India and Vietnam to deepen ties through ‘Make in India’

‘Make in India’ aimed at turning India into a global manufacturing hub, has garnered a lot of global attention. This is proving to be the most trending initiative since its inception a year ago. Considering its impact on the air cargo industry, the 42nd annual convention of the Air Cargo Agents Association of India (ACAAI), to be held in Vietnam in December, is around the theme of “Make in India – Local is now global”. Jasleen Kaur

With an aim to explore trade opportunities, the 42nd annual convention organised by the Air Cargo Agents Association of India (ACAAI) this year will take place in Ho Chi Minh City, Vietnam from 16 -19 December. Vietnam, known for its beaches, rivers, Buddhist pagodas and bustling cities is attracting worldwide trade and investment by steady economic growth. With Ho Chi Minh City as a commercial centre, Vietnam has traditionally been home to the country’s manufacturing and trade activities. Pinched by the surging cost of labour in China, many companies are looking for low-cost alternatives thereby making Vietnam a rising manufacturing powerhouse. Considering the bilateral trade growth over the past few years between Vietnam and India, Vietnam seems to be the perfect place to host this year’s convention.

The International Air Transport Association (IATA) expects the country to be the world’s fastest-growing air cargo market over the next three years, expanding at 6.6 percent a year, since a quarter of Vietnam’s trade by value is shipped by air. The Vietnamese government last year announced an ambitious aviation master plan to have 26 airports operating by 2020. Expansion programmes are underway at Noi Bai International Airport in Hanoi and at Ho Chi Minh International Airport.

Indo-Vietnam relations have been on the upswing in recent times thanks to the current political shifts and policy developments. According to United Nations’ Asia-Pacific Trade and Investment Report 2015, exports from India and Vietnam are expected to relatively do well in 2016 as their shipments are largely directed to advanced economies in Europe and North America that are expected to expand in the coming year. Seeking cooperation and investments in sectors like textiles, agriculture, pharma and energy, Vietnam has expressed confidence in achieving the bilateral trade target of $15 billion by 2020 with India. Vietnam’s combined imports and exports with India surged to $5.6 billion in 2014 from just $1 billion in 2006. Of all ASEAN (Association of Southeast Asian Nations) countries, Vietnam was by far the star performer in quarter three of 2015, according to Dun & Bradstreet’s ASEAN Business Optimism Index. As such, India’s recent warming to Vietnam both politically and economically is a promising sign for foreign investors alike both in Asia and worldwide.

Last year, India and Vietnam signed many crucial agreements during the visit of the latter country’s Prime Minister Nguyen Tan Dung. Indian Prime Minister Narendra Modi invited the Vietnamese companies to join the accelerated economic growth programme ‘Make in India’ for reaping the benefits of this new initiative.

Modi’s pet programme ‘Make in India’ witnessed several measures being launched. A year after he first pitched the ‘Make in India’ idea to foreign investors, the prime minister met with the big names of different continents –America, Europe and Middle East to reassure investors about the steps taken to make the operating environment in India more favourable. Under the ‘Make in India’ campaign, 25 sectors were identified for focused interventions, and FDI policy was liberalised to promote investments, including 49 percent FDI in defence; 100 percent FDI in rail infra; 100 percent FDI in medical equipment; 49 per cent FDI in insurance and pension.

Almost every industry stands to benefit from the ‘Make in India’ campaign’s success. However, with the improvement in infrastructure, roads and railways, the logistics sector will benefit the most. With the announcement made by the government to build the Delhi-Mumbai Industrial Corridor, which is the largest infrastructure project India has ever undertaken cutting across the country, linking the country’s capital city Delhi with the financial capital Mumbai; one can only imagine what opportunities this project alone can do for the logistics sector in India. “While its promise of ‘world-class infrastructure’ may seem some way off in a country that has previously been slow to develop, the campaign, supported by the government, envisages 24 manufacturing cities with opportunities for investment, in particular in the hi-tech, automotive, engineering, food processing, pharmaceutical, biotech and services industries,” said Prahlad Tanwar, Director Transport and Logistics, KPMG, an audit and consulting firm.

