Vietnam's Minister of Industry and Trade Nguyen Hong Dien (L) and his Israeli counterpart Nir Barkat sign an FTA between Vietnam and Israel, July 25, 2023. Photo courtesy of Vietnam's Ministry of Industry and Trade

Vietnam has become the first Southeast Asian country to sign a free trade agreement (FTA) with Israel, which will remove duties on at least 86% of Vietnamese products.

The Vietnam-Israel Free Trade Agreement, signed on Tuesday on the occasion of Deputy Prime Minister Tran Luu Quang officially visiting Israel, entails agreements on trade, service, investment, customs and legislation, among others, according to the Ministry of Industry and Trade.

The tax will be reduced in steps. The agreement will ultimately remove duties on at least 86% of Vietnamese products and 93% of Israeli products, according to the ministry. The two countries expect to raise bilateral trade turnover from $2.2 billion last year to $3 billion in the coming time.

The FTA would help Vietnamese businesses export goods and gain access to the goods and technology markets of Israel at more competitive costs. Vietnamese businesses would also find it easier to gain access to other markets, like the Middle East, North Africa or South Europe.

In return, Israeli businesses would be able to gain access to ASEAN and the Indo-Pacific, as well as other major economies that Vietnam also signed FTAs with.

The new FTA is the first signed by a West Asia country with Vietnam.

Israel is currently the 3rd largest export market, and 5th largest trade partner for Vietnam in West Asia. Their trade turnover of $2.2 billion last year was a 18% increase from 2021.

So far, Vietnam has signed 16 bilateral and multilateral FTAs, helping its trade turnover in 2022 to reach a record-breaking $732.5 billion, a 9.5% increase from 2021. The country is in negotiations for three more FTAs - Vietnam - UAE, Vietnam - EFTA (with Switzerland, Norway, Ireland and Liechtenstein), and the ASEAN-Canada FTA.