In the winter of 2013, Malaysian Prime Minister Najib Razak stepped across the Egyptian border at Rafah and made a rare visit by a head of government to Hamas-ruled Gaza. Razak, whose country does not have diplomatic relations with Israel, told reporters: “We believe in the struggle of the Palestinian people. They have been suppressed and oppressed for so long.”
It was crystal clear which side he was on. Yet all that time, his country was importing more and more Israeli products — but not talking about it much, certainly not in Gaza.
Official data published by the Israeli Central Bureau of Statistics (CBS) tells of a booming, but very discreet, trade relationship that is blossoming between the two countries, despite a hawkish prime minister in Jerusalem and Razak’s Islamist and proudly pro-Palestinian government in Kuala Lumpur.
Total trade between the two countries in 2013 reached $1.529 billion, almost double that of 2012, according to the CBS. That figure consists mostly of Israeli exports, at $1.457 billion. Trade continues to accelerate: Between January and July this year, Israeli exports to Malaysia soared to $884.7 million, a 27% jump over the same period last year.
By contrast, Malaysia’s foreign trade figures don’t carry any mention of Israel at all. In its annual data for 2012, for instance, trade with Israel is included in an entry for “Other Countries.”
A significant chunk of the trade boom can be traced to Kiryat Gat in Israel’s sandy southern plains, where global giant Intel has a plant churning out computer chips. It exports these to a second assembly plant in Malaysia. Every shipment is duly recorded in Israel’s foreign trade statistics but studiously ignored by Malaysia. Intel is a US-based company, but the Israeli government promised a 5% co-investment in its Kiryat Gat plant that could amount to one billion shekels ($290 million).
In addition to the officially recorded movement of goods, there is a heavy current of trade flowing beneath the surface, making it hard to calculate the value.
A raft of Israeli exporters and eager buyers in Malaysia and also neighboring Indonesia — the world’s most populous Muslim nation — are braving the political headwinds in order to do business — largely through third countries such as Singapore. Israel’s embassy there says that most trade is done this way, and in the case of Indonesia, with the embassy’s assistance. Including deals done through a third country, the estimated value of trade between Israel and Indonesia runs as high as $250 million last year, 10 times the $24.9 million of direct trade detailed in official figures.
Hush-hush trade between Israel and hostile states has been going on for decades, through conduits such as Cyprus, Turkey and Jordan, although some direct trade is registered to countries as surprising as Saudi Arabia and Yemen. As in the case of Southeast Asia, the allure of Israel’s high tech exports to businesspeople in these countries seems to outstrip the political hostility.
Israel sees commerce as a stepping stone that can lead to more co-operation with hostile states. Foreign Ministry spokesman Paul Hirschson labelled the volume of trade with Malaysia “pleasantly surprising” and that of Indonesia as “disappointingly low.”
“Israel does a lot of trade with many countries that we do not have formal diplomatic relations with and we are more than happy with this,” he said. When asked if plans were afoot for establishing more formal dialogue, he responded: “It is no secret that we have periodically engaged in dialogue with these countries. We would like nothing more than to establish diplomatic relations and representative offices.”
For the moment, initiating personal relationships amid such a political minefield is a triumph on its own.
“When I was there and I met the private businesspeople it was like normal,” says Ron Doron, an Israeli businessman with experience in Malaysia. “It’s only coming from the top that people are afraid.” The official anti-Israel sentiment is reinforced anytime Malaysians open their passport, which are all imprinted with the clear statement: “This passport is valid for all countries except Israel.”
That doesn’t stop the trade, though. Chemicals, medical equipment and pharmaceuticals are some of the most sought-after items. Those with knowledge of the trade say products are scrubbed of all insignia that could disclose their place of manufacture, to avoid hysterical scenes of the kind that erupted in Kuwait in January when rumors ran rife that Israeli potatoes had been spotted for sale at a local supermarket.
Discretion is essential, because the potential for reputation damage, and thus financial damage, to companies seen to be doing business with Israel exists as long as the Israeli-Arab conflict continues. According to Emanuel Shahaf, vice chairman of the Israel-Indonesia Chamber of Commerce, “There are two contradictory trends. The pro trend is that Indonesia demands more high-tech things… The negative trend is the political situation is not getting better (when it comes to Israel), in fact it’s getting worse.” Even so, this may not always suppress trade, according to Shahaf. “Sometimes in Indonesia … the forbidden is more exciting.”
Recent political developments are not promising, but it’s possible that even the collapse of the US-led Israeli-Palestinian peace talks in April and the renewed hostilities with Hamas, will not cause a slump in trade. Commerce continued to grow after the last flare-up in Gaza in 2012.
Political tensions mean that personal relationships are paramount when it comes to forging contacts and closing deals. “Israeli companies usually don’t have the patience for the long term,” says Doron. “That’s one of the problems for Israeli companies. In Asia, you need to look for long term. You cannot do business for the short term. It takes time to build the relationship and the confidence.”
Personal bonds have laid some ground work for Indonesians to be more receptive to Israel. Steve Stein has been coordinating humanitarian and development programs there since the early 90s and says that Indonesians see Israel in a “positive way” and “are eager to expend trade and investment.” Expanding the relationship could involve creating “a special long term Indonesia program by expending academic, agriculture for food security and medical cooperation,” says Stein. “This would expose the young generation of Indonesians to the land of Israel and its people, its academic and business community,” he wrote in an email.
Last November, Economy and Trade Minister Naftali Bennett made a visit to the Indonesian resort island of Bali, where he spoke at a World Trade Organization summit. It was the first visit of an Israeli minister to the world’s most populous Muslim nation for 13 years. However, it is understood he did not meet with any Indonesian government representatives.