Expanding Indo Vietnam Biz to US$20 billion Post COVID 19 through Smart & Secured Strategies

India and Vietnam have enjoyed exceptionally friendly and cordial relations that have been a product of historical understanding

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History of Indo Vietnam

India and Vietnam, with historical roots in the common struggle for liberation from colonial rule and the national struggle for independence, share traditionally close and cordial bilateral relations. Mahatma Gandhi and Ho Chi Minh, regarded as the Father of Nation in India and Vietnam respectively, led people in their heroic struggle against colonialism in the two countries. India was the Chairman of the International Commission for Supervision and Control (ICSC), which was formed pursuant to the Geneva Accord of 1954 to facilitate the peace process in Vietnam. India initially maintained Consulate-level relations with the then No       rth and South Vietnams and later established full diplomatic relations with unified Vietnam on 7 January 1972.

Overview of India-Vietnam Relationship

India and Vietnam have enjoyed exceptionally friendly and cordial relations that have been a product of historical understanding. Since last decade, several developments in the fields of defence, trade, business and investment as well as energy, education, culture and science and technology (S & T) have enriched the overall bilateral cooperation between the two countries, and have reiterated the commitment to deepen India-Vietnam relations.

Vietnam Economic at a Glance

India at a Glance

India’s Economic Performance in 2019-20

  • India’s GDP growth is expected to grow in the range of 6.0 to 6.5% in 2020-21.
  • GDP growth moderated to 8% in H1 of 2019-20, amidst a weak environment for global manufacturing, trade and demand.
  • In 2019-20, fiscal deficit was budgeted at 7.04 lakh crore (US$ 99.56 billion) (3.3% of GDP), as compared to INR. 6.49 lakh crore (US$ 91.86 billion) (3.4% of GDP) in 2018-19.
  • Inflation increased from 3% in H1 of 2019-20 to 7.35% in December 2019-20 due to temporary increase in food inflation.
  • Reforms undertaken during 2019-20 to boost investment, consumption and exports:
  • Speeding up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC).
  • Easing of credit, particularly for the stressed real estate and NBFC sectors.
  • The National Infrastructure Pipeline for the period FY 2020-2025 launched.

Institutional Mechanisms for Bilateral Exchanges

There are several bilateral mechanisms at different levels between India and Vietnam. The Joint Commission Meeting at the Foreign Ministers’ level and the Foreign Office Consultations and Strategic Dialogue at Secretary-level provide the broad framework for bilateral consultations encompassing all areas of mutual interest.Vietnam and India should enhance cooperation in advantageous fields of each country to realize the trade turnover target of US$20 billion in 2020.

In 2019, bilateral trade stood at US$11.3 billion while investment from India, the world’s fifth largest economy, in Vietnam remained modest at less than US$1 billion, much lower than the expectation and potential of two countries.

India is one of Vietnam’s major trading partners, Dung stated, adding the two countries could further cooperate in mining, textile & garment, footwear, supporting industries, machinery, and IT, among others.

Dung expected both countries to accelerate the process of opening markets for goods and products from each country, particularly Vietnamese fruits, and refrain from adopting measures hindering bilateral trade.India has huge potential for investment cooperation in food, energy, mining and pharmaceutical products and received positive results, added.

Increasing trade between India and Vietnam is not without challenges. There is a significant cultural, custom and language gap between people from both countries. Furthermore, the two countries are geographically far apart with flight time between most major cities around seven hours. This not only affects tourism but also impacts the import and export of goods and business exchanges.

Today, Vietnam’s main exports to India include electronics and electrical products, textiles, handicrafts, cashew nuts, coffee, tea, mate, spices, canned food, building material, pharmaceutical products, precious metals, copper and rubber.

In return, India top exports to Vietnam are agriculture and farm products, meats and seafood, cotton and pharmaceutical products.

In terms of investments in each other countries, India is the 26th ranked investor in Vietnam with almost 210 projects worth around US$880 million. These projects are in telecommunications, information technology, energy, mining, pharmaceuticals and electrical appliances. Vietnam’s direct investments in India are negligible.

In the longer term, Vietnam can increase its investments in India by taking advantage of the Indian government’s loosening up of foreign direct investment (FDI) quota for foods and beverage sector as well as the 100% allowance of FDI in the in e-commerce and foods manufacturing industries.

Overview of India-Vietnam Relationship

India and Vietnam have enjoyed exceptionally friendly and cordial relations that have been a product of historical understanding. Since last decade, several developments in the fields of defence, trade, business and investment as well as energy, education, culture and science and technology (S & T) have enriched the overall bilateral cooperation between the two countries, and have reiterated the commitment to deepen India-Vietnam relations.

