FTA can correct imbalances and raise Indo-Vietnam trade sizably

VIETNAM, situated on the eastern rim of the Indo-Chinese peninsula, is one of those ASEAN member-countries witnessing steady growth in GDP. In less than two decades of launching Doi Moi  (Economic Renovation) this primarily agro-based country has created such a liberal climate of investment as to draw substantial FDI by countries like Singapore, Japan and South Korea. But despite being an extremely cordial relationship with Vietnam, Indiaís bilateral trade and investment did not grow commensurating the potential of both the countries. "Indiaís share in Vietnamís total foreign trade is very small (0.89 percent in 2005). The significant imbalance in trade balance could be largely corrected and overall trade volume raised, if Free Trade Agreement is put in place," so feels Mr. S. K. Ghosh Chairman of Industrial India Trade Fair who had recently visited Vietnam this March as part of the delegation led by the West Bengal Chief Minister Buddhadev Bhattacharya.

There is immense potential to raise the bilateral trade between India and Vietnam, opportunities are there to invest in sectors like steel, two wheelers. On the other hand in some areas like IT, biotechnology, pharmaceuticals and marine food processing there is immense scope for collaborative works and joint ventures. India can seriously consider collaboration with Vietnam. "The Chief Ministerís visit would certainly provide added momentum in the bilateral relatsionships not only with West Bengal but with India as a whole,Ē Mr. Ghosh said in an interview by Amitabha Sen.

AS: An extremely cordial bilateral relationship between India and Vietnam notwithstanding, bilateral trade between these two countries is not corresponding to the potential of each country. How would you like to look at this issue?

SKG: Yes, the relation between Vietnam & India could be dated back to the age of Lord Buddha when His preachingís penetrated to Vietnam in a very large way. The Bondage of Religion continued for ages. However commensurate with the religious bondage commercial relationship between the two countries could not built-up as it should have been.

But the fact remains that the India-Vietnam bilateral trade relations have assumed greater significance with the ongoing negotiations between ASEAN and India for a Comprehensive Economic Cooperation Agreement. Although the bilateral relationships between these two countries are decades old, there is no denying the fact that bilateral trade did not grow despite huge potential that India and Vietnam offers. Steps like Free Trade Agreement (FTA) could be one of the measures to boost up trade between these countries. Both the countries signed the Joint Declaration for Comprehensive Cooperation on the 21st Century (2003) that offers the framework to boost the strategic partnership between India and Vietnam.

Significantly, Vietnamís trade and economic relations with neighbouring ASEAN members nations, the European Community, Japan, the US, South Korea, Australia have been expanding at significant rates. Vietnam is emerging as one of the most attractive investment destinations in the region after China. Japan, Singapore, Taiwan and South Korea have already invested substantially in Vietnam. Total investment from India into Vietnam as on December 2005 is US$ 580 million.

Since 1986, Vietnam has embarked upon Economic Renovation policy known as Doi Moi to introduce market economy. Investment climate is being liberalized. Investors from all corners of the world are showing ever-increasing interest in Vietnam.

AS: What is Indiaís share in Vietnamís total foreign trade?

SKG: If one compares with Vietnamís total trade volume, Indiaís share is negligible. But there is scope to raise it substantially. The total foreign trade of Vietnam last year (2005) is estimated at over US$ 69 billion. Of that India accounts for US$ 615.5 million only. This itself shows that there is immense scope to increase the trade volume.

The 2004-06 Action Program has set the target of raising the bilateral trade to US$1 billion by 2006. It is strongly felt that along with Myanmar in South East Asia, India needs to build up a strategic partnership with Vietnam to strengthen further its relationship with ASEAN bloc.

The urgent need to take corrective measures to strike a reasonable balance in trade between Vietnam and India could be gauged by the fact while Indiaís exports to Vietnam in 2005 is estimated at US$ 598.8 million, countryís imports from Vietnam is estimated at US$ 97.70 million. While there is an increasing trend in Indiaís exports to Vietnam, imports from Vietnam are fluctuating.

AS: Could you identify principal commodities that could fit in the EXIM baskets of both Vietnam and India?

SKG: In general Vietnamís export basket contains crude oil, textile & garments, marine products, footwear, rice, electronics, coffee, vegetables & fruits, handicrafts, rubber, pepper and tea. On the other hand major Indian exports to Vietnam include animal feed, pharmaceuticals & fine chemicals, plastic & linoleum products, sea food, machinery & equipment, iron & steel, pesticides, leather & leather garments and fabrics. Vietnamís major imports include machinery & parts, petroleum, textile & garments, electronic parts, steel & steel billets, motorcycle parts, plastic materials, fertilizers, chemicals, pharmaceuticals, yarn, automobile parts, automobiles, paper and cotton. Indiaís import basket for Vietnam contains pepper, tea, coal, rubber, cinnamon, electronic components, leather & leather made-ups, electronics, machinery and coffee.

