Vietnam seeks alternate use of India-granted line of credit

KV Prasad
Tribune News Service
New Delhi, November 18

In pursuance of India’s ‘Act East’ policy, President Ram Nath Kovind on Sunday reached Vietnam, the visit aimed at strengthening comprehensive strategic partnership between the two countries at a time when Hanoi seeks to utilise New Delhi’s grant of ‘line of credit’ for developmental purpose instead of defence.

President Kovind will, on his first visit to a Southeast Asian nation, interact with President Nguyen Phu Trong, who assumed office last month after the death of Tran Dai Quang. President Trong is also the general secretary of the Communist Party of Vietnam.

During a visit by then President Quang this March, both sides urged for early signing of a framework agreement on the $500 million credit, with diplomatic sources suggesting Vietnam wanted to use it for developing infrastructure.

Sources said at the heart of the problem is the 65 per cent public debt ceiling to GDP ratio by Vietnamese Parliament and current levels are just one percentage point short of the cap. In order to ensure that the spending does not breach the ceiling level, a number of measures have been put in place into the system that stretches decision-making process from earlier few months to a few years, sources familiar with bilateral relations told The Tribune.

India and Vietnam have a robust defence cooperation that includes regular exchanges of senior-level defence delegations, cooperation between the two armed forces, port calls of naval and coast guard ship, capacity building projects, procurement of equipment, transfer of technology and cooperation in regional fora. 

Shift from Defence to infrastructure

After its move to acquire high-speed patrol vessels for Vietnam Border Guards out of the $100 million line of credit provided by New Delhi, Vietnam has been unable to make use of another $500 million for defence industry even two years after it was announced. Now it wants to use the funds for infrastructure.