Trade & Economic Corporation: Bilateral trade turnover registered an annual growth of 12.81% and touched US$13.69 billion in 2018-2019. As per GOI’s data, bilateral trade for the period April-December 2019 reached US$9.89 billion. India is now the 7thlargest trading partner of Vietnam. On the other hand, Vietnam is the 4th largest trading partner of India among ASEAN countries after Singapore, Indonesia and Malaysia. Vietnam is the 14th largest destination of India’s exports globally. Vietnam is also the third largest export destination for India after Singapore and Malaysia in the ASEAN region..

India’s Investments in Vietnam: India’s investments in Vietnam are estimated at around US$1.9 billion including investments routed through third countries. According to Vietnam’s Foreign Investment Agency, as of 2019, India has 255 valid projects with total invested capital of US$922.34 million, ranking 26th among countries and territories investing in Vietnam. Major sectors of investment are energy, mineral exploration, agro-processing, sugar, tea, coffee manufacturing, agro-chemicals, IT and auto components.

Vietnam’s investments in India: As of 2019, Vietnam has six investment projects in India with total estimated investment of US$28.55 million, primarily in the areas of pharmaceuticals, information technology, chemicals and building materials.

Development Partnership: India has a long-standing development partnership with Vietnam that has made positive contributions towards capacity building and socio-economic development of Vietnam. India has also been providing assistance to Vietnam within the ASEAN framework. Under the Mekong Ganga Cooperation framework, India has a Revolving Fund with an annual contribution of US$250,000 for Quick Impact Projects in Vietnam for development of community infrastructure. So far, 9 Quick Impact Projects have been completed since 2017, while 5 new projects are under implementation. In addition, 7 grant-in-aid assistance projects for the benefit of the Cham community in Ninh Thuan province are under implementation at a total cost of around US$1.54 million. India is also providing technical assistance worth US$2.25 million for conservation and restoration of ancient Cham monuments located in the Quang Nam Province of Vietnam, showcasing the deep civilizational connect between the two countries.

The Coronavirus could act as a Catalyst for the Development of Indian-Vietnamese Economic Ties

The scope for increasing economic engagement with Vietnam also offers India an opportunity to increase its engagement with ASEAN since Vietnam is the current ASEAN chair for 2020.

Also with India refusing to join the Regional Comprehensive Economic Agreement (RCEP), it is expected that India and ASEAN will review its existing free trade agreement. India’s revised engagements with ASEAN could result in a doubling of bilateral trade to US$300 billion by 2025.

At present, there are two specific sectors—farm products and pharmaceuticals—that could benefit from reduced trade barriers. Vietnam has requested India ease its trade barriers on agricultural products since the coronavirus outbreak. Vietnamese agricultural exports are reliant on Chinese demand. Reduced orders from China caused by the coronavirus have left the Vietnamese government looking for alternative regional buyers. There are currently restrictions on imports of key items like black pepper and cashew nuts in India. If they are lifted, Vietnamese agricultural exporters could unlock a new regional market.

At the same time, India is asking Vietnam to open up its pharmaceutical market to generic version of drugs. The pharmaceutical sector is one of India’s fastest-growing sectors. Pharmaceutical exports account for almost 6% of India’s total merchandise exports. Vietnam’s domestic pharmaceutical industry is also growing, but at present, it meets only 53% of domestic demand. Vietnam is trying to get Indian pharmaceutical companies to manufacture in Vietnam rather than increase purchasing from India.

The full economic potential of India’s relations with ASEAN nations awaits to be explored. Concerted efforts towards strengthening Indian-Vietnamese economic relations offer benefits to both countries and could provide India with a platform to deepen economic engagement with ASEAN as a whole.

Capacity Building, Training, Scholarships: Vietnam has been a large recipient of training programmes under Indian Technical and Economic Cooperation (ITEC) programme. Vietnam receives more than 200 training slots annually, including more than 130 training slots under ITEC/Civilian and technical Cooperation Scheme of Colombo Plan and further 70 training slots under ITEC (Defence). Separately, Indian Council of Cultural Relations has several annual scholarship programmes including 14 scholarships under EEP/CEP (Education Exchange programme/Cultural Exchange Programme); 10 under MGCSS (Mekong Ganga Cooperation Scholarship Scheme); 20 under GSS (General Scholarship Scheme); and 4scholarships for Buddhist and Sanskrit studies. The utilization of annual training slots and scholarships on offer has consistently been very high. The recent initiative of Government of India launched in October 2019 to offer PhD fellowship programme in association with 23 IITs for 1000 students from ASEAN countries, has also received good response from Vietnam. Vietnam was also among the few partner countries where Government of India launched the new e-ITEC programme in October 2019.

