Israelis don’t think of Vietnam as a key business partner, but that could change with Tuesday’s signing of a free trade agreement between the two countries.
That’s because Vietnam is a member of the Association of Southeast Asian Nations, a political and economic union made up of 10 countries, including several that do not have diplomatic ties with Israel.
“ASEAN is kind of like the European Union. And Vietnam is now one of the strongest members of this organization. It’s kind of a hub,” Einat Halevy Levin, president of the Israel-Vietnam Chamber of Commerce, said. This is Israel’s first free trade deal with an ASEAN member.
“If you work in Vietnam and have a headquarters in Vietnam, it’s very easy to approach the other countries. It’s a good access point for the other ASEAN countries. Israel has no diplomatic relations with countries like Malaysia or Indonesia. You can take your product to Vietnam, process it and sell it as a Vietnamese product to other countries that can’t buy it as an Israeli product. That’s very good access to this market,” she said.
The new pact will reduce customs duties on Israeli exports, allowing it to better compete against other countries.
“Israel was left behind in many aspects of technology it wants to sell. We [will now] have better conditions to compete,” Halevy Levin said. “It was hard for Israeli technology to compete price-wise because of the custom duties that Vietnam put on Israeli products. Now the tax is reduced.”
The agreement is expected to lead to mutual tariff reductions on imported and exported products, alongside the improvement and facilitation of trade in a variety of other areas such as services, investments and standardization.
Halevy Levin said that the origins of the agreement lay in Vietnamese interest in Israeli technology.
“It started with Naftali Bennett,” who served as economy minister in 2013-2015, she said. “He was at a conference in Indonesia. The Vietnamese were eager for Israeli technology. Bennett understood there was a barrier because of the customs and tax issues and then he started the process.”
The biggest pitfall, she said, is Israeli businessmen rushing to Hanoi without taking the time to understand Vietnam’s business culture.
“There are different terms, a different pace. Israelis are very straightforward and nothing is ever official, while Vietnamese are very official and their hierarchy is different,” Halevy Levin stressed.
Negotiations took eight years, but “Vietnam wants to increase its exports to Israel. They want to strengthen trade relations. And they want less expensive access to Israeli technology.”
According to the Israeli Ministry of Economy and Industry, the main goods traded between the countries are chemicals, chemical industry products, electronic equipment, optical and medical equipment, electrical and mechanical machinery and equipment, fresh agricultural produce and food products.
Israel imports from Vietnam many consumer products such as clothing, footwear, coffee and cellphones.
The agreement requires ratification from the Israeli Knesset and Vietnam’s National Assembly before it can take effect.
A free trade agreement between Israel and South Korea went into effect in December 2022.