As President Ram Nath Kovind visits Vietnam, the government is hoping to operationalise a $500 million line of credit (LC) to Hanoi to boost defence engagement with the southeast Asian nation at the heart of India’s Act East Policy.
PM Narendra Modi had announced the LC more than two years ago and despite the focus on defence and security ties in India-Vietnam Comprehensive Strategic Partnership, the two countries have not yet been able to sign the framework agreement required to implement it.
This is all the more puzzling as Vietnam has in the recent past acknowledged defence cooperation as the central pillar of its relationship with India and has encouraged exchange of senior-level delegations, consultation mechanisms and stronger cooperation with Indian armed forces.
While announcing the LC during his visit to Vietnam in September, 2016, Modi was said to have reaffirmed India’s “significant” interest in promoting defence industry cooperation between the two sides. He had also announced a grant of $5 million for the construction of an Army Software Park at the Telecommunications University in Nha Trang.
Official sources here said though that the delay in the implementation of the LC probably had something to do with Vietnam stepping up scrutiny of agreements for foreign loans. Vietnam doesn’t want foreign debt to exceed 50 per cent of its GDP and public debt 65 per cent of GDP.
There might be other issues involved here too as diplomatic sources told TOI that Vietnam would not mind utilizing the LC in other areas like development of public infrastructure. India though, they said, has told Hanoi that the LC is meant only for, as Modi had put it, deeper defence cooperation.
The government wants Vietnam to use the LC for defence procurement from India. There’s already a template for that in the form of a US $ 100 million LC which India had earlier extended to Vietnam and which Hanoi used to sign a contract with India for purchase of offshore high-speed patrol boats from India.
The India-Vietnam joint statement issued after the visit to India by then President Tran Dai Quang in March, 2018, urged early signing of a framework agreement for the $500 million LC for defence industry only.
Sources here ruled out suggestions that Vietnam was delaying the agreement with India for fear of upsetting China, its giant northern neighbour. Significantly though, on the Quad mechanism, Vietnam has made it clear that it won’t support any “ganging up” exercise against any country. It won’t support any military alliance and will also avoid supporting any joint military exercise by such an alliance, let alone participating in it. Bilaterally, however, it agrees with India that it is essential to strengthen cooperation in maritime domain, including anti-piracy, security of sea lanes and exchange of white shipping information.
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