Vietnam is always at the center of geopolitics. BW Businessworld's Manish Kumar Jha engages with Vietnam Ambassador Pham Sanh Chau on comprehensive range of issues. Ambassador speaks his mind on South China Sea, security partnership with India, ASEAN & the QUAD in Indo-Pacific. Echoing Vietnam economic model that attracts global investors, he talks of openness, reforms and no red-tape.

India and Vietnam held the 17th meeting of their bilateral Joint Commission with EAM S. Jaishankar and Vietnam’s Deputy Prime Minister & Minister of Foreign Affairs Pham Binh Minh. What did they discuss and how important the meeting was?

Firstly, I want to emphasize on how the context is very important. 

We call this mechanism the Joint Commission Meeting. This is because participating at this talk, vice ministers of different ministries covering all domains our bilateral relations. So I want to make clear this meeting in important. 

Additionally, this is the 17th meeting between our countries and we have established our relationship at the highest level of diplomacy, namely comprehensive strategic partnership. Vietnam at the moment enjoys only three important comprehensive strategic partnerships - with Russia, China & India.  So you see how important that relationship is for us. 

Also, I would like to mention, this meeting took place against the backdrop of preparation for the 50th anniversary of the diplomatic relations between our countries, in 2022. We established our bilateral relations in 1972. 

These meetings took place in the context of instability prevailing in the region. Namely the tension and the complex development in the South China Sea, especially over the past one year, we have seen so many complex situations develop across the region. We also see the rising tension between India & China. So the moment is very crucial. In addition, India & Vietnam also serve as members of the United Nations Security Council next year 2021. Vietnam served this year and will be servicing next year, whereas India will serve from next year to the following year. This also signifies the importance of this moment. 

Because in the past, we haven't had the current situation of border tensions, simmering South China Sea strains and the overlapping terms at the UN Security Council.  More Importantly, Vietnam also assumed ASEAN chairmanship this years. 

Vietnam historical evidence of the Paracel Islands,South China Sea(1630-1635)
Source: Do Thanh Hai, Vietnam and South China Sea: Routledge, 2017, p.30

Secondly, I would like to discuss not just our bilateral relations but also how we coped with the covid-19 pandemic. Before 31st of July, we had no casualties, no deaths whatsoever and we had only 350 cases. Now, we have more than 1,000 cases, which was brought in by the second wave. 

How did the pandemic affect the economy of Vietnam? Did it affect Vietnam significantly like it did India? Was a lockdown initiated in Vietnam as well? 

We try to keep the situation as good as we can, both in terms of controlling the pandemic and develop the economy. 

We still have 1.8% positive growth as compared to many countries undergoing recessions.

One of the things we stressed, was the necessity for our two countries to break down all the technical barriers to trade as a result of the pandemic. So when we impose the lockdown, it also disturbed the whole natural flow of trade. Let's say we have fifty-four containers that got stuck in Nepal. But when we can release them from Nepal, it has to pass through Kolkata, and now it's stuck in Kolkata. And then this issue continued to strain when the lockdown prolonged further. So these things affect us. 

And we are also affected by the tightening control of the Indian agencies on imported goods, when it comes to the rule of origin. These are the things that should be brought into discussion. 

Vietnam model is being talked about as the preferred destination of many foreign companies wanting to invest in Asia. What makes Vietnam so attractive? Can you tell me, what has Vietnam done so right in terms of attracting such an investment at large scale?

I also want to congratulate India for being able to attract record amount of foreign investment this year amidst difficulties brought up by the pandemic. 

Vietnam is also one of the hottest destinations for investment. Direct Investment placed in Vietnam surpass US$ 38 million in 2019 -- a year on year increase of 7.2%. in the first 6 months of this year, we have got already US$15+ million. I understand in India, it's a little more than that, around US$ 56 million in 2019. So these investments are is also very important for economies. 

Now, I will share with you a number of elements which determine Vietnam's attractiveness as an investment destination. 

