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India and Vietnam: Pushing back the dragon

India Inc. Staff

The comprehensive strategic partnership between New Delhi and Hanoi is playing an important role in ensuring balance of power in AsiaRarely, if ever, does India weigh heavily on the minds of foreign leaders when they meet their counterparts from third countries. But when Chinese President Xi Jinping recently met Communist Party of Vietnam's General Secretary Nguyen Phu Trong in Beijing, seasoned observers could sense that New Delhi was the invisible elephant in the room.Great Power gameThat's because India has belatedly entered the game that Great Powers play and made Vietnam the fulcrum of its Act East Policy to expand its economic and geo-strategic footprint across East and South East Asia.And Hanoi, for its part, is using New Delhi as a counterweight to its large and increasingly belligerent northern neighbour with whom it is involved in a war of nerves over South China Sea, among other disputes.Closer defence tiesIn an attempt to counter the Chinese strategy of boxing India into a corner, New Delhi is steadily cranking up military and strategic ties with Beijing's neighbours.Uncharacteristically for a traditionally pacifist country, India is negotiating the sale of Akash surface to air missiles to Vietnam.This follows Prime Minister Narendra Modi's recent offer of a $500 million line of credit to buy Made in India defence platforms. The Indian premier will, thus, kill two birds with one stone - by selling missiles to China's neighbour he sends out a message to Beijing that India is no pushover; at the same time, he gets to dramatically showcase the success of his flagship Make in India initiative.Earlier, India had given Vietnam another $100 million line of credit to buy naval patrol boats from Larsen & Toubro. Besides, and much to China's chagrin, India is training Vietnamese pilots to operate the Sukhoi 30 fighter planes as Kilo-class submarines.Comprehensive strategic partnershipThe tight clinch between New Delhi and Hanoi comes in the backdrop of the two countries elevating their “strategic partnership”, which they established in 20007, to a “comprehensive strategic partnership” during Modi's visit to that country last year.Solid economic baseThe strategic partnership, obviously aimed at preventing any other Asian power from emerging as a regional hegemon, has a strong economic component as well.The Modi Cabinet had, last year, approved a Rs 500-crore ($75mn) project development fund to facilitate and increase the entry and presence of Indian companies in the CLMV sub-group within Asean, which have preferential access pacts with China, European Union and the US and so, can act as gateways for India Inc into these markets. As the acronym suggests, the four countries are Cambodia, Laos, Myanmar and Vietnam, with the last playing a disproportionately large role within this group for India.Energy securityCloser ties with Vietnam could also play an important role in securing India's energy needs. Hanoi has allotted ONGC, India's public sector oil explorer, two oil blocks in the South China Sea, though China opposes these awards, claiming, without any rationale, that the oil reserves fall within its own territory.ONGC Videsh, the overseas arm of ONGC, has stopped work on one block because of poor prospects of finding oil but has recently received an extension of one year to June 2017 for the other.India Inc at the forefrontTaking advantage of the close ties between the two countries many leading Indian business houses such as the Tatas, Reliance Industries, Aditya Birla Group, ONGC Videsh, Tech Mahindra, Godrej, NIIT and Ranbaxy, among several others, have set up operations in Vietnam.Vietnam is a former centrally planned economy that is transitioning to a market economy. And agriculture remains the dominant vocation in that country. So, Indian companies are ideally suited to become partners in Vietnam's progress.Growing trade relationsBilateral trade between India and Vietnam has been growing in tandem with the strategic relationship.According to official data, bilateral trade during January-October 2015 was $4.28 billion. This included $2.5 billion of exports from India and $2.07 billion imports into the country. However, if commodities of temporary import are included, the total value of trade was more than $9.2 billion in 2014-15.During the visit of Nguyen Phu Trong to India in November 2013, the two sides agreed to expand this figure to $15 billion by 2020.New market for Indian companiesAt a time when India Inc is struggling with sluggish consumption at home and shrinking demand abroad, markets like Vietnam offer hope.Indian companies are executing projects worth almost a billion dollars in Vietnam in the oil and gas, minerals, sugar, agro-chemicals, IT and agricultural processing sectors.Entry point into AseanThe Tiger economies of South East Asia, who provide the main ballast to the Asean grouping, are industrially far ahead of other member countries such as Vietnam. This presents Indian companies with a great opportunity to build beachheads in Vietnam and use these to expand their presence in the more advanced countries within this group.Business as a sub-set of geo-politics

The rapid scale-up in economic ties notwithstanding, analysts acknowledge that these have to be built on the bedrock of the geo-political interests that bind the two nations.China is clearly rattled by this new found closeness between Hanoi and New Delhi. The Global Times newspaper, which the Chinese government often uses to disseminate views it cannot air openly, has questioned this relationship several times, most recently when India announced it would set up a satellite tracking and imaging centre in southern Vietnam.This will be a civilian facility and will have scientific, agricultural and environmental applications but it can also be used for tracking Chinese military moves.The Brahmos questionVietnam is learnt to be keen on acquiring the Brahmos supersonic cruise missile to bolster its defences against China. There is no doubt that the induction of this missile, the fastest cruise missile in the world, will significantly beef up its defence capabilities.But Brahmos is a joint venture between India and Russia and New Delhi needs Moscow's nod before it can sell it to a third country. Given that Russia is almost reduced to the role of China's junior partner, such an approval is unlikely to materialise.Back to AkashNot only does Hanoi want to buy Akash missiles, it also wants an agreement for transfer of technology and local production in that country. India, on the other hand, wants a more graded approach, starting with off the shelf sales of the missile.Talks are also on for the sale of Varunastra anti-submarine torpedoes to the country Defence Minister Manohar Parrikar has described as a “close friend”.Asian chess boardTill about three years ago, it seemed as if India was willing to roll over and concede Asian hegemony to China. But the election of Narendra Modi as Prime Minister has changed that. To be sure, India is still miles behind China on almost all parameters, but as New Delhi's clinch with Hanoi shows, geo-politics is high stakes long-term game that players with weak stomachs should best avoid.

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