Home > 2016 > Modi’s Visit to Vietnam: A New Push to India’s Act East Policy

Mainstream, VOL LIV No 38 New Delhi September 10, 2016

Modi’s Visit to Vietnam: A New Push to India’s Act East Policy

Friday 9 September 2016

by Rajaram Panda


On his way for the G-20 summit meeting in Hangzhou, China, and East Asia Summit and related Summits at Vientiane, Laos, Prime Minister Narendra Modi made his maiden visit to Vietnam to hold wide-ranging talks with the country’s top leadership on ways to bolster strategic bilateral ties in key areas like defence, security, counter-terrorism and trade. This marked the first by an Indian Prime Minister to visit Vietnam in 15 years. Modi was the fourth Indian Prime Minister to visit Vietnam in over five decades, and therefore a significant landmark in the burgeoning relationship between the two countries. The last Prime Minister of India to visit Vietnam was the then Premier, Atal Behari Vajpayee, in 2001.

The relationship between India and Vietnam is not recent; it dates back to over 2000 years when Indian traders travelled to Vietnam for commerce, taking along with them Buddhist monks to Vietnamese shores where they soon got assimilated with the local population and contributed to the local economy. The influence of Buddhism also dates back to that period. The Cham community of today and the presence of Hindu temples is a testimony to the historical links that both the countries share. The relation-ship between the two countries witnessed many common historical experiences such as fighting against the colonial rule and standing by each other’s sides in times of need. This relationship is therefore time-tested and has become robust over the years. Prime Minister Modi’s visit is yet another milestone in this long journey of building a strong partnership between the two countries. In recent times, there have been also other high-level visits, including that of the President, Defence and External Affairs Ministers among others.

A Host of Agreements

A host of issues were discussed and agreements reached. These covered economy, strategy, defence, education and culture. The following were the major highlights: (i) upgrading the India-Vietnam relationship to a Comprehensive Strategic Partnership, which Hanoi only has with Moscow and Beijing; (ii) announcement of a new defence credit line of $ 500 million by India; (iii) signing of a contract for fast offshore patrol vessels by L&T with Vietnam Border Guards under $ 100 million from the defence credit line given; (iv) agreement on cooperation in outer space for peaceful purposes; (v) Navy-to-Navy agreement on White Shipping information sharing; (vi) memorandum of understanding on cyber security; (vii) agreement for India to assist Vietnam participate in UN Peacekeeping; (viii) grant of $ 5 million for a software park; (ix) MoU on cooperation in the IT sector; (x) MoU on setting up Centre for Excellence in Software Development; (xi) postgraduate and doctorate scholarships for Buddhist and Sanskrit studies in India; (xii) protocol on double taxation avoidance agreement; (xiii) MoU for mutual recognition of standards; (xiv) MoU on cooperation in health and medicine; (xv) MoU between the Indian Council for World Affairs and Vietnamese Academy of Social Sciences; and (xvi) protocol on celebration of the 45th anniversary of India-Vietnam diplomatic relations.

Besides holding extensive talks with his counterpart, Prime Minister Nguyen Xuan Phuc, and President Tran Dai Quang, Modi also met Communist Party General Secretary Nguyen Phu Trong and National Assembly Chairperson Nguyen Thi Kim Ngan. The talks ranged from defence, security, science and technology, trade and culture and the above-mentioned agreements reached. Modi also paid homage to the revered leader, Ho Chi Minh, whom he described as one of 20th century’s tallest leaders, and laid a wreath at the Monument of National Heroes and Martyrs, besides visiting the Quan Su Pagoda.

Ho Chi Minh’s role in Vietnam’s liberation movement is legendary. This iconic figure travelled to India and built strong bonding with the people of India and found common grounds in the fight for liberation. This is echoed even today. Not only has Vietnam a city named after him, he is also called as “the Vietnamese George Washington”. After his death, his embalmed body, kept in a mausoleum in the capital city of Hanoi, is worshipped by the Vietnamese people and it was therefore apt for Modi to lay a wreath there.

Defence Cooperation

Apart from agreements on bilateral issues, what emerged as of significance was the sharing of common viewpoints on regional issues that the nations of the region are confronting. Issues of regional and multilateral cooperation were in focus. The thrust of the multifaceted relationship between the two countries has remained towards stability, maintenance of peace, economic growth and prosperity, both bilaterally and also beyond. After coming to power, the Modi Government has rechristened India’s Look East Policy as Act East Policy to inject new vigour to the country’s economic push towards the South-East Asian region. Vietnam is an important pillar in India’s initiative to build a partnership encompassing security, strategic, political, counter-terrorism, and defence collabo-ration in addition to economic ties.

