Israel places a high priority on expanding ties with countries around the globe, especially given growing efforts to boycott, divest from and sanction the Jewish state. One region that offers Israel enormous potential to foster greater bilateral trade and investment is East Asia—home to the world’s second and third largest economies.
Countries in this region are drawn to Israel’s innovative technological advances to meet their challenges in a variety of fields. Israel, for its part, not only views East Asia as an important destination of its technology exports, but also as a key source of human and economic capital that can help grow domestic industry.
For example, the Third China-Israel Science & Technology Innovation Investment Summit, held this past June, attracted thousands of Chinese and Israeli business leaders, investment institutions and government representatives. And in July, Japanese automobile giant Toyota’s research arm announced its first investment in an Israeli startup.
Such recent developments underscore that despite efforts to isolate the Jewish state economically, Israel continues to find new ways to combat divestment with investment.
China is the world’s second largest economy—behind the United States—and Israel’s largest Asian trading partner; approximately one third of foreign investment in Israeli technology comes from China. In 2016 alone, Chinese investment in Israel increased more than tenfold to $16.5 billion.
In March 2017, Israeli Prime Minister Benjamin Netanyahu and Chinese President Xi Jinping met in Beijing to deepen bilateral ties, especially in technology and innovation. To this end, the two countries signed more than a dozen agreements. Netanyahu and Xi also pledged to accelerate the completion of an Israel-China free trade agreement.
“We have always believed,” said Netanyahu, “that Israel can be a partner—a junior partner—but a perfect partner, for China in the development of a variety of technologies…in every area.”
Xi stated that a “comprehensive innovation partnership” between the two countries would increase bilateral cooperation and “[bring] more on-the-ground benefits to Israel and China.”
Netanyahu and Xi also discussed Israel's place in China's One Belt One Road (OBOR) initiative—China's plan to create a transportation and communication stream line that stretches from China to Europe. China sees Israel as an integral partner to help shape the OBOR initiative in the Mediterranean region due to its strategic location. In this regard, a potential railway linking Israel’s port cities of Eilat, on the Red Sea, to Ashdod on the Mediterranean may be of particular interest to China—a topic broached by Israeli officials with their Chinese counterparts.
This project would not be the first major Chinese investment in Israeli infrastructure. A Chinese government contractor built the Carmel tunnels project for more than $300 million in 2007-2010. A Chinese company is building the future Ashdod port at a cost of $1 billion. And another Chinese company will operate the new deep-sea port being built in Haifa.
China Railway Tunnel Group also won in May 2015 the $800 million bid to construct Tel Aviv's first light rail, which has positive implications for Tel Aviv's Gush Dan metro area, home to 45 percent of Israel's population of over 8 million. The first light rail line is scheduled to be completed by 2021 and is expected to lead to a 50,000-car reduction from Israel’s congested roads.
Japan, the world’s third largest economy, also views Israel as an important partner in a wide range of sectors. For example, the island nation is looking to Israel to help strengthen its cybersecurity technology ahead the 2020 Summer Olympic Games in Tokyo. Despite its small population, Israel receives 16 percent of the world’s cybersecurity investment.
In May 2017, Israeli Economy Minister Eli Cohen and his Japanese counterpart Hiroshige Seko signed two agreements that call for greater business and cybersecurity cooperation. The agreement dealing with cybersecurity calls for increased investment and collaboration between the two countries, including a joint training program, collaborative workshops and the contribution of Israeli experts to Japan’s Center of Excellence in Cyber Security.
“We need Israeli support in the cyber field ahead of the 2020 Tokyo Olympics, and we look forward to fruitful cooperation,” said Seko.
The second agreement deals more broadly with trade, with the goal of doubling bilateral trade volume. It specifically calls for increased governmental and private sector cooperation, including in fields like artificial intelligence, robotics, the Internet of Things and autonomous driving.
“I see cooperation with Japan, the third biggest economy after China and the United States, as a strategic goal for the Israeli economy,” Cohen said. “Minister Seko’s visit to Israel is a sign of Japan’s serious intentions to become closer to Israel and increase our economic relations.”
The two agreements build upon a growing trend of Japanese interest in the Israeli startup scene. In 2014, Japanese e-commerce firm Rakuten purchased the Israeli communication giant Viber for $900 million. And in 2016, Japan’s External Trade Organization in Tel Aviv reported that the number of Japanese companies that opened an Israeli subsidiary increased from 35 to 50 between 2015 and 2016.
Although Vietnam’s economy is dwarfed by those of China and Japan—it was ranked 46th largest in 2016—the Southeast Asian country has become an increasingly important destination for Israeli technology and expertise, especially in agriculture and water security. Of note, in the first quarter of 2017, Israel had 25 foreign direct investment projects in Vietnam totaling over $46 million.
In March 2017 Israeli President Reuven Rivlin traveled to Vietnam to further bilateral ties. “I believe that cooperation between Israel and Vietnam can contribute to the advancement and improvement of the lives of many,” Rivlin said. “Together we can promote food security, agricultural advancements, water technologies, education, health, hi-tech, and cyber.”
During his trip, Rivlin—along with Vietnamese Deputy Prime Minister Vuong Dinh Hue—attended the Vietnam-Israel Business Forum, hosted by the Vietnam Chamber of Commerce and Industry in collaboration with the Israeli Embassy in Vietnam. The two leaders expressed hope that Vietnam and Israel would conclude a free trade agreement in the coming year.
Also in March 2017, Israeli company Water Gen, whose innovative technology extracts clean drinking water from thin air, inked a deal with the Hanoi government to provide drinkable water to the residents of the Vietnamese capital.
“The government of Vietnam greatly esteems the technological developments in Israel, and I hope that the Israeli technology that we supply to Vietnam will significantly help to improve water conditions in the country,” said Water Gen President Mikhael Mirilashvili after the signing in Hanoi.
Agriculture has also become an important focal point of Israeli-Vietnamese cooperation. For example, of the 500 graduating students of the 2016-2017 agricultural program at Israel's Ramat Negev Desert AgroResearch Center, 350 hailed from Vietnam. The 11-month training course provides students insights into Israel’s modern agricultural, including state-of-the-art technology and business management, so that they can bring this knowledge back home to Vietnam. The Ramat Negev Desert AgroResearch Center is one of four agricultural technical institutes in Israel providing training to Vietnamese students. Such programs that foster people-to-people ties are another way Israel can help blunt efforts to isolate it internationally.
These recent developments in Israel’s ties with China, Japan and Vietnam demonstrate how Israeli technological innovations and know-how can serve as a springboard to advance relations with other countries. And while the campaign to isolate the Jewish state economically should not be underestimated, the strategy of combating divestment with investment, partnership and trade serves as a powerful tool for Israel as a growing number of countries realize the great benefit of deepening ties with the Jewish state.
Tags: Near East Report Near-East-Report