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12 September 2016, Gateway House

India-Vietnam: setting a new benchmark

Prime Minister Narendra Modi’s recent trip to Vietnam had both heads of state announcing an upgrade of their ‘Strategic Partnership’ into a ‘Comprehensive Strategic Partnership’. This added term captures the importance both sides have vested in the need to deepen the relationship and the prospect for future cooperation.

Visiting Research Fellow, Institute of South Asian Studies, National University of Singapore

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Since coming to power in 2014, Prime Minister Narendra Modi has made three important ventures into South East Asia. The first was in November 2014 to participate in the 12th ASEAN-India and the 9th East Asia Summits taking place in Myanmar. During this visit, Modi revealed the government’s ‘Act East’ policy, a step up from the earlier ‘Look East’ policy, launched by Prime Minister Narasimha Rao in 1992[1].

Narendra Modi’s second South East Asian visit took place in November 2015 to Malaysia, again to attend the two premier annual meetings. The recent trip to Vietnam (September 2-3) however, is significant for the fact that it was purely a bilateral visit, en route to the G-20 in Hangzhou, China, followed by the ASEAN and East Asia summits in Vientiane, Laos. It is also the first visit by an Indian Prime Minister in 15 years: Prime Minister Atal Bihari Vajpayee travelled to Vietnam in 2001.

Geopolitics: the dynamism of bilateralism

In Hanoi, Narendra Modi and his counterpart, Nguyen Xuan Phuc, announced that the relationship would be upgraded from a ‘Strategic Partnership’ to a ‘Comprehensive’ Strategic Partnership[2]. What exactly distinguishes the two levels was not clarified but the term captures the effort to deepen this bilateral relationship, and, most crucially, it sends a signal of cooperation to come. While India has signed ‘comprehensive’ economic cooperation agreements (with Singapore[3], for example) and ‘comprehensive’ economic partnerships (with Japan[4], South Korea[5] and ASEAN[6], for example), this is the first strategic partnership to be elevated in such a manner. It is thus a partnership with a strong emphasis on defence interests.

In 2015 Indian defence minister Manohar Parrikar was in Vietnam to discuss new initiatives in the military sector, including the possibility of selling the Indo-Russian-produced, short-range, supersonic missile, BrahMos that can be launched from submarines, ships, aircraft or land. This would be the first such transaction of its kind for India. While the deal has not transpired, talks reportedly continue. In the meantime, a previous grant of $100 million by India has been put to use by Vietnam with a commitment to procure offshore patrol boats, built by India’s Larsen & Toubro, for Vietnam’s border guard[7]. Furthermore, during PM Modi’s visit, India announced its biggest defence line of credit (LoC) yet–to the tune of $500 million[8].

That defence should be a cornerstone for relations between India and Vietnam mirrors similar recent developments in Vietnam’s relations with the United States and Japan. Diplomatic relations with the US were restored only in 1995 and the process of normalisation has been a gradual one. Over the last few years a number of significant steps were taken including the easing of restrictions on a long running arms embargo, the signing of an ‘Extensive Comprehensive Partnership’ in July 2015[9] and during President Obama’s visit in May 2016, the complete lifting of the arms embargo.

Efforts have been under way to deepen Hanoi’s relationship with Japan, which, in 2006, already took the form of a strategic partnership (amongst the first with Vietnam). Economic cooperation has been the mainstay of this bilateral with Japan, a leading investor in Vietnam. Whilst this has been extended recently with the announcement of further Japanese overseas development assistance, the relationship has also moved in the direction of closer security and defence cooperation: for example, in 2015, Japanese patrol vessels were provided to the Vietnam Marine police in an attempt to boost maritime law-enforcement capabilities. These were used vessels, but on the side lines of the 2016 September ASEAN summit in Vientiane, Prime Minister Shinzo Abe reportedly told his Vietnamese counterpart, of Tokyo’s intention to provide Vietnam with ‘new’ patrol ships[10].

