The Economies of Vietnam and Israel Complement Each Other

Minister of Industry and Trade of Vietnam Nguyen Hong Dien.

The economies of Vietnam and Israel complement each other, with a basic structure of goods and imports that do not directly compete with each other. This provides a favorable basis for Vietnam to promote the export of its strengths to Israel, while also having the opportunity to access Israel's high-tech products, contributing to reducing production and business costs, and enhancing the competitiveness of Vietnamese goods.

On the Israeli side, there is the potential to enhance cooperation with Vietnam to ensure food security and explore stable supply sources for food products, seafood, processed food, fruits, and consumer goods.

The 30 years of friendly cooperation between Vietnam and Israel have seen significant progress, creating momentum for economic and trade cooperation. This has made Vietnam the second-largest importing partner of Israel in the ASEAN region, while Israel is also one of Vietnam's top trading and investment partners in the West Asian region, viewed as a large and potential market for Vietnamese goods in this area. The economies of Vietnam and Israel complement each other, with a basic structure of goods and imports that do not directly compete, as previously mentioned.

Regarding industrial and investment cooperation between the two sides, it is still relatively modest. However, we believe these are areas with great long-term potential for cooperation because Israel has strengths in science, technology, high-tech, and information technology, while Vietnam is focusing on and prioritizing the development of foundational industries such as electronics, chemicals, energy, and industrial materials. Especially in high-tech, biotechnology, and information technology, there is a high demand for electronic products and high-tech components (memory cards, motherboards), as well as various machinery, equipment, and spare parts for domestic industrial production.

In particular, achieving agreements on all chapters of the Vietnam-Israel Free Trade Agreement (VIFTA) (especially the strong commitments of both sides to increase the trade liberalization rate) and agreements on electronic visas for citizens of each country, as well as opening direct flights from Vietnam to Israel, will be positive drivers for promoting economic, trade, and investment cooperation between the two sides to develop strongly, deeper, more effective, and sustainable.

Minister, can you tell us about the cooperation and trade plans between the two countries in the coming time?

After the VIFTA was signed, the Ministry of Industry and Trade is closely coordinating with relevant ministries and agencies to complete the internal procedures as stipulated so that the Agreement can take effect soon. Both Vietnam and Israel have set the goal of completing internal procedures in 2023 for the Agreement to come into effect in early 2024. In addition, the two countries have also discussed quickly seizing opportunities from VIFTA to enhance bilateral trade and investment cooperation. In the coming time, both sides will organize exchanges of large and strong business delegations to promote trade opportunities.

Minister, how do you evaluate the benefits of Vietnam-Israel relations after signing the Free Trade Agreement?

When the VIFTA is implemented, in terms of trade in goods and general imports and exports, Israel commits to eliminate tariffs immediately when the Agreement takes effect for 66.3% of tariff lines and commits to eliminate tariffs after a certain period (with a schedule of 3-5-7- 10 years) for 26.4% of tariff lines, raising the overall liberalization rate to 92.7% by the end of Israel's commitment schedule.

Especially, most of the agricultural and aquatic products that Vietnam exports to Israel receive preferential tariffs, and some agricultural products (such as chicken eggs, meat, potatoes, carrots, cauliflower, mushrooms, honey, tuna, etc) enjoy a tariff quota with a tariff rate of 0%. In addition, tariffs on products with large export turnover to Israel (over 1 million USD) will be eliminated with a maximum schedule of 10 years.

Vietnam also commits to eliminate tariffs immediately when the Agreement takes effect for 34.66% of tariff lines and after a schedule of 3-5-7-10 years for 51.16% of tariff lines, raising the overall liberalization rate to 85.8% by the end of Vietnam's commitment schedule. Therefore, Vietnam's imports and exports will benefit significantly from tariff reductions when the VIFTA takes effect, and it is expected that bilateral trade will reach 5 billion USD when this Agreement is implemented. In addition, VIFTA includes commitments related to trade in services and investment, creating even more favorable conditions for Vietnamese and Israeli businesses to increase their investments in each other's markets.

Minister, in the coming time, which sectors should Vietnamese businesses focus on for cooperation with Israel?

Many of Vietnam's strengths can be exported to Israel without facing much competition from Israeli domestic products. On the other hand, the products that Israel is interested in importing are also areas where Vietnam has strengths, and vice versa. This advantage will be further strengthened when businesses are aware of the advantages that the VIFTA brings, such as tariff benefits, services, and investment.

In recent times, information and trade connections between Vietnam and Israel have been actively promoted. In the coming time, the Ministry of Industry and Trade will continue to work closely with Israel to quickly apply and implement the VIFTA from early 2024.

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