1. We have a very stable political system. The situation is stable across the country. We have good coordination between provinces. We don't have much competitions between different provinces, because of centralized governance. I must say, our advantage is, in our country we have a one-party system, in which power is exercised in unity across the country since independence. Of course, provinces may compete with each other in order to attract investment and business but the central government will coordinate and provide the framework to avoid the race to the bottom, and guide investments into the places and industries we want the most.. For example, the tax system is implemented by the central government. On the basis of that tax system, every province can come with additional incentives. 

2. Our economy is consistently doing well. So even during the pandemic, we still register positive growth. On average, we registered around 6-7% growth over the past 30-40 years. So a positive and sustained growth rate is also one of the very important elements, making Vietnam an attractive destination for investment. We have a strong private sector economy as a new growth engine. 

Our private sector drives the economy. Before, the reform, we were a centrally planned economy and now the private sector accounts for significant share the whole economy.

Vietnam opened its economy in 1986. The journey into global market…

Five years before India; India opened it in 1991 and we opened in 1986. 

3.The third element is that Vietnam has a very open economy, which is also the most open populous economy in the world - 200%. I understand that the economy of India is open 40-50% whereas for us, it is at 200%. This basically means our GDP is around US$ 260 million in 2019 and our total trade two ways is US$ 520 million. We have a very open economy since we have signed many FTAs, and we have had 13 FTAs in total so far. We have just signed our most important FTA which is with the European Union. This is second FTA of the new generation after the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) that we have signed. EU has signed FTAs with only 3 Asian countries - Republic of Korea, Singapore and Vietnam. 

I know that India is still in discussion with the European Union on such deal. I even asked the Minister Hardeep Singh Puri on how far India is on that matter. 

an another important factor for Vietnam is the U.S.- Vietnam comprehensive partnership. This is very important. We call this the two-highways for the economy of Vietnam - one to the European Union and the other to the United States of America, Mexico and Japan. 

This year, we are going to sign the RCEP with 16 countries including Australia. I know India is not part of this, we backed India for this deal but finally India opted out. But we still save a seat for India. We also have an agreement with Russia & Belarus. Our economy is very open.

4. The fourth element, on the macro-level, we keep trying to improve our business environment. Ease of Doing  Business Index of Vietnam keeps improving. We are ranked at 70 among 160 countries. So what do I mean by business environment? This means you try to streamline the administrative procedures, you try to give more incentives in terms of tax, you try to train more skilled labour workers etc. So a lot of things combine in order to make sure that the environment is competitive. 

As you mentioned, I have to compare with India where issues like Ease of doing business, Red- tape & land acquisition are usually being highlighted by foreign investors. How are these issues being resolved in Vietnam? How did you work on?

I'll give you some examples so you can compare. 

1. We have a one-stop policy. Everything goes through with one-stop. Whereas in India's case, i heard of complaints, there are many stops. 

2. In terms of land acquisition, similar to India, we clear all the land and we put other things, so the investors don't have to put any other land clearances. 

Recently, we welcomed the measures taken by the Indian government, by putting all the land together in Gujarat for investors. In Vietnam's system, we do more. We provide infrastructure, power and housings for workers and investors. Now, when it comes to Red Tape, we have encountered excessive bureaucracy-while trying to clear procedures our containers in Kolkata. I see how difficult it is. 

I will give you another example, which has less to do with business but it may duplicate in other places in India's system - the nomination of one honorary consul. In India, we started the process in 2017. Now it is 2020. With that type of nomination, in Vietnam it takes only one month to finish. So this is little frustrating for us. Not just on this matter but on others as well. 

Sometimes, I wonder how you can rule with that type of Red Tape. I was told this was traditional India. But in traditional India, the bureaucracy is very strong. 

They have to set up a pillar, to make sure regardless of the political party in place, this functions smoothly in that way. So I have respect for that way. Because India is very big and very diverse in terms of religion, culture etc., so sometimes they have to balance, by buying time in order to check and supervise. But what I mean is that, with that in mind it is very difficult for India to be competitive with countries. This is the case, perhaps because Vietnam is smaller and sometimes those are smaller they are quicker and faster at such things. 