The decision to extend a $ 500 million Line of Credit to facilitate deeper defence cooperation with the South-East Asian nation was in line with the decision to raise the bilateral ties to the level of a Comprehensive Strategic Partner-ship to respond to emerging regional challenges. Modi, therefore, rightly observed that this decision to upgrade the capturties the intent and path of their future cooperation as it would now provide a new direction, momentum and substance to the relationship. Modi’s “extensive and very productive” talks with his Vietnamese counterpart therefore encompassed the full range of bilateral and multilateral cooperation. The common efforts are aimed to contribute to stability, security and prosperity in the region. In particular, the decision to construct offshore patrol boats signalled a step to give concrete shape to defence engagement between the two countries. As two major countries in this region, both India and Vietnam feel it necessary to further their ties on regional and international issues of common concern, which was why a host of agreements were inked to serve this long-term objective.

There is more to India’s offer of half-a-billion dollars defence credit than just a part of bilateral defence cooperation. As Vietnam seeks arms boost, India’s credit line provides a lift to Vietnam at a time when it is pursuing a military deterrent as discord festers in the South China Sea. Both India and Vietnam share borders with China and also enjoy large trade volumes. At the same time, both are locked in territorial disputes with China—India in the Himalayas and Vietnam in the South China Sea with no sign of early resolution. Both India and Vietnam are modernising their defences to be prepared for any crisis situation. India’s defence industry is now open to friendly countries for joint production of equipment and is also promoting sale of its supersonic BrahMos missiles to Vietnam and four other countries. In late 2014 India had made a loan of $ 100 million available to Vietnam for four yet-to-be-built patrol vessels. This time Modi made no mention of the patrol vessels, nor the possible sale of BrahMos missiles. He also did not elaborate on what Vietnam would use the $ 500 million credit for, except saying that “mutual defence cooperation” would “contribute to stability, securities and prosperity in this region”.

Economic Collaboration

In the economic domain, it was agreed to tap into the growing economic opportunities in the region. Both countries see enhancing bilateral commercial engagement would complement their strategic objective and therefore both agreed to expand trade and business opportu-nities. Bilateral trade currently stands at $ 7.83 billion and both sides are committed to achieve a target of $ 15 billion by 2020. With this in view, new sectors and thrust areas were identified to give impetus for enhanced investment.

Indian investments in Vietnam currently stand at about $ 1.1 billion and this is expected to be significantly enhanced when the large infrastructure project—Tata Power’s Long Phu-II 1320 MW thermal power project with an estimated cost of $ 2.2 billion—is completed. Similarly, India is ready to welcome investment from Vietnam by creating an attractive and investor-friendly climate. In particular, India would be happy to invite Vietnamese entre-preneurs to invest in its North-East, a focus area in India’s Act East Policy. This is because India is committed to increase connectivity between its North-East and ASEAN and for this purpose has already allotted a $ 1 billion Line of Credit for India-ASEAN physical and digital connectivity.

Besides seeking facilitation of ongoing Indian projectsand investments in Vietnam, Modi invited Vietnamese companies to take advantage of the various schemes and flagship programmes of the Indian Government. Modi told his Vietnamese counterpart: “As Vietnam seeks to empower and enrich its people, modernise its agriculture; encourage entrepreneurship and innovation; strengthen its science and technology base; create new institutional capacities for faster economic development; and take steps to build a modern nation, India and its 1.25 billion people stand ready to be Vietnam’s partner and a friend in this journey.” The framework agreement on space cooperation would allow Vietnam to join hands with the Indian Space Research Organisation to meet its national development objectives.

India is also planning an early establishment and opening of an Indian Cultural Centre in Hanoi. Being cultural partners, the agreement also included archaeological support to Vietnam with the Archaeological Survey of India starting the conservation and restoration work of the Cham monuments at My Son in Vietnam. Seen from a larger perspective, the ASEAN, as a regional grouping known for demonstration of solidarity and unity, is important to India in terms of historical links, geographical proximity, cultural ties and strategic space that both share. India views the ASEAN as central to its Act East Policy and Vietnam as the ASEAN Coordinator for India could play a catalytic role in strengthening India-ASEAN partnership across all areas. It was therefore agreed to keep the ongoing momentum in the relationship.

South China Sea Issue

The South China Sea is a major flashpoint in the Asian region. The sea bed is believed to contain precious oil and gas and many Asian nations make claims to their exclusive economic zones to control such resources, whereas China claims it in its entirety and threatens the use of force to assert its territorial and maritime claims. This has created a situation of unease in the region. In the wake of Chinese assertiveness in staking claims, the smaller claimant nations are seeking to bolster their defence preparedness as well as solicit support from nations friendly to their cause. India-Vietnam defence cooperation needs to be viewed from this perspective.

According to the Stockholm International Peace Research Institute (SIPRI) think-tank, which tracks the arms trade over five-year periods, there has been an almost 700 per cent surge in Vietnam’s defence procurements as of 2015. Vietnam’s quiet military build-up, designed as a deterrent, is aimed to secure its 200 nautical mile Exclusive Economic Zone in the wake of China’s assertive claims in the South China Sea. Therefore, Vietnam is in the market for fighter jets and more advanced missile systems, in addition to its six kilo-class submarines it has bought from Russia. The 12 agreements signed during Modi’s visit covering cyber security, ship-building, UN peace-keeping operations and naval information-sharing are in tune with Vietnam’s aim to boost its defence capability and India-Vietnam defence cooperation needs to be seen from this perspective.