Concerns about China’s actions and claims in the South China Sea have, of course, been driving these developments. These have challenged American influence in the region and the freedom of navigation in an area crucial to economies like Vietnam, which is highly dependent on exports (accounting for roughly 150% of its GDP[11]) as well as Japan, which relies heavily on the network of shipping lanes, linking the Indian and Pacific Oceans.

Relations with India have an additional embedded shared value, arising from geography and recent history. Both share a long land border with China, (1,281 km for Vietnam[12] and 3,488 km for India[13]) and both countries have actually fought armed conflict with their northern neighbour. In the case of Vietnam, this has been in the form of a series of border and naval clashes from 1979 to 1990, and for India, it was the 1962 Sino-Indian border ‘war’ or ‘conflict’, as it is known.

To date, a vast part of India’s land border with China remains unresolved and while Vietnam’s territorial borders are recognised through treaties, its maritime borders with China in the South China Sea are mired in dispute and include the Spratlys and Paracel island groups.

Reflecting the perceptions and reality of a worsening security environment is the data from the Stockholm International Peace Research Institute (SIPRI), which reports that Vietnam’s defence imports increased 699% in the period 2011-2015, compared to the previous five-year period[14]. SIPRI’s data puts Vietnam as the eighth largest arms importer in the last five years, compared to 43rd in the preceding period[15].

Vietnam has also provided India with a direct conduit into the South China Sea. Since 2011 the overseas investment arm of India’s state-run Oil and Natural Gas Corporation (ONGC), Videsh, has been exploring offshore gas in the South China Sea which sparked protests from China about India’s forays into contested areas.

Most recently, Vietnam awarded and India accepted a renewed extension to its stake in Block 128, where, to date, no hydrocarbon has been found[16]. As a result, India is seen to be standing by Vietnam and has positioned itself with the potential to play a greater role in the South China Sea.

Maritime engagement has therefore taken on additional importance and symbolism. Thus, a Vietnamese frigate crossed thousands of nautical miles from the East Sea in the Pacific, through the Strait of Malacca, to the Indian Ocean to join the International Fleet Review held in February 2016. More recently, four Indian naval ships made the reverse journey, under the Command of the Flag Officer leading the Eastern Fleet, for a four day visit to Vietnam in May 2016, as part of a deployment to the South China Sea and North Western Pacific.

Nonetheless, India continues to exercise caution and to apply a measure of ambiguity in its position on the region’s controversies. In Vietnam, while Prime Minister Modi pronounced that “their common efforts will also contribute to stability, security and prosperity in this region”, the joint statement reflected India’s careful stance in its language of “noting” rather than “welcoming” (as Vietnam had done) the July 2016 Hague tribunal ruling.

Tapping the economic potential

According to Vikas Swarap, ministry of external affairs (MEA) spokesperson, “The visit set a new benchmark for India-Vietnam ties,” taking the relationship “to a whole new level”. With 12 MOUs and agreements signed across a range of issues, including health, space and technology, the relationship has certainly taken on a comprehensive dimension.

Furthermore, India’s policy towards Vietnam itself reflects a more integrated approach of coordinating across different ministries, including external affairs, trade, commerce and industry, corporate affairs as well as defence. With Vietnam keen to reduce its dependence on Chinese imports through diversification, India is an attractive partner. Trade has been growing, with a bilateral target of reaching $15 billion in 2020[17] and there has been greater involvement of Indian companies in a number of sectors. In return, Vietnam can be an important source of support in the ongoing negotiations for a Regional Comprehensive Economic Partnership (RCEP), between the ten ASEAN states and their Free Trade Agreement partners which includes India.

Jivanta Schottli is a Visiting Research Fellow at the Institute of South Asian Studies, National University of Singapore.

This feature was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive features here.