Indian Community: An estimated 5,000 people from India, including some short-term visitors, constitute the Indian community in Vietnam. A majority of them are based in and around Ho Chi Minh City (HCMC) in the southern part of Vietnam. Most of the community members are professionals employed in business and trading companies, oil refineries, IT sector, hotels/restaurants, mining, yoga institutions, civil aviation sector and schools. Some Indians in Vietnam currently hold senior positions in multi-national companies and international organisations, including the United Nations organisations. Indian Business Chamber (INCHAM), a recognized organisation by the Government of Vietnam, represents Indian community and promotes Indian business interests in Vietnam.

Digital Economy of Vietnam

Compared to the traditional economy, there are severalnovel features of the digital economy:

  • Data as the source of value in the digital economy:The increase of digital technologies means that data cannow be collected from many sources: from smartphonesto millions of sensors in factories, traffic vehicles andindividuals. These massive data flows, together withbig data analytics, can generate value in all private andpublic activities.
  • The advance of ICT-related hardware and software:The digital economy is the result of the developmentof new digital technologies – such as robotics,Internet of Things and digital platforms– that havetransformational effects beyond the ICT sector. Thetransformation cuts across all sectors, from finance totransport, manufacturing, media, education, healthcareand others.
  • New business models that both enable anddisrupt businesses: Businesses models based ondigital platforms allow various groups of peopleto interact, thereby creating network effects andincreasing efficiency due to reduced transactioncosts. E-commerce, for example, facilitates ordersof goods and services that can be delivered throughconventional channels or completely electronically.Online advertising is another emerging area where theInternet becomes a medium to deliver precise targetedmessages to segmented customers. Meanwhile thesharing economy offers individuals job opportunitiesand access to underutilised assets and services.
  • New role of consumers: Digital technology hasput consumers on the centre stage. The ability tocommunicate and share reviews with others not onlychanges the purchasing experiences of customers,but also significantly affects business reputations. TheInternet also empowers consumers with a new way ofcreating and sharing ideas. Consumers may become asignificant new source of innovative ideas for producers.

How to manage now?

There is no ‘one-size-fits-all’ solution to the issues facing Industrial due to the scale and diversity of the sector. Global operations rely on international supply chains which are under immense pressure, while different regions and markets mean many different reactions to the COVID-19 crisis.

Right now, Business continuity and Prioritization is the focus

The scale of the impact on supply chains eclipses anything most Industrial companies have had to deal with. And right now, companies must ensure the most resilient supply chain possible whilst protecting their workforce. This requires them to:

  • Establish a command center and begin rapid response deployment;
  • Rapidly adjust operations and continue response cycle;
  • Establish an on-going operating capability.

All of this must be done with a specific focus and prioritization on their customers’ core needs, as client-centricity continues to be of the essence. At the same time companies must enable virtual work whenever possible to protect their people while ensuring highest levels of productivity. This change in the current ways of working will clearly stress existing IT infrastructure and systems.

System resilience is of the upmost importance putting even more pressure than before on technology teams and IT infrastructure across the whole enterprise. And digital channels must be leveraged to their fullest extent to keep commercial links with customers and partners as well as the products, machines and assets in operation.

But cash is becoming critical!!!

The potential of an extended lockdown is looming, and based on current cash reserves, Companies can only afford a full lock-down of business for a maximum of 2-3 months. Yet those same cash reserves are also vital to prepare the company to ramp up business and go back to industrial markets. This requires companies to

  1. Reprioritize investments and put on hold all non-essential investment programs, as well as;
  2. Launch cost reduction initiatives across the enterprise with both immediate and longer-term impacts.

This makes managing the covid-19 crisis a timeline battle: the remaining cash buffer vs the necessary financial demands to revive the company.

What’s on the horizon: Reinventing Industrial?

Companies, while focusing now on maintaining their customers’ core operations should also start anticipating the ramping back up of the business. They must take a longer-term view and think through the post COVID-19 implications. There are several critical business capabilities Industrial Equipment manufacturers will have to adjust. These are ‘no regret’ moves that should be anticipated: (1) a more elastic workforce and digitally enabled workplace, (2) differentiated and resilient supply chains by customer segment, (3) resilient and distributed IT infrastructure and systems and (4) digital channels and ecommerce platforms.

Companies will need to scale their leverage of digital across the enterprise and its ecosystem – from proof of concepts (PoC) to scale deployment. But this requires rethinking the portfolio of products with an acceleration of the development of digital services.

Strategic Investment

Every business needs capital to run and the question that crosses the mind of every founder/entrepreneur in these difficult times is from where they will get the capital. There are many funds who have enough capital to deploy for the coming years and they may not shy away from it.