Sometimes I encourage my Vietnamese people to invest in India, but they come and they say "We need to think twice, not because of the market is not good, but because procedures are is too cumbersome, and we have different culture of doing business," so that prevents our investors.

Now we have somebody investing in Hyderabad and Bangalore, in the area of IT. But apart from that even if someone wants to invest in here, for example to produce aluminium, because you have mines and you have labour but procedure wise it’s not easy. 

Chinese Cost Guard Vessels harassing Vietnamese in the Paracels in April 2020( Source:Thanh Nien Newspaper)

Prime Minister Modi has a very close relation with his Vietnam counterpart. He sees Vietnam as a closest partner. So what you have said is everything for India, which I also understand. 

Vietnam and India have excellent relationship, in last 2000 years we have never fought each other, we have never had enmity. We always `supported each other. Even our prime minster said that relationship between  India and Vietnam is as clear as a blue sky without a single cloud, very beautifully termed.

Vietnam has welcomed Indian investors. As India is an energy deficient country, it’s a welcome move by Vietnam. What is your outlook on the Indian investment in the Oil and Gas in Vietnam? As Indian firm, ONGC Videsh has been exploring in Vietnam, what are the potential in this areas?

My message to Indian firms in this sector is that, Vietnam is a promising oil and gas market, that number 1. Number 2, ONGC is among the dew company that we have selected. You know at the moment we have only 2 very strong presence- Rosneft, Russian oil company, and ONGC, India. You came in 86', nearly 40 years , ONGC has brought back dividends, 100 million dividends in dollars back to India. 

This is a strong partnership India would win a lot from that investment and it’s the same for Russia, because we gave the best part of our oil and gas to our best friends and reliable partners, Russia and India.  

Now China is also interested but it stakes excessive claims. USA also has ExxonMobil and they are also also interested as developer. But India is now trying to get an extension, so we are looking into that, favourably, no issue. I came to see them twice and I continue to see them here again. So we continue to work with them. 

Now we have the new partner ESSAR. ESSAR group has just discovered a big gas field off the coast of Vietnam, which is very commercially promising. So, we will create all the favourable conditions for ESSAR to do business here. 

We are working on the project of US$11 billion downstream, upstream gas, petrol, etc. This is a huge project and we are trying to do whatever we can in order to support the company. I hoped that, ESSAR is teaming up  with A&I from Italy, they are very good partners. 

This is gas not oil we are talking about, so this was successful too. 

So, during my term I bring ESSAR to ONGC and I want to bring another company- HCL. They want to create biggest IT training centre in Asia out of India. And my next target is for Reliance. So those are the very important sectors, and we give only out of comprehensive strategic trust. 

Our defence corporation is turning strategic; defence minister was here recently.  In the past, India has promised to deliver key equipment like BRAHMOS & AKASH to Vietnam, it did not happen so far. How Defence cooperation is unfolding?

We have agreed that defence constitutes an important pillar of our comprehensive partnership. And in that pillar of cooperation and defence security, we had identified a list of things that need to be done. And out of that list we focus a lot on training- service personnell training in different fields including linguage. We also discussed the purchase of equipment Therefore we have  2 important Credit line, provided by the Indian government to Vietnam. First one is US$100m Credit line in order to produce Offshore Petrol Vessels (OPV), and second is US$500m Credit line. US$500m Credit line is very important in various areas of equipment, preparation and training.So that is very important and it reflects the trust between two countries. We have frequent high-profile visits at up- level, like ministers, chief of staff, service commanders among other key visits. It was very fruitful; cooperation is going on. 

India-Vietnam military exercise off Cam Ranh Bay in Vietnam 

On that matter, I can answer that no pressure can threaten our cooperation in the field. But specific decisions also depend on many other factors, including domestic situation and our ability. 

