Australia/Israel & Jewish Affairs Council

Israel and Japan sign historic R&D agreement

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Japan's Minister for Economy, Trade and Industry, Toshimitsu Motegi, touched down in Israel on Sunday for an official visit, heading a delegation of senior members of his ministry as well as leading Japanese business people. The trip, which came about through an invitation from Prime Minister Netanyahu in the wake of his recent visit to Japan in May, is expected to further strengthen economic cooperation between the two countries. In an historic move, Minister Motegi and his Israeli counterpart, Minister for the Economy, Naftali Bennett, signed a research and development (R&D) collaboration agreement, which will make official a joint commitment to collaborate on R&D projects initiated by Israeli and Japanese businesses and research centres. The agreement will be put into practice by the Office of the Chief Scientist (OCS) under Israel's Ministry of Economy.

Japan and Israel commenced diplomatic relations in 1952 and since the mid 1980's have steadily expanded upon their bilateral ties. Much of this relationship has been centered on trade and economic links, as reflected in the signing of several agreements over the last few decades. In 2012, Israeli exports to Japan came in at US $953 million. Indeed, for Israel, maintaining strong trade relations with the world's second largest developed economy is a huge imperative.

Importantly, the R&D agreement is the first agreement of this sort that Japan has signed with any country. According to Globes, an online publication for Israel's business news, during the current visit both Israeli and Japanese delegations will participate in a seminar hosted by the Foreign Trade Administration in the Ministry of the Economy and the Japan External Trade Organisation (JETRO), at which, "opportunities for economic and commercial cooperation between the two countries will be presented."

The signing of the R&D collaboration agreement was spearheaded by Mr. Netanyahu during his recent visit to Japan, where he and Japan's PM, Shinzo Abe, met to discuss security and regional cooperation issues as well as matters relating to economic cooperation. After visiting the Panasonic headquarters in Tokyo on May 13 and holding several business meetings, Mr. Netanyahu issued a statement praising Israel-Japan relations as "significant and important."

Interestingly, after meeting with Panasonic corporate leaders, including Chairman of the Board, Shusaku Nagae, Mr. Netanyahu noted that Israel had much to offer Japan specifically in one niche area: cyber security. He encouraged Japanese companies in this field to follow the global trend of international corporations investing in cyber security currently being developed in Israel.

"All the systems that I saw here are computerized systems; they're all vulnerable," Netanyahu said.
The PM continued that cyber security was a "growing need and a central need for your businesses."

Speaking about the trip more generally, Israel's Prime Minister stressed the growing opportunity for cooperation between the two technologically innovative countries.

"We share a commitment to take this traditional friendship and bring it into the technological age. We think there is opportunity in economy and trade, in science and technology, in energy and agriculture, in security and counter-terrorism and of course, in the pursuit of peace and stability in our region and throughout the world."

Following the Summit Meeting held at Prime Minister Abe's Office on May 12, the two Prime Ministers released a joint statement detailing their deliberations on key areas including bilateral relations and regional affairs. Central to this, PM Netanyahu announced his decision to lift import restrictions previously applied by Israel, while suggestions to launch discussions on an "investment agreement," the fruits of which are being seen now with the R&D signing in Israel, were also raised.

Bilateral trade relations between Israel and Japan are strong despite a reported drop in Israeli exports to Japan in 2013, down 20% from the previous year. According to the Jerusalem Post, one reason for the decline is the devaluation of the Japanese yen, "which lost 25 per cent of its value in ten months." It further reports that imports to Israel of Japanese goods totaled US $1.4 billion in 2013, compared with US $2.08 billion in 2012. Nonetheless, the undertaking of the joint R&D agreement would suggest that bilateral cooperation between the two allies on a range of security, diplomatic and economic issues, is set to surge in coming years.

In a sign of the changing geopolitical landscape in the 21st century, during his recent visit to Japan Mr. Netanyahu said, "we are turning east, and we want you to turn in the direction of Israel." Indeed, Israel's increased cooperation with Japan, one of Asia's three rising super powers (along with China and India), is symptomatic of its reorientation to East Asia.

Israel's pivot to Asia is captured in MK Bennett's recent slogan, "Go East," which reflects his agenda as Economy and Commerce Minister, of fostering greater strategic and trade relations with Asia and turning away from a traditional Western European-US focus. During his visit to Australia last December, following a trip to Asia, Mr. Bennett described Asia as "the future." He also explained his decision to refocus trade offices away from Europe and into Asia.

"We need to diversify Israel's trade, go to the fastest growing markets, China and India. China was my first visit, India was my second and only then did I fly to the States. My fourth tour abroad has been to Indonesia and Australia - and deliberately so."

"I have about 40 trade offices around the world, and I'm diverting offices from Western Europe to the East. So, I closed one in Sweden and moved it to Hong Kong. I've closed one in Finland and moved it to China. I'm moving eastward. That's where I view the future."

More on this can be found in a blog post written by AIJAC's Ahron Shapiro here.

At the same time, however, Asian countries are increasingly pivoting towards Israel, noticing the strategic and economic gains to be made from strengthening ties with the burgeoning state. Most notably, the election of Prime Minister Narendra Modi in India in May seems likely to fast track security ties with Israel. While defence trade between the two amounts to approximately US $10 billion, there is also speculation that Modi will also be the first Indian Prime Minister to visit Israel.

Moreover, negotiations on an India-Israel Free Trade Agreement are said to be moving ahead. More on the status of bilateral ties in the wake of the Indian election can be found in a previous AIJAC blog post here.

During a recent visit to Tel-Aviv, which concluded on July 3, Indian Defence Secretary, Radha Krishna Mathur, met with Israeli defence officials to discuss the potential exchange of weapons and defense items on "a government-to-government basis."

According to the Independent Media Review Analysis, the potential list of weapons is set to include, among other things, a variety of missiles, a number of Sword Fish- "high-powered radars for ground tracking" and two airborne warning and control systems. India already acquired four of these in a deal with Israel in 2005.

When asked by Defence News, an online publication specialising in defence, military and government, about renewed defence cooperation between the two countries, New Delhi based defence analyst, Nitin Mehta, said:

"The move to strike government-to-government tie ups with Israel, as was done with the United States, is aimed at fast pacing the procurement of weaponry and avoiding the open competition route, which has been time consuming and laced with controversies."

During his visit to Australia in December, Bennett described Israel as a "lighthouse" due to the fact that it has a strong base but also "shines light for the benefit of others." Increasingly, Asian states are seeing the gains to be made from investing in, and collaborating with, Israel in a range of fields; technology, agriculture and rural development, military IT, cyber security, water preservation and medical innovation.
Meanwhile, Israel is directing its focus to emerging markets in Asia, with this also reinforcing diplomatic ‘friendships' with Asian states.

As of 2009 there has been a permanent Vietnamese ambassador to Israel, replacing the previous arrangement of a non-resident ambassador operating from Cairo. Moreover, MK Bennett said in an interview with Globes, that as part of the quest to "Go East" over the past six years, Israel has added an attaché in Vietnam and an office in Manila, as well as opening several new offices in China and India, while trade attaché offices in Austria, Hungary, Finland and Sweden have been shut, downsized or merged with offices in neighboring countries.

Israel's R&D agreement with Japan is a major gateway for Israeli companies to enter Japanese markets and provides opportunities to strengthen economic ties throughout the entire region. Indeed, the hope is that this platform for collaboration and joint innovation will serve as a model for cooperation with other Asian states, and importantly, will act as a springboard for moving diplomatic relations beyond trade and economics, to deeper political and diplomatic partnerships.

Gabrielle Debinski

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