Indian delegations met with Vietnamese counterpart in HCM City to explore ways and means to increase its exports of raw cotton and cotton textiles. Ao Doi, traditional Vietnamese woman dress, would definitely be finding easy acceptance with Indian new found fashion.

While the China factor has influenced both countries engagement on strategic aspect till now, there are number of potential areas of collaborations which can be a win-win for both countries. One of such areas of cooperation is the environmental front especially addressing both mitigation and adaptation of climate change. The energy cooperation would rather go beyond fossil fuels (oil and coal) as India has the ability to export renewable energy (wind and solar) to Viet Nam.

Both countries are facing acute threat of climate change. The climate vulnerability index of India and Viet Nam are very high. Both having long coastlines, predominantly agrarian economies with large chunk of vulnerable indigenous people, frequent natural disasters, and coastal erosion, the bilateral cooperation must be focused on climate change, environmental conservation, water resource management and coastal protection. The prospects of bilateral cooperation may now move beyond China factor only.

A comprehensive bilateral climate change cooperation strategy is need of the hour for both countries. — VNS

* Dr Avilash Roul (Ph.D.), Senior Fellow, Society for the Study of Peace and Conflict, New Delhi, India.

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