Vietnam's efforts in accelerating integration into the global market offer many opportunities for economic cooperation with India. Vietnam is implementing the Free Trade Agreement (FTA) with the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Illustrative photo (Source: congthuong.vn)
During Vietnam's 2020 ASEAN Chairmanship, 10 ASEAN member states signed the Regional Comprehensive Economic Partnership (RCEP) - the world's largest free trade agreement. Joining RCEP is also a way for Vietnam to diversify trade and investment.
Along with the diversification of trade and investment, Vietnam encourages India to import Vietnamese agricultural products and promote its investment in Vietnam. Vietnam's bilateral trade with India accounted for only USD11.1 billion in the 2020–2021 financial year - 12 times smaller than that with China. India's imports from Vietnam grew from USD2.5 billion in 2015–2016 to USD6.1 billion in 2020–2021, but the growth rate is modest compared to its trade relationship with major ASEAN countries. In contrast, India's exports to Vietnam have not grown steadily over the past five years, reaching only USD5 billion in the period 2020–2021.
While India has taken several steps to promote economic integration with the CLMV countries (Cambodia, Laos, Myanmar and Vietnam) through projects such as the India-CLMV Business Agreement and the Mekong-Ganga Cooperation Initiative, economic relations in general still have a lot of unexploited potential. To better compete with China in Southeast Asia, India reconsiders its economic policy towards Vietnam, as well as Southeast Asia.
India is starting by fast-tracking the review of the ASEAN-India FTA through multilateral dialogues for ASEAN countries. Since its inception in 2010, the ASEAN-India FTA has shown few results as the parties have not made much progress in reducing non-tariff barriers, so updating and reviewing the ASEAN-India FTA aims to strengthen economic linkages with India.
Regarding India’s foreign direct investment in Vietnam, it is a reliable investment destination for Indian companies among its eastern neighbours. India works with Vietnam to promote aid diversification in Southeast Asia. Vietnam is not only a close strategic partner of India but also an active mid-range country in ASEAN.
Vietnam plays an important role in promoting the socio-economic progress of Southeast Asia through the ASEAN platforms and the Cambodia-Laos-Vietnam Development Triangle Area. Vietnam is also interested in attracting non-regional companies into the Mekong region to promote regional growth and economic diversification. For these reasons, Vietnam can act as an important bridge between India and the CLMV countries in the area of connectivity and economic cooperation./.