Feb 21, 2019
Israeli Ambassador: Japan/Israel commerce improving rapidly, but there is still headroom
Yaffa Ben-Ari, the outspoken Ambassador of the state of Israel to Japan, opened the “Israel Startup Seminar” at Japan’s largest law firm, Nishimura Asahi, today. Having been allocated five minutes, but “been whispered to that I can talk as long as I want”, Ben-Ari took full advantage, and provided an inspired review of the Japan/Israel commercial relationship for the best part of half an hour. Needless to say, it was worth every second.
I am paraphrasing from my notes. All mistakes are mine.
In 2013, Japan foreign direct investment (FDI) in Israel stood at USD 20m. In 2018, it was USD 6bn. Although the numbers between the Israeli and the Japanese side differ slightly, and both admit that they are hardly able to capture every deal, this implies a super-charging of the commercial relationship within five years.
Although an uptick in engagement was already seen in 2013, a true transformation of the relationship started with the trip of the Keidanren to Israel in February 2014, followed by the first visit of Prime Minister Netanyahu to Japan in May 2014. This was reciprocated by Prime Minister Abe’s visits to Israel in January 2015 and May 2018. These exchanges not only served political purpose, but also were a catalyst for trade and investment between the two countries.
Also, in February 2017, a bi-lateral deal to promote and protect direct investment was signed, coming into force in October that year. Being the first deal of that kind, it provided preferential legal treatment for future investors, opening the door for significantly increased engagement.
A ministerial-level dialogue was established in January 2019, in parallel with Minister Seko leading a delegation of approximately 200 Japanese business people from 99 companies to Israel. Many of the participants visited startup companies. The objective was to facilitate match-making for investment and collaboration.
Actually, Israel runs a trade deficit with Japan. Cars make up about USD 2bn of the 3bn in goods Japan exports to Israel currently. The Ambassador shared that she was driving a Subaru in the 80s, which at that time was the only Japanese car available — obviously, times have changed. However, exports from Israel to Japan have increased 46% over the last year, and have reached USD 900m.
The Ambassador emphasized that the relationship is not only about trade, it is also about joint ventures, collaboration and investments. Although both are trying hard, neither embassy is able to capture all activity, so there is a fair chance that the true level of activity is even higher.
There are more than 70 Israeli companies that have established operations in Japan. “This is the biggest and most interesting bridge ever, in Asia and the world”, commented the Ambassador. In Israel, Japan is perceived as one of the smartest countries in Asia and the world, so doing business with Japan is truly exciting.
With regards to the actual FDI statistics, the USA are dominant in Israel with a 35% share. Then four countries make up 12%: China (3.5%), Germany & the United Kingdom (3% each), and Japan (2.5%). So in a very short time, Japan has become extremely competitive in this market.
Israel has been looking East for the better part of 10 years. The Ambassador herself has had prior assignments in Korea and China. “Working in Asia is a major strategic decision” Israel has made. Looking at the USA and EU as the major trade partners for both countries, it is interesting that both Japan and Israel have significant trade deals in place with both counterparts, but not among themselves. This would be something to strive for, according to the Ambassador.
There is also significant academic co-operation, and the sciences extend into industrial co-operation as well. The focus here are cyber security, life sciences, and stem cells. Again, the future is not only driven by economic/commercial relationships, but also by the relationships between the people in both countries.
The Ambassador stressed once more that developing a partnership is exciting. Israel is a country of only 9m people, with no natural resources but their people, which is very similar to Japan. But both countries are different in spirit — while Israel is vibrant & energetic, Japan is thoughtful & deliberate. Both complement each other.
The last five years have seen tremendous growth in commercial terms, but there is still headroom. The Ambassador wished for direct flights between both countries to facilitate this. [Author’s note: when a trade delegation from San Diego visited Tokyo last year, they could not state often enough how the start of a Japan Airlines direct flight between Tokyo and San Diego changed the Japanese FDI in the region, so these things do matter.]
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