However, we might witness a dip in VC/HNI (Venture Capital funds / High Networth Individual) funding in the short run. Investors will be more vigilant and may take longer than usual to make funding decisions after following stringent diligence procedures. But there is nothing to worry about because if we look at the previous economic downfalls, we can notice the market eventually bounce back after the end of an epidemic crisis. In order to extend the runway, businesses can even approach existing investors for additional funding. Since, they are already invested and have their skin in the game; they are more likely to help out during this time.

Vietnam is forecast to be one of the fastest-growing economies in Southeast Asia, despite the impact of COVID-19.The government launched a US$10.8 billion credit support package in March to combat the crisis. Post COVID-19, the economy is expected to rebound at a growth rate of 6.8% in 2021 with continued strong growth. The second outbreak of COVID-19 in March started a new phase in the fight against the pandemic, severely affecting all of Vietnam’s major trading and investment partners. As a result, Vietnam’s GDP fell to 3.8% in the first quarter of 2020 compared to 6.8% in the same period in 2019 as per the General Statistics Office of Vietnam (GSO).

This is the time when understanding the gravity of the situation and turning it favorable for the business is all that matters to let it sail smoothly in these difficult times. Here are a few tips to stay connected and afloat during the shutdown:

  • Communicate transparently with your customers

We are all in this together, so the ideal way is to stay transparent with your consumers about what your business is going through. Customers can empathize with companies facing a crisis, as long as the communication is transparent. Communicate with customers to understand their perception of the product/solution offered by you.

  • Maintaining healthy relationship with contracted parties

It is understandable that it might be difficult to pay out vendors/suppliers during the shutdown. However, it would be helpful to give your vendors, suppliers, landlords’ etc. sufficient notice in case there is going to be any delay in payments so that they can also be prepared and there is no bitterness in this already difficult time. It is important for businesses to remember that such business relationships will need to be tapped into during the eventual restart and ramp-up of operations post COVID-19, and jeopardising such valuable relationships is not in their long-term interest. Trying times like these bring an opportunity to galvanise business relationships through mutual understanding & cooperation.

  • Managing employees & related optimization

For large companies considering layoffs, the primary option should be to cut the salaries of the higher paid exec/employees to try to retain the people who least can afford to lose their jobs employed. However, when the time comes to make the tough call, do it with compassion look out for government directives, and offer extra compensation as and when required. Such implementation should be carried out only once and not in stages such that it does not affect employee morale.

  • Keep Service Team Engaged

The team relies on you so keep them updated about every development. As a promoter, it is your responsibility to keep team members engaged and stay connected with them through available video conferencing tools. It is very important to maintain high spirits within the team and understand the general mood within your remote workforce.

  • Communication to stakeholders

Consult with your investors or external experts to plan the right form of communication with stakeholders, most importantly customers and employees. Have an honest conversation on the situation and its impact on your business with your entire leadership team. Any negative message should be delivered with utmost empathy along with transparent reasons.

In these difficult times it is important to stand united and help one another in whatever way we can. Stay safe and stay healthy. Please remember that some of the best initiatives are built in trying times. Like all difficult situations, this too shall pass!

The Concept of Secured Governance in Key Industries

Secured Governance offers a strategically initiative by the Vietnam Government for the Government to enhance the spending’s on basic infrastructure development with a minimal investment by the respective sectors. It is a concept of developing Techno Economic Corridors connecting HUBs which will act as growth centre for individual sectors. The very concept of “Secured’’ here implies a secured convergence or knitting with various sectors defining a growth for an economy.”The current year, in order to implement practical activities to promote trade and investmentwould be around US$20 billion.

Advantages of the proposed participation of Industry Growth

Vietnam needs to be becoming a major international HUB for the Global industry. The goal of the Secured Governance strategy is to develop many mini HUBs in semi urban cities and nano HUBs in backward areas. Besides it could provide a route into financial professions and develops skills that are useful in key sectors. The secured governance HUB development aims to help all registered small, medium and large scale firm’s growth and generate new and sustainable revenue streams. It provides access to local and international investment opportunities would be US$20 billion and 5 million employment opportunity.

These HUBs development that yield net present value in terms of demonstrable user fees or a direct increase in additional revenues to the government and policy makers can enhance the efficiency and productivity with used to create resilient economic prosperity. It could enhance access to direct and indirect job opportunities and services for both skilled levels.


 

By Akram Hoque,

Founding Editor, The Policy Times

 

By Dr. P. Sekhar

Chairman of Global Smart Cities Panel, Micro Tech Global Foundation


 

Summary
Article Name
Expanding Indo Vietnam Biz to US$20 billion Post COVID 19 through Smart & Secured Strategies
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India and Vietnam have enjoyed exceptionally friendly and cordial relations that have been a product of historical understanding
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THE POLICY TIMES
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