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References

[1] Ministry of External Affairs, Government of India, Opening Statement by Prime Minister at the 12th India-ASEAN Summit, Nay Pyi Taw, Myanmar, http://www.mea.gov.in/Speeches-Statements.htm?dtl/24230/opening+statement+by+prime+minister+at+the+12th+indiaasean+summit+nay+pyi+taw+myanmar, (Accessed on 12 September 2016)

[2]Ministry of External Affairs, Government of India, Joint Statement between India and Vietnam during the visit of Prime Minister to Vietnam, http://www.mea.gov.in/bilateral-documents.htm?dtl/27362/Joint+Statement+between+India+and+Vietnam+during+the+visit+of+Prime+Minister+to+Vietnam, (Accessed on 12 September 2016)

[3] World Bank, Comprehensive Economic Cooperation Agreement Between the Republic of India and the Republic of Singapore, http://wits.worldbank.org/GPTAD/PDF/archive/India-singapore.pdf (Accessed on 12 September 2016)

[4] Ministry of Foreign Affairs of Japan, Signing of the Comprehensive Economic Partnership Agreement between Japan and the Republic of India, http://www.mofa.go.jp/announce/announce/2011/2/0215_01.html, (Accessed on 12 September 2016)

[5] Ministry of Commerce and Industry, Government of India, India-Korea CEPA (2009), http://commerce.nic.in/trade/india%20korea%20cepa%202009.pdf, (Accessed on 12 September 2016)

[6] Ministry of Commerce and Industry, Government of India, Agreement on Trade in Goods Under the Framework Agreement on Comprehensive Economic Cooperation Between the Republic of India and the Association of South East Asian Nations, http://commerce.gov.in/trade/asean-india%20trade%20in%20goods%20agreement.pdf, (Accessed on 12 September, 2016)

[7] Ministry of External Affairs, Government of India, Joint Statement between India and Vietnam during the visit of Prime Minister to Vietnam, http://www.mea.gov.in/bilateral-documents.htm?dtl/27362/Joint+Statement+between+India+and+Vietnam+during+the+visit+of+Prime+Minister+to+Vietnam, (Accessed on 12 September 2016)

[8] Ibid

[9] Office of the Press Secretary, Joint Statement: Between the United States of America and the Socialist Republic of Vietnam, The White House, https://www.whitehouse.gov/the-press-office/2016/05/23/joint-statement-between-united-states-america-and-socialist-republic, (Accessed on 12 September 2016)

[10] Parameswaran, Prashanth, ‘Japan Pledges New Vessels, Loans to Vietnam in Boost to Strategic Partnership’, The Diplomat, 16 September 2015, (Accessed on 12 September 2016)

[11] Nguyen Ngoc Anh, Duc Nhat Nguyen, and Nguyen Dinh Chuc, The Global Crisis and Medium Term Growth Prospects for Developing Countries: The Case of Vietnam, (Hanoi), 30 October 2009, http://veam.org/wp-content/uploads/2016/06/2009_theGlobalCrisisAndMediumTermGrowthForVietnamFinal30October2009.pdf, p. 12 (Accessed on 12 September 2016)

[12] Central Intelligence Agency, The CIA World Factbook, 2010, (Skyhorse Publishing, Inc., 2011), p. 737

[13] Department of Border Management, Ministry of Home Affairs, Government of India, International Border, http://www.mha.nic.in/hindi/sites/upload_files/mhahindi/files/pdf/BM_Intro_E_.pdf, (Accessed on 12 September 2016)

[14] Stockholm International Peace Research Institute, Trends in International Arms Transfers, 2015, February 2016, http://books.sipri.org/files/FS/SIPRIFS1602.pdf

[15] Stockholm International Peace Research Institute, International Arms Transfers, https://www.sipri.org/research/armament-and-disarmament/arms-transfers-and-military-spending/international-arms-transfers, (Accessed on 12 September, 2016)

[16] PTI, ‘ONGC gets one-year extension to explore Vietnam block in South China Sea’, The Economic Times, 27 August 2015, http://articles.economictimes.indiatimes.com/2015-08-27/news/65929043_1_block-128-block-127-south-china-sea, (Accessed on 12 September 2016)

[17] Ministry of External Affairs, Government of India, India-Vietnam Relations, 18 August 2015, http://mea.gov.in/Portal/ForeignRelation/Vietnam_2015_08_18.pdf, (Accessed on 12 September 2016)