The business outlook for the Indian manufacturing sector improved in Q2 FY 2014–15 due to greater optimism on the overall business situation, production, order books, capacity utilisation, imports, and exports. This is complimentary to the growth of Indian air cargo industry too. Samir J Shah, owner of JBS Group of Companies, said, “Manufacturing in India accounts for around 16 percent of GDP, which is relatively low compared to more than 20 percent in other emerging economies such as Brazil, China, Indonesia and Malaysia. While technology, product development and skilled labour are the pillars for the ‘Make in India’ initiative, ancillary businesses such as logistics, packaging, vendor and inventory management, as well as fulfillment solutions, need to be evolved in order to support growth.

Aman More, Senior Vice President, Kale Logistics, said, “Make in India campaign has seen active participation from all the major sectors including aviation, retail and other industries; however this needs to be matched with efficient and reliable technology, e-freight and infrastructure developments at airport and airlines’ expansions.” Pradeep Panicker, chief commercial officer (aero), Delhi International Airport Limited (DIAL), said, “Make in India campaign will certainly lead to an increase in manufacturing in India which will create a great opportunity for the air cargo sector. It will also create a demand for domestic and international cargo movement through different airlines.”

The “Make in India” initiative seems to display a happy future for many; however when related to the current scenario of the air cargo industry in India, the moot question is will the investment bring efficiency to infrastructural and technological developments taking place at airports and some flourishing sectors like pharma?
Panicker said, “The major investments required are to be in airport infrastructure. Though the government is taking initiatives for air freight stations, there is a need for the development of cargo hubs and cargo villages, which are critical for operations to run smoothly. One still has to deal with multiple layers of agency which not only increases cost of operations but also acts as a barrier to efficiency. Logistics industry is set to play a major role, and is capable of supporting growth which is anticipated with major investment been done in infrastructure of which we hear from the government now.”

Tanwar stated, “There are few things to be considered. One, we will get to see polarisation of services and service providers. Air cargo companies which have expertise and skills will be in a position to win more business. Second, it will bring standardisation and streamline some processes. Third, it will bring focus on multi-modal operations in logistics. Only then, global companies will bring global practices.”

The entire air cargo fraternity is optimistic about the ‘Make in India’ campaign. “It is certainly a major step and this will benefit the air cargo sector tremendously. Logistics in India has immense potential to grow and I am confident that such initiatives can have a huge impact resulting into massive growth for the Indian economy and the logistics industry,” said Samir J Shah.

Commenting on the escalation of this initiative, More stated, “We see ‘Make in India’ driving growth in the logistics segment and along with e-commerce this is a segment that is set to grow quite well. The various policy initiatives by the new government to attract investments and to improve industry sector performance, among others, have helped improve sentiment and expectations.”

Tanwar said, “If Prime Minister Modi’s Sagar Mala project goes according to plan, India will witness a holistic development of ports for the first time. This will lead to development of mega ports. It will also create focus on hinterland connectivity and setting up of industrial hubs which are connected to ports and have good logistics network. Therefore, overall we are quite optimistic.” Sagar Mala project is a strategic and customer-oriented initiative of the Government of India to modernise India’s ports so that port-led development can be augmented and coastlines can be developed to contribute in India’s growth.

The IATA Airline Industry Forecast 2014-2018 shows that international freight volumes are expected to increase at a rate of 4.1 percent over the next five years. As per the Air Cargo Agents Association of India (ACAAI), the current cargo growth is extremely encouraging for the Indian air cargo industry, which has grown by 12.2 percent as compared to the last financial year.

Seeing the potential, the Ministry of Civil Aviation is also strengthening the air cargo infrastructure in the country. The air cargo industry is picking ‘Make in India’ trend that is bound to boost growth in trade and commerce. “Prime Minister Modi is making efforts to increase and improve trade relations with many nations. His propaganda is clear, come to India and make in India. If speedy and timely clearance for business setup, long term ease of operations are assured, then the Indian air cargo industry will get a huge benefit,” says Shankar Iyer, Director – Cargo, South East Asia & Middle East, Swiss WorldCargo.