Israeli businesses will benefit from the Israel-Vietnam Free Trade Agreement

Economic and diplomatic relations between Vietnam and Israel are going to improve.  They are already very good but on 1-3 December, Vietnamese Deputy Prime Minister Hoang Trung Hai travelled to Tel Aviv and officially declared the start of a Free Trade Agreement (FTA) between the countries.  It is something that has been in the works for years and I think Israeli Ambassador Meirav Eilon Shahar has done a fantastic job managing relations between the two countries and demonstrating how Israel can assist Vietnam reach its Startup Nation 2025 goals and transform multiple economic sectors.

Vietnamese Approach to Israel

While in Tel Aviv, the Deputy Prime Minister affirmed that the goal of the FTA was to strengthen cooperation in economic development, trade, investment, science and technology, particularly in the fields of agriculture and human resources training.  Vietnam has the goal of bringing bilateral trade turnover to US$2 billion or more in the coming years and will create optimal condition for Israeli goods, as well as seeking ways to strengthen trade activities, market research, and business opportunities between the two countries.

The Deputy Prime Minister focused particular attention on creating favorable conditions for Israeli companies to seek business and investment opportunities in Vietnam, particularly in the fields of agro-industry, information technology, telecommunications and tourism.

Israeli Approach to Vietnam

At their meeting, Israeli Prime Minister Benjamin Netanyahu promised mutual cooperation and respect and promoted multifaceted cooperation with Vietnam.  Israel sees VIetnam as having huge potential for Israeli companies focused on agricultural breeding, post-harvest preservation technology, effective use of water resources and the transfer of operational models for scientific research.  In addition, Israeli technology and startup nation status can benefit Vietnam through production applications, business operation, climate change response and other high-tech fields.

Bilateral trade volume reached over US$1 billion in 2014 with Vietnam exporting nearly US$500 million to Israel – mainly cell phones and electronic components, seafood, coffee, textiles, and footwear – while importing machinery and equipment, hi-tech goods and fertiliser.  Israel currently has 18 FDI projects in Vietnam with total capital of US$39 million, primarily in textiles, chemicals, software and aquaculture.

According to the Israeli Embassy website,

After 23 years of diplomatic ties, Vietnam and Israel have become important partners. In terms of commerce, Israel is one of Vietnam’s major partners with bilateral trade volume swelling from US$ 375 million in 2011 to nearly US$ 1.7 billion in 2015. Prospects for co-operations have been seen in other fields such as investment, finance, services, science, technology and labor.

It has even been suggested that Vietnam is Israel’s closest ASEAN partner.  Israel has been a considerable partner in Vietnam’s agricultural and dairy industries. In what has been referred to as “dairy diplomacy,” Israeli firm SAE Afikim, for instance, has been running the $500 million project to supply 300 million liters of milk every year, produced by imported cows at 12 state-of-the-art mega dairies and a milk processing plants – all built with Israeli equipment and expertise.  It was reported that the project is the largest of its kind in the world and the biggest ever undertaken by an Israeli firm.

Israeli Technology and Expertise is Making an Impact on Vietnam

Israeli interests are now invested in the Vietnamese agricultural sector.  Vietnam imports fertilizer, machinery, equipment as well as electronic parts from Israel. There are now literally hundreds of Israeli brands, such as Iscar, that have found their way to Vietnam.  Israel is putting down roots in first-rate renewable and farming technologies and they are fundamentally invaluable to assist Vietnam in realizing its fullest agricultural capabilities and ambitions.

Israeli specialists have administered training courses pertaining to agriculture in Vietnam and it has been touted by both governments that there are plans to expand collaboration into the aquaculture segment.  People-to-people exchanges have also contributed to the strengthening of the relationship. Besides a large number of Vietnamese workers in Israel, there are frequent and recurring meetings between politicians, businessmen, and academics.

Israeli ties with Vietnam have also widened into a variety of differing realms, including education.  There are approximately 2,000 Vietnamese students on average studying agriculture in Israel each year. Meanwhile other exchanges are taking place in the realms of culture, biotech, information technology, and communications.

Israeli Ambassador Meirav Eilon Shahar’s Optimistic Vision

In a late June 2016 interview with BizLIVE, Ambassador of the State of Israel to Vietnam Meirav Eilon Shahar shared her views on future of the Vietnam-Israel relations, particularly in agriculture, trade and startup.  In particular, she said, once the FTA is agreed on Israeli private firms will increase investment in Vietnam.

Here are some of the things the Ambassador and the State of Israel have already put in place:

  • Israel is providing training to different delegations from different provinces in Vietnam.  In June, a delegation from Can Tho city studied Israeli agricultural technologies.
  • Israel has a dairy demonstration farm, created to transfer technology and know-how with 200 cows in Ho Chi Minh City that uses Israeli technologies and know-how, and is helped by an Israeli expert.
  • Israel is also cooperating with the TH Group in Nghe An province, where Israel allows private companies of the two countries to take loans. The farm has 30,000 cows with Israeli technology and know-how.
  • Israeli technologies can be seen in almost every province focused on agriculture, especially drip irrigation, which is well known for its efficiency. This technology optimizes the use of water as well as pesticide.
  • Two different Israeli companies have two projects with VinEco, a subsidiary of Vingroup (VIC), that deal with greenhouses, clean vegetables and food.
  • Israel has cooperated in high-school education with Hanoi-Amsterdam High School where they brought 20 students to Israel to learn about robotics and helped establish a robotics center in Hanoi-Amsterdam after the Israeli model.

Conclusion

Let me conclude by quoting the Ambassador at length:

The two governments are trying their best to enable both private sectors to learn and work together. I think in agriculture, much more can be done.  We don’t have high level of investment here and we could do better. There are Israelis investing in real estate, coffee production, garment, electronics, and IT components.  We are trying to encourage Israeli investment in Vietnam and give more information about opportunities here.

 

I truly believe that it will enable more trade and investment in the two countries, in all areas, and private companies will take advantage of it to increase investment in Vietnam.  What Israeli companies need is transparency and protection of intellectual property. When it comes to transparency, I don’t mean corruption, but the understanding the processes [of doing business], which sometimes are complicated.

About the Author
Jason Kassel is a Lecturer at RMIT University Vietnam (Hanoi) in the Center for Commerce & Management. He specializes in Entrepreneurship and Innovation, Vietnamese Startup Nation Goals 2025 and being a part of enhancing the Vietnamese Startup Ecosystem.
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