The significance of scheduling Modi’s visits to the three Asian countries cannot be missed as Vietnam was the first destination before he reached China because of differences of similar kinds that both India and Vietnam have with China. Besides differences on territorial issues, both India and Vietnam are concerned over China’s disrespect to the rules-based international order that is contributing to rising tensions in the region.

India has taken a principled stance on the South China Sea issue and its eastern outreach in the wake of the July 12 declaration of the Permanent Court of Arbitration challenging China’s territorial and maritime claims in the South China Sea region. This needs to be understood in perspective. It was therefore not difficult to discern the growing strategic conver-gence between the two sides as defence procure-ment was a major component of the slew of agreements signed. Naval cooperation too has been progressing smoothly between the two countries.

Vietnam’s Response to India’s Position on the SCS

The response in Vietnam to India’s outreach was on expected lines. Vietnam lauded India’s principled position on the disputed South China Sea and sought India’s participation in the oil and gas sectors. Communist Party General Secretary Nguyen Phu Trong expressed Vietnam’s desire to intensify coordination in the regional and inter-national fora and reiterated that India always stood as a friend with Vietnam throughout history and that it was rare to find such a relationship which has lasted 2000 years.

The strategic significance of the South China Sea in terms of the large volume of trade flow through this critical sea route cannot be under-stated. This busy waterway is also of critical importance to India as 50 per cent of its trade passes through this Sea. China is involved in a raging dispute with Vietnam, Taiwan, the Philippines, Malaysia and Brunei over ownership of the territory in the South China Sea. The world tribunal’s ruling on July 12 rejected China’s claims of having any historical basis. Though it looked a victory for the Philippines, it made China toughen its stance saying that the tribunal had no power to adjudicate. China’s aggressive stance was further reinforced by the knowledge that the tribunal does not have the authority to enforce its ruling.

India is on the same page as its Asian partner countries on this subject. It supports freedom of navigation and overflight, and unimpeded commerce, based on the principles of international law, as reflected in the United Nations Convention on the Law of the Sea (UNCLOS). India strongly believes that states should resolve disputes through peaceful means without threat or use of force and exercise self-restraint in the conduct of activities that could complicate or escalate disputes affecting peace and stability.

China’s Reaction

China’s reaction was not so kind to India’s outreach to Vietnam. The Chinese media observed that Modi’s Vietnam visit was aimed at putting pressure on China and to raise their “bargaining chips”. The state-run Global Times commented that when negative emotions towards China among the Vietnamese people have been rising because of festering tensions over the South China Sea, India by siding with Vietnam and upgrading the strategic partnership is trying to upscale the bargaining position to “pile pressure on Beijing”.

The paper further commented that “New Delhi and Hanoi both wish to raise their bargaining position while having interactions with China, but neither of them wants direct confrontations with Beijing”. It further said such a possibility cannot be totally excluded, but it will not play a vital role either. It was critical of India by observing that India is always cautious in dealing with China for fear of escalation and allowing the US to be used indirectly in the latter’s efforts to rebalance the Asia-Pacific strategy without the US openly admitting it. What the report meant was that there seems to be a hidden strategy between India and the US to deal with China with Vietnam being a cog in this larger wheel. It dismissed the view that if the US and Japan with their strong support could not succeed in piling pressure on Beijing, it would be unrealistic for Vietnam to garner India’s support to deal with its differences with Beijing. China views that the growing India-Vietnam bonhomie and strategic bonding would have only limited influence on China.

Concluding Observations

Going by the historical narrative that comple-ments the current priorities of India’s engage-ment strategy, India values Vietnam as an old friend and a member of the ASEAN grouping and a very important pillar in its Act East Policy. Being the ASEAN Coordinator for India for 2015-18, both are committed to strengthen their bilateral relationship within the India-ASEAN and Mekong-Ganga Cooperation framework. The year 2017 would mark a significant milestone as India and Vietnam would celebrate the 45th anniversary of establishment of diplomatic relations and 10 years of strategic partnership betweem them. Both have plans to organise various events throughout the year to commemo-rate the events.

With the elevation of the existing strategic partnership to a “comprehensive” level, the security and defence relationships would assume greater depth and intensity. This institutionali-sation may look recent in the journey of relationships; however, in reality India-Vietnam relationship is not recent but spans two millennia of contacts between the two civilisations. The influence of Buddhism and the remnants of the Hindu Cham civilisation stand testimony to the long-tested relationship, which has acquired robustness in recent times. Modi’s latest visit further contributes to this narrative. There can be no difference of opinion that, as former Vietnamese Prime Minister Pham Van Dong described, India-Vietnam relationship was “as pure as a cloudless sky”.                     

Dr Rajaram Panda is currently ICCR India Chair Visiting Professor, the School of Economics and Business Administration, Reitaku University, Japan. He can be contacted at e-mail: rajaram.panda@ gmail.com