Vietnam -Australia bilateral ties at the crossroad of new era

The PMs and Foreign Ministers from the two countries at the signing ceremony for the Strategic Partnership (Photo: Australian Embassy in Vietnam)

New Delhi, 17 March 2018: Vietnam and Australia deepen ties with state visit of Prime Minister of Socialist Republic of Vietnam, Mr Nguyen Xuan Phuc in Australia. It takes place at the time when the two sides are celebrating the 45th anniversary since the establishment of diplomatic relations in 1973.

The visit to Australia from 14 to 17, March 2018 is along the special ASEAN-Australia Summit in Sydney from 17 to 18, March, 2018. The first Australia visit by PM Phuc since his assumption of office affirms Vietnam’s active contributions to promoting the ASEAN-Australia strategic partnership in a substantive and effective manner

On 10 November 2017, during Prime Minister Turnbull’s visit to Da Nang for the Asia-Pacific Economic Cooperation (APEC) summit, Australia and Vietnam had announced that the bilateral relationship would be elevated to a Strategic Partnership. Now subsequent visit by Vietnamese top delegations to Australia reflects Australia and Vietnam’s mature and diverse bilateral relationship, encompassing wide-ranging cooperation on political issues, trade and investment, education, defence and security, policing, immigration, and combating transnational crime, people smuggling and human trafficking.

On 15 March 2018, after meeting with Vietnamese Prime Minister Nguyen Xuan Phuc in Canberra, Australian Prime Minister Malcolm Turnbull said the elevation of Australia’s relationship with Vietnam was about the two countries working together to create a more “secure and open” region. The reference to openness has become code for an adherence to international law without impediments to free trade, particularly in the South China Sea, which China has claimed as its own.

Many analysts of geo-politics interpret this deepening of ties as Vietnam is very keen to see the reformation of the Quadrilateral Security Dialogue because the recent development of Vietnam’s relations with the four quad partners, the US, Australia, India and Japan have been quite dynamic and quite extensive in the recent few months.

As Australia, Vietnam and ASEAN are playing a vital role in the Indian Ocean-Pacific region. Australia is seeking the opportunities to expand and enhance its influence not only in economics but also in politics, security and defense in this region, due to response to new security challenges in the region, especially, the emerging and rising of China. With “Asia Pacific Policy” now known as “the Indo-Asia-Pacific Region” of the United States under President Trump, “Free and Open. Indo-Pacific Strategy” of Japan and “Act East” of India, ASEAN, including Vietnam, is continuing to be an important factor in competition between power countries.

Australia also don’t want to miss the opportunity to enhance its influence this region. Australia are also actively lobbying for the establishment of a new alliance, including: United States, Japan, Australia and India, for establishing a new balance in the Indian Ocean-Pacific region, in which ASEAN is center.

Vietnam has been in transition from a centrally-planned to a market-based economy since the late 1980s. Vietnam achieved World Trade Organization (WTO) membership in January 2007. While significant reforms remain outstanding, changes to date have resulted in economic benefits for Vietnam, particularly through increased exports and foreign direct investment. Vietnam has reduced its poverty rate from 58 per cent in 1993 to around 13.5 per cent in 2013, allowing more than 40 million people to escape poverty (World Bank).

Now Vietnam is committed to global economic integration and trade liberalisation through participation in APEC (which it hosted in 2017), the ASEAN Free Trade Area, the WTO and a growing network of free trade agreements, including the ASEAN–Australia–New Zealand FTA (AANZFTA). It is also a party to Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and in Regional Comprehensive Economic Partnership (RCEP) negotiations.

Vietnam’s General Statistics Office reported 6.8 per cent GDP growth in 2017, driven by the manufacturing and construction sector. Both domestic and foreign investment increased substantially: attracted by positive developments in foreign ownership laws and anticipated opportunities from the ASEAN Economic Community (AEC) and new free trade agreements. As reform efforts bear fruit, including full implementation of the 2014 Investment and Enterprise Laws, together with other trade and investment facilitation policies, investment should continue to rise. The Asian Development Bank forecasts growth at 6.5 per cent in 2018.

Vietnam considers Australia as strong partner for trade and investment. In the five years to 2016-17, Vietnam was one of Australia’s fastest-growing trade markets in the ASEAN region, averaging 11.9 per cent annual growth. Australia and Vietnam are parties to the Agreement Establishing the ASEAN–Australia–New Zealand Free Trade Area (AANZFTA) which entered into force on 1 January 2010. Vietnam ratified the agreement on 24 June 2009. Australia and Vietnam are both members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Total two-way trade between Australia and Vietnam in 2016-17 was valued at $11.8 billion. Vietnam is Australia’s fifteenth largest trading partner, and Australia is Vietnam’s seventh largest trading partner.

Economic, trade and investment cooperation is a bright spot in the Vietnam-Australia relationship. Australia is Vietnam’s eighth largest trading partner, with bilateral trade reaching nearly US$6.5 billion in 2017, up 22.2% against 2016. To date, Australia has invested about US$1.8 billion in 412 projects in Vietnam, ranking 20th among more than 120 countries and territories investing in Vietnam. Australia is one of the largest providers of non-refundable ODA with over AUD110 million delivered each year since 2010.

Prime Minister Nguyen Xuan Phuc official presence in Australia and attendance at the ASEAN-Australia Special Summit aims to continue the implementation of Vietnam’s foreign policy of diversification, multilateralisation, and active and proactive international integration. This also affirms that Vietnam attaches special importance to and wishes to enhance the bilateral relationship with Australia, participate in regional cooperation activities in a proactive and responsible manner, and shape the future of the ASEAN-Australia relationship for peace, stability, and development in the region and the world at large.

*Ajay Kumar is an economist and follows the emergence of Vietnam in World Economy