AS: What is the scope of India-Vietnam cooperation in IT sector?

SKG: There is good scope for India-Vietnam cooperation in the IT sector. The Indian IT industry can provide IT training, collaboration in specific areas of IT and ITEs, can help implement e-governance projects and also can help Vietnamese companies move up the value chain in IT applications. Vietnam has introduced policies designed to create a software development sector. The country has taken number of government-led IT initiatives, including a national e-governance initiative, several IT zones and a GIS initiative. Most government ministries and agencies are actively upgrading their IT enabling capacity. The Internet user-base is expanding. There are currently 10 million Internet users in Vietnam. Indicating 12 percent penetration per ITU. The government aims to attain 35 percent penetration by 2010.

It is to be noted that in August 1999, the First India-Vietnam Protocol on Information Technology was signed, which details types of possible cooperation in the field of information technology. The Government of Vietnam has identified India as a strategic partner in this field.

AS: What is the prospect of foreign investment in Vietnam?

SKG: There is scope to invest in sectors like motorcycle, steel etc. Singapore is the largest investor in Vietnam today. Between 1987 and 2004, a total of 5110 FDI projects had been licensed in the country with a value of $ 45.6 billion. Of this the actual inflow had reached $ 26.77 billion. According to Ministry of Planning and Investment figures, since the Foreign Investment Law came into effect in 1996 there have been about 6170 licensed foreign direct investment projects in Vietnam with a total registered capital of approximately US$48.8 billion till end of November 2005. FDI in industry topped the list with over 4000 projects with registered capital of approximately US$30 billion. FDI in industry accounts for about 60-65 percent of all FDI projects in Vietnam. Among industries, oil and gas sector attracted substantial FDI so far.

While India can offer partnership in the areas of technical assistance, technology transfer & the intermediate level technology in particular, Vietnam also offers Indian private sector vast scope for investment in the ASEAN member-country. The potential sectors for FDI include pharmaceuticals, telecommunications, information technology, agro-tech industry & fertilizer production etc. Vietnam can also gain considerably by collaborating with Indiaís oil and gas sector.

AS: You recently visited Vietnam as part of a delegation led by West Bengal Chief Minister Buddhadeb Bhattacharjee. How relevant the visit was and what is the scope of collaboration between Vietnam and Bengal?

SKG: The Chief Ministerís decision to visit Vietnam was at an appropriate time and quite relevant in the context of strategic location of West Bengal and Government of Indiaís LOOK EAST POLICY. Vietnamís economy has been growing at remarkable pace in last few years creating unlimited business opportunities for India in general and for West Bengal in particular. The country is growing at 8.4 percent and had a consistent growth of manufacturing - over 12 percent - in last few years. Logistically this state is better placed. Can there be more appropriate time for West Bengal to explore and encash the opportunities being offered by Vietnam. Vietnamís unique positioning near China, Laos, Cambodia and Thailand offer great opportunities for business in West Bengal.

AS: What are those business opportunities?

SKG: For West Bengal, there are opportunities galore in Vietnam. Sectors offering these business opportunities include food processing, textiles, garments, IT, biotechnology, construction, urban development, iron & steel, chemicals, plastics, two wheelers, lifestyle products etc. In sea food sector there is scope for technology transfer from Vietnam and joint ventures in areas such as crab hatcheries, cage culture of catfish and production of value added seafoods. Vietnam is witnessing world largest demand for two-wheelers. There is no local manufacturers at the moment. This offers very good scope for joint venture projects for Indian two-wheeler companies.

Vietnam on the other hand has shown interest in cooperation in biotechnology sector. The cooperation to develop biotechnology in the agriculture sector to build on the agricultural advantages of both the countries would be of immense interest to both the countries.

While interacting with leaders at various forums the Chief Minister spoke high of West Bengalís emergence, as one of the most preferred IT destinations in the world. He has drawn their attention particularly to global IT leaders setting up facilities there and the availability of skilled human resources required for this growing industry. The Vietnamese IT industry leaders and leaders of Chambers of Commerce have been told that today West Bengal is well positioned to offer IT & ITEs services, advanced IT training, partnership in implementation of E-Governance projects in that country and to help corporate sector in Vietnam to move up the value chain in IT Applications.

Mr. S. K. Ghosh, is a Member, Board of Trade, Federal Ministry of Commerce, Government of India. Besides being Chairman of Industrial India Trade Fair and CAPEXIL, he holds various positions in different industry bodies in the country. These include Federation of Chambers of Commerce and Industry; Federation of Indian Export Organization,  Bengal National Chamber of Commerce and Industry. He was President of BNCCI. He is current Chairman of  College of Engineering & Ceramic Technology and Trustee of Indian Museum, Kolkata.



April 7, 2006