Other Briefings
Vietnam-Israel FTA Negotiations Complete, Trade Boost Expected
In recent years, the two-way trade between Israel and Vietnam has shown promising growth, and the upcoming Vietnam-Israel Free Trade Agreement (VIFTA) is expected to further enhance it. We take a brief look at the current state of trade between these two countries and the potential benefits of this agreement.
The year 2023 marks the 30th anniversary of the establishment of diplomatic relations between Vietnam and Israel. This coincides perfectly with the conclusion of VIFTA negotiations announced in Tel Aviv earlier this month. The trade treaty has culminated after seven years and 12 rounds of negotiations.
The VIFTA agreement represents a significant milestone in the bilateral economic relationship between Vietnam and Israel and is a natural progression of their growing economic ties.
The FTA provides a framework to enhance bilateral trade and promote cooperation in the sectors included in the agreement.
Vietnam-Israel trade overview
Israel is currently Vietnam’s fifth-largest trading partner in the Middle East and has huge export potential.
The economic and trade cooperation between Vietnam and Israel has grown steadily in recent years. Two-way trade between Vietnam and Israel reached US$2.23 billion in 2022, representing a 17.85 percent increase over the year before.
Vietnam’s exports to Israel, in particular, have grown, with around US$780 million worth of goods exported to the West Asian nation in 2022.
Israel FDI projects in Vietnam
Between January 1 and March 20 of this year, Israel invested in two new projects in Vietnam, with a total registered capital of US$60.01 million.
Israel is currently ranked 12th out of 67 countries and territories in terms of investment in Vietnam in 2023. Israeli investment projects focus on processing, manufacturing, information technology, and agriculture.
Israeli organizations and businesses are also showing interest in collaborating with local partners, particularly those involved in clean energy production, renewable energy storage technology, and solar power projects.
Vietnam also has large corporations that invest tens of millions of dollars in the research and development (R&D) market in Israel.
See also: Vietnam FDI Tracker: Latest Update March 2023
Vietnam-Israel Free Trade Agreement
The signing of the VIFTA presents an opportunity for Vietnam to expand its presence in the Middle East.
Key Israeli exports to Vietnam
| Description | US$ |
| Computers, electrical products, spare parts, and components thereof | 1,209,703,025 |
| Fertilizers | 92,803,854 |
| Machine, equipment, tools, and instruments | 59,300,809 |
| Fruits and vegetables | 3,801,791 |
Agricultural exports
Among sector beneficiaries is the spice industry. Israel and the Middle East has a high demand for spices like cinnamon, anise, and pepper. Notably, pepper production in Vietnam accounts for about 40 percent of the world’s pepper supply.
Vietnam can leverage the VIFTA to increase exports of food products and consumer goods, such as seafood, cashew nuts, coffee, soft drinks, confectionery, textiles, and shoes, to the region.
Compared to the US or the EU, Israel’s standards are not as stringent, creating a promising opportunity for Vietnamese agricultural products and, in particular, spices from Southern Vietnam.
Technological devices, parts, and components thereof
Israel is renowned for its technological innovation, especially in the fields of computers and electrical products. Numerous Israeli companies lead the way in developing new technologies, producing high-quality goods that are in demand worldwide.
Israeli computers, electrical products, spare parts, and components are well-regarded for their quality and reliability. Vietnamese companies and consumers prioritize durable and long-lasting products of exceptional quality, making Israeli products an appealing choice.
Fertilizers and other agricultural products
Israel is known for its expertise in agriculture, particularly in the area of innovative agricultural practices and technologies. This expertise has allowed Israeli companies to develop and produce high-quality fertilizers that are effective in enhancing crop yields and improving soil health.
Israeli companies produce a wide range of fertilizers, including organic and biofertilizers, as well as specialized fertilizers for different crops and soil types. This diversity in the product range makes Israeli fertilizers suitable for different applications and industries. This is highly valued by Vietnamese businesses.
Vietnam’s main exports to Israel
Vietnam exports around 70 items of all kinds to Israel each year. Its main export items include mobile phones and components, seafood products, agricultural products, footwear, and textiles.
In 2022, Vietnam exported mobile phones and components to the value of US$293.2 million, and seafood products to the value of US$80.4 million. This is alongside agricultural products, such as cashew nuts (US$59.8 million) and coffee (US$24.3 million), as well as footwear (US$92.3 million), and textiles (US$32.8 million).
Key exports from Vietnam to Israel
| Description | US$ |
| Telephones, mobile phones, and parts thereof | 293,213,492 |
| Footwear | 92,296,681 |
| Fishery products | 80,359,296 |
| Cashew nut | 59,750,487 |
| Textiles and garments | 32,769,288 |
| Coffee | 24,310,619 |
Telephones, mobile phones, and parts thereof
Vietnamese companies are able to produce mobile phones, and their parts at a lower cost than many other countries, making them a competitive option for Israelis looking for affordable electronics.
There is a growing demand for mobile phones in Israel, and Vietnamese companies have been able to capture a share of this market by offering affordable, good-quality products.
Footwear
Vietnamese companies have made significant investments in developing high-quality footwear products that meet international standards, which has helped establish a reputation for Vietnamese footwear manufacturers as reliable and trustworthy.
Vietnamese companies manufacture a wide range of footwear products, including athletic shoes, dress shoes, sandals, and more. This diverse selection of products makes it convenient for Israelis to find footwear that meets their specific needs and preferences.
Fishery products
Israel has a relatively short coastline and this means that it relies heavily on imported fish and seafood. Vietnam has a well-developed fishing industry and is able to supply Israel with a wide selection of fish and seafood products to meet its demand.
Vietnamese companies produce a wide variety of fishery products, including shrimp, squid, and fish filets. This product diversity makes it easy for Israeli businesses and consumers to find fishery products that meet their specific needs and preferences.
The future of trade between Vietnam and Israel
The future of trade between Vietnam and Israel is very promising for businesses and consumers in both countries.
Vietnam and Israel have complementary economies, with Vietnam being a major producer of agricultural and manufacturing products, while Israel is a leader in technology, R&D, and innovation.
Over the years, Vietnam and Israel have established robust bilateral relations, marked by an increasing number of high-level visits and exchanges between the two nations. The culmination of this cooperation is the VIFTA.
Overall, the future of trade between Vietnam and Israel looks bright, with significant opportunities for foreign investors to tap into these dynamic and growing markets. As both countries continue to strengthen their economic ties, businesses can expect to see continued growth and success in the years to come.
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