What Vietnam is looking from from India and what kind of industrial/defence cooperation is required?

The persons involved in these sectors need to discuss in detail. So they are discussing what is important to Vietnam, mainly for the defence purposes; It also has to come to the Ministry of Finance, who checks whether it’s appropriate, whether it’s within the financial requirement of Vietnam, as the new debts are mandated by the parliament under 65% of the GDP.

Let's talk on the South China Sea. As per the reports, China's coast guard vessel keeps coming within Vietnam's 200 nautical mile EEZ. Recently, Chinese violated and came at Block 06.1, an oil & gas extraction. Along, China has deployed fighter jets & bomber to the disputed Paracels islands. I would like to know the perception of Vietnam on such trespassing by China. How does Vietnam plan to counter such aggression?

Let me start by saying that yesterday in a statement, our minster mentioned that over that past one year development in the South China Sea has been complex. My first argument is, South China Sea is important. it is the main sea route for transport and second most important sea route of the world after the Mediterranean. US$ 5 trillion trade through the South China Sea lanes and Malacca Straits. So anything happening here will affect the whole world. 

Therefore we had to level up the security in the South China Sea. It is not only the issue for the littoral counties but those across the world including India. As India has more than 55% of its trade that goes through this sea route. 

This area is also rich in natural resources. Therefore many countries also pay attention to that. So for three elements trade route, natural resources and geo-politics, three factors combined makes this region very important. As it is becoming very important therefore, there are many issues happening here. But we need to make a distinction here in the several issues. The first issue validity of existing sovereignty and maritime claims. The second issue is the freedom of navigation, over-flight, peace and security. In terms of the first issue, we have two categories--the  conflicting sovereignty claims of China and Vietnam over the Paracel Islands. 

Vietnam has a sufficient historical and legal evidence for its claim over Paracel Islands. Before 1956, the Paracel Islands was of Vietnam. In 1956, as we were busy to recover the country from France, Chinese PLA sent its troops and took half of the Paracel islands.  And the second half Chinese sent the troops and used force to take it in 1974, when we were busy in fighting America. So, China took it from us, illegally, so it’s clear the whole world knows. 

So we asked China to give it back to us, so this is the issue between China and Vietnam. We don’t need any other countries to do arbitration. Now China has to give it back according to the law. 

The second issue is the Spratly Island, claimed by 6 parties but 5 countries. By 6 parties I mean- Vietnam, Philippines, Malaysia, Brunei, China and Taiwan. In terms of these claims, we believe that the 6 parties have to sit down and discuss. 

Vietnam and South China Sea

Why 6 parties are claiming that, historically what is the reality? What has history taught us about Spratly Islands? 

We have adequate historical and judicial evidence to show that the Spratly belongs to us, but recognize that other countries also stake claims. We have 200 cases of territorial dispute across the world according to the statistics of the tribunal. This is not the only dispute. In many cases there, they dispute and they bring them court, and the ruling of the court it follows. So in that matter, we believe that we can discuss, that is the first set of issue of sovereignty. 

Now second set of issue is peace, security and legal order. We need to make sure that peace and security are respected. The Law, notably UNCLOS, must be respected. And freedom of over fly and navigation is respected. The reason why our people are worried about this is because some country, number one, they tried to make artificial islands and after having the artificial  islands, they also claim the waters surrounding unlawfully. 

Number 2: They are militarizing the islands. They put equipment & weapons there. There are of 7 such artificial Islands China claimed. They have created  many more acres at the expanse of marine environment, they put artillery, arm and ammunition, and they practice military exercises. There also put fighter jets, and then they draw in other players as well. Here it becomes an arena for quick power rivalries. So the tension keeps increasing and it’s another set of concern. China claimed the waters within the 9- Dash line which was disputed by different sovereign countries. that 9-dash line is then taken to the courtroom and rejected by arbitral tribunal in July 2016.

