Israeli Economy Minister Nir Barkat has embarked on an official visit to Vietnam, accompanied by a delegation of 21 Israeli companies. The trip follows the recent signing of a free trade agreement between Israel and Vietnam, marking the third such pact with an Asian nation in recent years, following agreements with South Korea and the United Arab Emirates.
The visit, coinciding with the 30th anniversary of diplomatic relations between the two countries, is anticipated to strengthen economic links between the two countries and enhance Israel's presence in the Asian market.
During the visit, Barkat and the delegation will engage in various meetings, beginning with discussions with the Communist Party chairman of Ho Chi Minh City, a pivotal commercial hub.
The group will also tour a notable technology park and inaugurate an Israeli-owned medical center, before attending the Israel-Vietnam business forum, which facilitates dialogue between Israeli and local companies. The delegation will subsequently make its way to Hanoi, where another business forum will take place, enabling interactions between Israeli delegates and local enterprises.
Barkat highlighted the significance of the visit, stating, "This is an important and historic visit that opens the gates of Asia to the State of Israel and will strengthen our ties in the region. The importance of Asia as an export market for Israel is increasing over the years.”
He noted that, alongside Singapore, “Vietnam consistently demonstrates a capacity for economic growth along with entrepreneurship and local growth capacity that will grow even more as a result of the free trade agreement we recently signed thanks to collaborations with Israeli companies,” concluding that this trip, as well as an upcoming visit to Singapore, present a beneficial opportunity to strengthen economic relations within the area.
Israel and Vietnam: a worthwhile match to make
The trade relationship between Israel and Vietnam presents a wealth of opportunities for both nations to leverage each other's strengths, contribute to economic growth, and foster collaboration in various sectors for mutual benefit.
Expanding trade ties with Vietnam provides Israel with further access to a rapidly growing and diverse market in Southeast Asia. This diversification is crucial for Israel's export-oriented economy, as it reduces dependence on a limited number of trading partners.
Furthermore, as trade volumes increase Israeli companies may establish a stronger presence in Vietnam, leading to job creation and economic growth in both countries. This could encompass various sectors, including manufacturing, services, and technology.
Can Vietnam mitigate judicial reform turbulence?
Improved economic ties may attract foreign direct investment from both sides, facilitating the exchange of capital and fostering entrepreneurial ventures. Such a development could stand to insulate Israel against the mounting negative effects that its economy is currently undergoing.
Recent warnings from financial institutions including Citi, Moody's, Morgan Stanley, and S&P have highlighted growing concerns about the impact of judicial reform on Israel's economic stability. These concerns, and those of countless economists, experts and executives throughout Israel have led to increased uncertainty in the economic outlook, which has in turn contributed to a turbulent period in Israel’s economy.
According to Start-Up Nation Central (SNC), private funding for Israeli hi-tech companies has declined by 29% in the first half of 2023, reaching a five-year low. This is due to a decline in early-stage funding rounds, particularly those under $20 million, as well as a decrease in investor participation. Foreign investors are now leading funding rounds for the first time in a decade. The market for initial public offerings (IPOs) and mergers and acquisitions (M&As) in Israel has also seen significant decreases.
In an earlier report, SNC noted that 68% of Israeli startups have taken steps to mitigate risk, such as relocating headquarters, withdrawing cash reserves, and restructuring staff. 22% have diversified cash holdings outside of Israel, and 8% have already relocated their headquarters. 69% of investors expect portfolio companies to relocate, and 67% of investors are considering investments abroad. 12% of Israeli investors expect a local venture capital market recovery in the next six months, while 65% are optimistic about the US market. 78% of company executives and 84% of investors believe the judicial reform has negatively affected their businesses. 80% of investors believe diplomatic tensions between Israel and the United States could adversely influence Israel's tech industry.
"The situation is becoming increasingly worrisome as we observe companies and investors taking active steps to move their activities away from Israel. This trend has intensified notably over the past three months," said SNC CEO Avi Hasson in July. "Steps such as registering a company abroad or launching new start-ups outside Israel may have long-term implications that could be difficult to reverse."