Indonesia, Vietnam improve overall relationship in 2005

Veeramalla Anjaiah, The Jakarta Post, Jakarta

The year 2005 witnessed immense activity in the relations between two Southeast Asian giants -- Indonesia and Vietnam.

In May, President Susilo Bambang Yudhoyono visited Hanoi and his Vietnamese counterpart, Tran Duc Luaong, paid back the favor in April to enhance cooperation between the two countries.

With its impressive economic growth at an average of 7 percent during the last decade, Vietnam has gradually emerged as an important country in Southeast Asia both strategically and economically. It is also on the verge of becoming a new economic hub in Asia.

Indonesia, meanwhile, which lost most of its economic strength in the late 1990s due to 1997 Asian financial crisis, has made large improvements democratically, holding its first-ever direct presidential elections in 2004 and making some serious efforts to reform its investment climate.

There is also another dimension to the increased activity in the two countries' bilateral relations this year.

Both Indonesia and Vietnam are celebrating 60 years of independence in 2005 and they are also commemorating 50 years of diplomatic relations.

On Dec. 30, 1955, Vietnam and Indonesia established consular relations and subsequently upgraded them to full diplomatic status in August 1964.

"With the passage of time, the deep-rooted sympathy, friendship, mutual respect and understanding, and the desire for cooperation have always been treasured by our governments and peoples and are a dominating theme in our bilateral relations," Vietnamese Ambassador to Indonesia Nguyen Hoang An said recently in Jakarta.

Indonesia has Southeast Asia's largest economy, and Vietnam -- the third-biggest nation in the region in terms of population -- enjoy a convergence of strategic interests, which could provide the basis for building cooperation between the two countries.

This was reflected in the several high-level visits between the two countries this year and the increasing bilateral trade.

Both presidents' visits in 2005 also opened new chapters in the history of both countries' relations.

Prior to this in June 2003, during the visit of then president Megawati Soekarnoputri to Vietnam, the two countries signed various documents, including the historic Declaration on the Framework of a Friendly and Comprehensive Partnership, an Agreement on the Delimitation of the Continental Shelf and an Agreement on Visa Exemptions for Both Countries' Citizens.

Both these agreements and high-level visits have contributed to the strengthening of areas like trade, tourism and people-to- people exchange programs.

Bilateral trade, a key element in the relations, has surpassed the US$1 billion-mark for the first time in 2004, from $883.70 million in 2004, and is predicted to increase further this year.

This is in part thanks to a memorandum of understanding signed by both countries' chambers of commerce and industry in 2005.

However, Indonesia and Vietnam are not only friends, they are also fierce competitors. They produce many of the same products -- rubber, rice, coffee, tea, crude oil and manufactured goods -- and compete for foreign direct investment from the same group of investor countries.

While there is obviously little interest in trading these commodities, there is still room to trade in sectors like oil and gas, tourism, energy and mining and others.

The competition for investment has caused some disappointment on the Indonesian side, as several Japanese and South Korean companies have recently shifted their manufacturing plants from Indonesia to Vietnam, whose attractions are cheap-but-skilled labor, low production costs and less red tape.

In order to woo foreign investors, Indonesia must improve its investment climate. With its recent successes, Indonesia could also learn from Vietnam on how to attract and reap more benefits from investors.

With its 83 million population and as the second-fastest growing economy in Asia after China, Vietnam has much to offer to Indonesia.

"Thanks to the Doi Moi (Renovation) policy, from 1991 to 2000, our country doubled its GDP (Gross Domestic Product) with an annual growth rate of 7.5 percent. Since 2001, average GDP growth has been sustained at over 7 percent. In 2004, it was 7.6 percent," Hoang An said.

The Doi Moi policy's main aim is to transform Vietnam's centrally planned, closed and import-substitute economy into an open, socialist-oriented, multi-sector market and an export- oriented trader; to integrate its national economy into that of the Southeast Asia and the world. Another objective is to achieve rapid economic growth, while ensuring social progress and justice for the sake of human development; to ensure sustainable development.

On the security front, both countries have agreed to increased cooperation in the forms of official visits, exchanges of information and by sharing experiences in dealing with terrorism and transnational crimes.

Impressive bilateral progress has already been made in fisheries, science and technology, education and training, tourism, sports, health, agriculture, transport, the postal system and telecommunications, natural resources and civil aviation sectors.

Around 15,000 Indonesian tourists visited Vietnam last year, however, there is no information on how many Vietnamese visited Indonesia recently.

Several Vietnamese students have also received scholarships to study in various educational institutions in Indonesia. People-to-people exchanges, especially involving businesspeople, are also on the rise.

From the geographical as well as the ASEAN point of view, officials believe Indonesia and Vietnam need each other. Both countries' close partnerships in economic, political and defense sectors will not only strengthen ASEAN but also provide a counterbalance to China's increasing influence in the region.

Vietnam, a highly proud and nationalistic state, has the distinction of having defeated three major powers -- France, U.S. and China -- during the last century.

Susilo is expected to visit Vietnam again in 2006 to attend the APEC (Asia Pacific Economic Cooperation) Summit in Hanoi. This could give a big boost to the relations between both countries and Hoang An is optimistic about future relations.

"I do believe that these relations will be further strengthened and developed (next year) to serve our two countries' interests, as well as to contribute to the stability and development of the whole region." Hoang An said.