Over the past 1 year, China keeps sending vessels in our waters. They send them because  they want to materialize the 9-dash line claim. And not only Vietnam's waters they went to those of Malaysia, Indonesia, saying that it’s a fishing ship and things like that. I had to stress on this occasion that we have very good overall relations with China and South China Sea is the remaining issue. Unlike India, we have been able to settle the land border with China.we signed the land boundaries agreements 20 - 30 years ago and we were able to demarcate it. Vietnam & china normalized normalized their relations 30 years ago. We have 4 billion visitors every year from China. China is also our biggest trade partner. 

We have provinces and their relations with China are by & large fair and good, except this part. I have to put the South China Sea in a context, otherwise you will see Vietnam & China having only one issue. That is why Vietnam termed China as a 'comprehensive strategic partnership'.

So, the trade relation is not affected at all? It is separate from this? 

No. We are only trying to do separate things-different things treated differently. We have a very strong party-to-party system. We have a very strong trade system. We have very strong trading & tourism. We still have maritime disputes in South china Sea. 

Having said that, China sometimes does attack the Vietnamese boats, very openly - disregarding this close relationship. How do you look at all this?

The issue is that it comes back to the claim of Spratlys and Paracels. Because the Paracels are part of Vietnam. Our people go there and fish. And they say that this is their island, so they chase them away. So, that sort of thing - happens here and there. 

One has to keep an objective assessment of the situation. It cannot be generalized. 

Whatever is good in our bilateral relations, we need to promote and treasure. What remains a problem for us, we need to address fairly and squarely. 

The same is for India. I think the two have very good relations. You have summit in Wuhan, Chennai, you have beautiful pictures and the two leaders speak many times. This is a good, positive development. 

Chinese Boat collides in South China Sea 

But we have finally now corrected our trade relations with border situations. Our Foreign Minister has very clearly said - we have to have a very good relation, while we do trade. It will not go vice-versa. So, it is an evolving Indian foreign policy. For Vietnam?

Correct. We heard about that policy. But, for us, we think that these two things are separate. We don't want to disrupt our relations with China. It is very traditional, very good. But we stand up to defend our legitimize rights  and tried to handle  the South China Sea  not to the point of disrupting  the entire relationship with neighbors. 

So, two things - we treasure our relationship with China but on the other hand, we are resolutely determined to protect our sovereignty and legitimize rights on the sea because China transgressed into our area-deep down as you said around Block 06.1 within Vietnam's 200- nautical mile exclusive economic zone

Recently, in July, we called the diplomatic note battle in New York. Pompeo came up with official letter of dispute China's claim. Then Australia said they reject China's claims and its narratives. 

Then Philippines, Malaysia, Vietnam, and Indonesia - all share these points. What we now focus on is that - you need to respect international law- regardless that you are big or small.

In the same context, now, you take the chairmanship from ASEAN. But I see ASEAN focusing more on the trading part and less on such issues. Do you think such disputes with China will be resolved through ASEAN? 

Of course they can and they should. Because they are a very successful regional grouping. ASEAN is not only a trade-block. It has a charter. It means we are the whole community. 

So, we have three pillars - political security pillar, economic pillar, social and cultural pillar. In terms of social - we try to become one family. In economic - we try to develop one block (free trade); in security, we are very successful, because we are the only regional grouping that can bring all the major power on the table. No single organization in the world can do that. Everyone wants to become a partner of ASEAN. During our chairmanship, we tried to manage everyone's expectations. We talked about regional security matters, among which one of the most dominant topics is the South China Sea.

Firstly, I think that ASEAN has a central role in regional affairs. Secondly, the situation of the whole South China Sea affects the whole ASEAN group. Thirdly, it’s a matter of peace and stability in the entire region and the world. ASEAN needs to come forward with that. Because they are the most successful regional grouping. They are the only one that can bring all the major power at one table. If you cannot address that, who can? 

But in ASEAN, we have a rule which is  'consensus'. We don't want the South China Sea which affects more coastal countries, to be seen by the continental countries as something which has less to do with them.

