Asia primed to beat out US as top Israel export market

In 2014, Israel is expected to export more on an annual basis to Asia than it will to the United States, the Economy Ministry said Sunday. Asian markets accounted for 21 percent of Israeli exports in 2013, almost the same as exports to the US, as exports to the Far East trended higher over the past three years, and exports to the US trended downward.

If that pattern continues, Israeli exports to Asia will pass those to the US this year and continue to grow, with Asia accounting for a full quarter of Israeli exports by 2018, the ministry said. Israeli exports to Asia are predicted to grow 4.7% in 2014, while the ministry anticipates that exports to the US and European Union will rise just 1.3% and 1.5% respectively.

Europe remained Israel’s largest group trading partner in 2013 and seems likely to remain so for the foreseeable future. In 2013, 32% of Israeli exports went to Europe, and 28% went to the US, making that country Israel’s largest single-country trading partner.

The change in the destination of Israeli exports from West to East is due to a combination of forces, according to the Israel Export Institute. In a 2012 report on Israeli export activity, officials said that, due to the lingering effects of the recession in the US and Europe, Israeli companies developed new markets for their products and services in the Far East, particularly India and China, but also Taiwan, Singapore, South Korea and Vietnam.

Between October 2011 and January 2012, 21% of Israeli exports went to Asia, greater than the 20% that went to the US during that period, the institute reported in March 2012. Exports to the US exceeded exports to Asia on an annualized basis in both years.

If the Economy Ministry is right, 2014 will be the first time Israel sends more products to Asia than to the US on an annualized basis. Israel’s largest trading partners in Asia are China and India, respectively.

There are already dozens of Israeli companies in these countries, and some already built strong ties with the local market there. The Israel Trade Mission in China lists nearly 300 Israeli companies doing business there, and the Israel Export Institute has run numerous seminars designed to help companies enter the Chinese market.

Many Israeli companies are succeeding in the Chinese market. For example, Solbar, an Israeli company and the world’s largest maker of soy products, has a large manufacturing facility in China, where it produces mostly for the local market. Solbar’s products are popular among Chinese makers of processed vegetarian and meat products, which sell to the local market and export to other Far Eastern countries. Solbar is one of the few non-Chinese companies to have won a top award from the Chinese government for excellence in management.

India also looms large as a destination for Israeli companies, perhaps even more so than China. In a recent report, the institute said that while China’s economy was growing more quickly than India’s, there was more opportunity for growth in areas such as infrastructure, health and education in India than in China. In the coming decades, growth in India is expected significantly outpace growth in China, as India’s young population continues to grow at the same time that China’s relatively older population begins to die off.

With more trade comes more interest from investors looking to get in on the action. Israel’s Catalyst Equity Management and Hong Kong-based Everbright Limited Investments run a new $100 million fund, called Catalyst-CEL, focused on Israeli companies that have technologies, products and services that China needs, according to Shangyan Fen, head of strategic investment and development at China Everbright Ltd. and a managing director of Catalyst-CEL.

“China has a lot of needs, and we believe that Israeli companies are in a unique position to bring in many of the solutions China needs,” Fen told the Times of Israel in an exclusive interview. “We are concentrating on bringing in companies that have established solutions in areas like technology, environmental and water technology, manufacturing and even consumer needs.”

Commenting on Sunday’s news, Economy Minister Naftali Bennett said that his ministry “is prepared to assist exporters to reach their target markets. We are working to develop trade agreements with the key economies of Asia, including India, China and Vietnam, and we are beefing up our economic offices in these countries to provide more assistance to exporters.”

Watch a talk on Asian trade from the 2013 Israel-Asia Summit:

https://www.youtube.com/watch?v=bHQJEp-I4ZQ