And in an interview with Fairfax Media ahead of the special ASEAN-Australia leaders summit this weekend, Mr Phuc has called for all nations to respect the rule of law in the South China Sea.

Mr Phuc also said there was "vast room" to improve cooperation and two-way trade, worth $11.8 billion in 2016-17, between Australia and Vietnam.

Australia and Vietnam will formally sign a strategic partnership agreement this week, which will upgrade diplomatic, defence and trade ties.

In a written interview with Mr Phuc, the prime minister said the two nations would expand cooperation in areas including "search and rescue, counter-terrorism, anti-human trafficking, cyber security and water security" and also support each other in "regional cooperation mechanisms on national defense and security".

Fairfax Media asked Mr Phuc what Australia and ASEAN, including Vietnam, could do to resolve tensions in the South China Sea and whether his nation would consider cooperating on freedom of navigation operations with other countries.

"Maintaining peace, stability, security, safety, and freedom of navigation and overflight in the East Sea [the South China Sea] where global major shipping routes pass through is in the common interest and a shared goal of all countries," he said.

"It is important that countries make active contributions to this shared goal, refrain from actions that may cause or escalate tension, resolve differences through dialogue and by peaceful means on the basis of international law.

"Both Australia and ASEAN have important positions and roles in the region."

The United States undertakes freedom of navigation exercises in the South China Sea within the 12 nautical mile zone of militarised, man-made islands China has built to signal it does not accept the legitimacy of Beijing's claim to the waters around those islands.

The Turnbull government has resisted calls for Australia to undertake a navigation exercise and Foreign Minister Julie Bishop has suggested such a move would ratchet up tensions in the region. She has repeatedly stated Australia does not take sides in the dispute over the islands between claimant states.

Tensions between Vietnam and China centre on the two nations' competing claims to the Spratlys and Paracel Islands in the South China Sea.

China and the ASEAN bloc of nations have begun negotiations over a code of conduct in the South China Sea to de-escalate tensions in the region, rather than explicitly resolve sovereignty disputes.

Mr Phuc said an effective code of conduct would maintain peace and security and, in a carefully-worded message to China, added: "in the meantime, it is important that all countries continue to uphold the rule of law, exercise restraint and refrain from the use of force or the threat of force".

China claims almost all of the South China Sea as its own. It is also in conflict with Malaysia, the Philippines, Brunei, Taiwan and Indonesia over islands, maritime boundaries and access to oil and gas resources in the region.

University of New South Wales emeritus professor Carl Thayer said Vietnam was unlikely to join military patrols but that the country wanted greater defence and economic cooperation with Australia and the region more broadly.

"They want as many countries with naval ships sailing through the South China Sea as possible and maintaining that [strategic] balance, but they are not going to sign on to an anti-China coalition," he said.

Professor Thayer added Vietnam had quietly supported the revived "quad", or quadrilateral security dialogue between the US, Australia, Japan and India and backed a free and open Indo-Pacific region.

The Vietnamese prime minister will arrive in Australia on Wednesday ahead of a special ASEAN-Australia leaders summit in Sydney over the weekend. He will meet Prime Minister Malcolm Turnbull, Governor-General Peter Cosgrove, and attend business and innovation summits.

Last week the USS Vinson made a port call in Da Nang, the first by an American aircraft carrier to a Vietnamese city since the end of the war in 1975, and the visit has been interpreted as a sign Vietnam wants to balance Beijing's increasingly assertive presence in the region.

The upgrade in ties between Australia and Vietnam comes as the economic and security priorities of the two nations grow closer, and as trade in commodities and services such as education, tourism, resources and wheat continues to grow.

Both nations have signed up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [CPTPP], the successor to the Trans-Pacific Partnership free trade deal which the United States has walked away from but 11 other nations have signed up to.

Mr Phuc said there were "immense opportunities for Australian businesses to invest in Vietnam".