But this is not judt the  question of sovereignty. It is the question of peace and security in the region. Therefore, all the continental countries also associate with that. Hence, they should show solidarity. When it comes to the interest of certain countries, the whole group should support. It’s obvious. 

India has of course great relations with all ASEAN countries. But how does Vietnam look at the ASEAN’s outlook on various Indo-Pacific Strategy unfolding, like the QUAD to achieve security & growth in the region? Will Vietnam be keen to be part of The Quad grouping? 

There are two set of questions, we need to address in your question. The first set of question is - Indo Pacific. We call it the ASEAN Outlook on Indo-Pacific, which came out last year. It is a fundamental paper, which defined the position of ASEAN as how the  Indo Pacific would be.

We wanted to make sure that ASEAN‘s centrality is respected.

We also want international law including UNCLOS to be respected. On that basis, we welcomed Indian initiative on Indo Pacific - not to merge the two but to complement each other - with the final objective of upholding  peace, security & rule of law in the region. Thus, the first issue of Indo Pacific. 

Therefore, we understand the Indian position as communicated by PM Modi. It’s very close. We are almost the same. 

Now, when it comes to QUAD. QUAD is basically 4 major countries - U.S., Australia, Japan and India. 

We are following the evolution of QUAD very closely. We are of the view that any idea or movement that contributes to the peace and stability in the region, that contributes to upholding international law and that contributes to the peaceful settlement of dispute through dialogue - should be welcomed. 

So, in the future, Vietnam would be keen to be an observer or contributor in the QUAD - as an equal partner? 

We are talking about QUAD's involvement in supply change. Their involvement in addressing conventional, traditional security challenges. Let’s say 'if' - I put the question back to you. If the four countries of QUAD ask Vietnam to join in a fight against climate change, would Vietnam refuse? So, it very much depends on what you are working on, in order to invite Vietnam. Or if QUAD asks Vietnam for the supply of cotton, since Vietnam is a major textile producer and exporter. Should Vietnam refuse when it needs to import more cotton? Therefore, it cannot be generalized that QUAD is something threatening to somebody. 

In our perception - what is termed as Indo--Asia Pacific? So, it should be open and inclusive to everyone. We should include everyone. It should not be exclusive. That is our interest. Our interest is anyone who contributes to peace & stability and anyone who has respect for international law is welcome. we have a defence policy that we will not join military alliance in the peacetime.

That explains why it takes Vietnam so long to come to the decisions on sending its force to the peace keeping of the UN. Because we have gone through so many devastating wars, we have suffered a lot. So, we don't want to suffer more. 

Are you disappointed with India not joining RCEP for reason that we have a huge trade deficient with China, and also with ASEAN countries? What is your perspective on this?

Number 1, the decision taken by the Indian government is a sovereign decision. We respect that. If a sovereign government can make a sovereign decision, that decision is to be based on the best interest of the people and country. That's number one. We cannot complain. 

Number 2, we understand that there are issues behind that decision. We understand. We are sensitive. 

Your opposition, your reservation, India is a big country, it has many elements that need to be brought into consideration and understanding. 

The third point is that Vietnam as the Chair of ASEAN, we have been negotiating with India bilaterally and in the broader context of discussions with other 11 countries - we have created all the favourable conditions. We facilitated the whole process. 

6-7 years back, India decided to join. Once, you decided to join, you negotiating. And during the negotiation, you give concession back and forth - on both sides. 

Lastly, you said you cannot join. Of course you still know how strongly we felt about that. I don't use any objective to describe how we felt. Having worked together for 7 years, giving so many concessions back and forth. It is really a pity that anyone need to drop out.. Then I'd say that, either countries have expressed themselves.

The fourth point - that why we may not be happy - we may not feel very accomplished, as something is missing. India is a big country and important partner.

We can try to find different arrangements, because India should have been there. And the place is still there for India.

Will it pass through? Will it see the day of light this year?

Certainly. `