When vietnamese Prime Minister Nguyen Tan Dung visits New Delhi next week, there is one anomaly in Indo-Vietnam relations he wants to rectify. Bilateral trade and investment between the two countries have failed to keep pace with the 8 per cent annual growth both have been recording. “Why this is the case is the question we are asking ourselves,” said Vietnam prime minister Nguyen Tan Dung. "We want this to change.”
It has been 20 years since the process of “doi moi” – translated imperfectly as ‘renovation’ – began in Vietnam. The Communist Party set about transforming the economy along capitalist lines while retaining the communist underpinnings of the political system. Under a system in large part like China’s, Vietnam’s economy has made great leaps – extreme poverty has gone down from 51 per cent in 1990 to 8 per cent in 2006; the stock market is booming; the growth of exports to the United States is greater than even China’s.
Under its current five-year plan, the Vietnamese government has set itself a target of attaining 8 per cent growth every year until 2010, and since joining the WTO last year, has opened itself up to FDI in most sectors.
And investors are queuing up. While Taiwan, South Korea and Japan are the largest investors, former enemies China and the US are catching up too. The reasons are many, although the most significant is demographics –70 per cent of the population is under 30 years of age, and literacy rates are over 90 per cent.
Moreover, the country is politically stable, and the environment is very pro-business. It takes just 15 days to get a certificate of registration; foreign businesses are governed by the same laws as domestic ones; and there are generous tax breaks for the wealthy. “President Bush said if he were younger and wanted to invest somewhere, he would invest in Vietnam,” said a smiling Nguyen Ngo Phuc, Vice-minister, Ministry of Planning and Investment.
In addition to Vietnam’s market, an investor gets access to the Asean market. “While outsiders pay 35 per cent duty, investors in Vietnam can access the Asean market by paying just 5 per cent tariff,” said J.N. Misra, the Indian Consul-General in Ho Chi Minh City, Vietnam’s commercial capital. He enumerated a host of sectors that Indian corporates could invest in – IT/ITES, pharmaceuticals, agri-tech and agri-business, oil and gas, power, construction, human resource development and so on.
So far, only a few recognisable Indian names have a presence in Vietnam: Ranbaxy, Godrej, ONGC, NIIT and Vallabhdas Kanji Ltd. Relative to other Asian countries, especially China, India has been a late arrival. However, two recent investments by Tata and Essar – of $3.7billion and $527million respectively – have made India the tenth largest investor in the country.
“We want more investment in higher value-added fields,” says Phuc, “and we think India will be a good partner.”