09 Sep Vietnam-India ties forge path to promising future
Trade and investment between Vietnam and India are on an upward trajectory, boosted by governmental efforts to create favorable conditions for dialogue and connections between their two business communities.
Indian capital flows to Vietnam
Indian Consul General in Ho Chi Minh City K. Srikar Reddy said Vietnam is a firm pillar in India’s “Look East” policy. Bilateral relations have been strengthened through national-level visits during the past several years. Most recently, Indian Vice President Venkaiah Naidu paid an official visit to Vietnam from May 9-12, 2019. During their talks, state leaders determined that increased economic participation and strengthened trade are strategic goals and core factors of a comprehensive strategic partnership.
With the facilitation of the Indian government, Indian companies are becoming increasingly interested in investing in Vietnam and doing business with Vietnamese partners to contribute to bilateral trade and access the entire East Asian region.
Vietnamese Ministry of Planning and Investment data show that by June 20, 2019, Indian firms had invested about US$928 million in 254 projects in Vietnam. If investment via a third country/territory such as Hong Kong (China) and Singapore is included, the total amount is about US$1.7 billion.
Given these results, India currently ranks 29th among 129 countries and territories investing in Vietnam. Major areas of Indian investment in Vietnam include energy, mineral exploration, agricultural product processing, sugar production, coffee and pharmaceuticals.
The Vietnamese food sector also attracts Indian companies. Ramesh Anand, Chairman of the Indian Chamber of Commerce (INCHAM) in Vietnam, said that with a population of more than 95 million, Vietnam has seen growing consumer demand for food and beverage (F&B) products. Moreover, the Vietnamese government has applied various policies to develop the F&B sector, including improving the business environment for manufacturers, reforming public administration, providing soft loans and launching demand stimulation programs. New-generation trade agreements signed by Vietnam have also facilitated Indian investment flows to Vietnam.
Bilateral trade growth
Along with investment, bilateral trade between Vietnam and India has grown strongly. Since the ASEAN-India Free Trade Agreement (AIFTA) came into effect in 2010, Vietnamese exports to India have increased considerably.
General Department of Vietnam Customs data show that in 2010, Vietnam exported US$992 million worth of goods to India, an increase of 136 percent or more than US$572 million compared with 2009. In 2011, the export value for the first time exceeded US$1 billion, reaching US$1.5 billion, a rise of 53 percent or US$531 million compared with 2010.
In 2012, the export value reached approximately US$1.8 billion, up 16.7 percent or US$255 million compared with 2011. Since then, exports to this market have grown annually and reached US$6.5 billion in 2018, a 74.2 percent increase compared with 2017.
In the first four months of this year, bilateral trade reached US$3.59 billion, up two percent compared to US$3.52 billion of the same period last year. This included US$2.1 billion worth of Vietnamese exports to India.
India, one of the most populous countries in the world, is a promising market for Vietnamese firms, with exports to this market becoming increasingly diverse in range and growing in value.
With gross domestic product (GDP) growing 6.8 percent in the 2018-19 fiscal year, India is forecast to become the world’s third largest consumer market by 2025, creating further opportunities for Vietnamese firms. Nguyen Phuc Nguyen, Secretary General of the Vietnam Fruit and Vegetables Association, said the fruit and vegetable sector is seeking new business opportunities in India through participation in trade connection programs launched by the Vietnamese Ministry of Industry and Trade and workshops and exhibitions in India.
Nguyen Van Nga, Deputy Director of the Agency for Southern Affairs of the Ministry of Industry and Trade: With diplomatic ties of over 45 years and a decade of strategic partnership, Vietnam and India have maintained a friendship strengthened and developed by generations of the two countries’ leaders. In recent years, trade and investment promotion has been expanded to connect the two business communities.