India has 132 projects with total investments of about US$1.1billion including investments routed through other countries. Major sectors of investment are energy, mineral exploration, agro-processing, sugar manufacturing, agrochemicals, IT and auto components.
In the oil and gas sector, ONGC Videsh Limited (OVL) and Essar Oil are already providing oil and gas exploration services in Vietnam along with PetroVietnam. In 2013, Tata Power, part of the Tata Group, was awarded a US$ 2.1 billion thermal power project in Soc Trang Province, which is the largest Indian investment project in Vietnam till date. Another company under the same group, Tata Coffee, announced setting up a greenfield instant coffee facility in Vietnam at a cost of US$ 50 million in December 2016. Other Indian firms include Reliance Industries, Gimpex, J K Tires, and Glenmark Pharmaceuticals Ltd.
Along with the private sector, the government is also pushing for an increase in trade and investment. The Indian government has recently approved for a Project Development Fund of Rs 500 crore (US$ 77 million) for supporting Indian companies to build production and supply chains in Cambodia, Laos, Myanmar, and Vietnam. This will benefit India’s industries in terms of business expansion, maintaining cost competitive supply chains, along with increased integration with global production networks.
In 2014, the Indian government also offered a US$300 million line of credit to Vietnam as an impetus to accelerate textile trade and investment between the two countries. The credit is to be disbursed through the Vietnam Exim Bank, is to be used mainly to set up a textiles and garment industrial park close to the Ho Chi Minh city as well as to help Indian and Vietnamese companies to forge joint ventures.
Bilateral agreements and trade
Both India and Vietnam are members of the ASEAN–India Free Trade Area (AIFTA), which came into effect in 2010. The FTA includes tariff liberalization of over 90 percent of products traded between the two regions. The last period for tariff reduction or elimination under the various tariff categories for Vietnam is set for 2024.
India is also currently negotiating the Regional Comprehensive Economic Partnership (RCEP) trade agreement between member states of ASEAN, Australia, China, Japan, South Korea, and New Zealand.
Key imports
Key imports from Vietnam include electrical and electronic equipment, rubber, machinery and instruments, coffee, tea, and spices.
Key exports
Key exports include meat and edible meat offal, fish, crustaceans, and mollusks, iron and steel, cotton, and cereals.
Sector opportunities
Agriculture
Agriculture provides a number of opportunities especially in rice, coffee, and tea production, which are major exports of the country. Investments in new science and breeding technology, irrigation technology, storage facilities, and development of the value chain offer a huge market for investors. In addition, Vietnam has the natural advantage of climate condition, soil with high yield from the central highlands suitable for coffee plantations. Tata Coffee has recently decided to invest in a US$50 million coffee facility in Vietnam.
Seafood
Huge potential lies for Indian seafood processing companies to establish value chain in exploration, processing, and trade units in Vietnam, especially the Mekong Delta region. Although Vietnam’s seafood exports are huge, they also import large volumes of seafood products for export processing because of lack of due to limited production from domestic sources. Indian companies can take benefit of several incentives for investments, credit, insurance and preferential tax available for organizations operating in the fisheries sector. These tax incentives include tax exemptions for natural marine resource extraction, excise exemptions for aquaculture farming and fishery logistic services and offering free land and water use for aquaculture and seafood production, among many others.
Automotive components
Vietnam’s automotive manufacturing industry is growing rapidly, but the development of supporting industries providing spares and parts have been slow. This offers an opportunity for Indian auto components manufacturers, who are already amongst the top exporters in the world. Last year, automobile components industry exports constituted 4 percent of India’s overall exports and expanding overseas will help firms in diversification.
Assembling and manufacturing of agriculture machinery
With the country giving greater importance to agriculture sectors and various incentives, assembling and manufacturing of the agricultural machinery and farm implements are potential areas to be explored for investment.
Export-oriented industries
There are huge investment opportunities for setting-up support industries in Industrial Parks and Indian firms can take advantage of various trade agreements that can provide a greater market access. Industries in focus include textile, leather, footwear, and food processing.
Infrastructure opportunities
With a growing economy and urbanization, Vietnam’s infrastructure needs are on the rise. Indian firms can support and explore opportunities in projects such as road, power generation and transmission, and rural electrification.
Other sectors of interest include IT/ITES, Hospitality, and Healthcare.
(Source: Vietnam Briefing)
