MARKET RESEARCH COUNTRY REPORT

ISRAEL

CONTENTS

Main Industry SectorsEconomic OverviewForeign Direct Investment [FDI]FDI Government MeasuresCountry Strong PointsCountry Weak PointsForeign Trade Overview

MAIN INDUSTRY SECTORS

Israel has a diversified and technologically advanced economy. 

The agricultural sector employs 2% of the population and the country's main crops are fruits

and vegetables, cereals, wine and cattle farming. 

Israel is self-sufficient in food production, with the exception of cereals.

The fields of excellence of the Israeli industry are chemical products (Israel specializes in

generic medicines), plastics engineering and high technologies. 

The companies, particularly those of the state-of-the-art technology, have profited from the

collection of funds arriving from Wall Street and other financial centers of the world. 

As a fact, Israel classifies second, after Canada, for the number of companies registered in the

American stock market. 

The  state-of-the-art technologies (aeronautics, electronics, telecommunications, software,

bio-technologies) represent about 40% of GDP. 

Israel are diamond cutting, textile and tourism. 

This last one is always significant despite the Israeli-Palestian conflict. 

ECONOMIC OVERVIEWWhile enduring the effects of the global economic crisis, Israel has experienced in 2009

an economic slowdown phase, without having to go into recession due to a cautious

monetary and fiscal policy. 

The growth rate, which was revived in 2010, is estimated to be 4.2% and it is led by

three different drivers: a dynamic private consumption, a high level of investment in

companies and in R&D, and an increase in exports. 

The growth should slow down in 2011 due to the presumed weakness of the economies

of Israel's main trade partners which are the United States and the European Union. 

The priority of Israel is to maintain growth and control inflation on the context of the

currency appreciation (Shekel) and the rise in real estate prices. 

The government has established a pro-active policy in order to reduce the public debt

and inflation. 

Measures have been taken to reduce VAT and taxes in order to maintain domestic

consumption. 

Israel enjoys one of the highest standards of living in the area and the average salary is at

a close level to the European average. 

25% of Israelis live in poverty and inequalities are strong. 

The unemployment rate experienced a rise with the global crisis, surpassing 7%, but it

has decreased to around 6% in 2010. 

FOREIGN DIRECT INVESTMENT [FDI]

The investment system in Israel is liberal and most of the activities are open to private national and

foreign investors. 

According to a report of the Bank of Israel, the flow of foreign direct investment (FDI) into Israel

totaled USD 3.7 billion in 2009, which means a decrease of more than 50%  compared to 2007, and they

have remained weak in 2010.

This strong decline can be explained by the context of the global economy and most of all, the American

economy because Israeli start-ups depend very much on the situation of the other side of the Atlantic. 

Israel benefits from these assets: a strong R&D activity and a high-skilled and multilingual

workforce.

Israel suffers from a particularly unstable geopolitical environment.

FDI GOVERNMENT MEASURES

Foreign investment incentives, to encourage investment in Israel, are given through the

recently revised law.

The new law differs from the first one by the addition of a financial incentives plan.

COUNTRY STRONG POINTS

Israel is the country which invests the most  in research and development (4.8% of the

GDP) in the world.

Israel has a highly qualified manpower, particularly in engineering.

Israel is ranked 2nd place in world, with regard to availability of venture capital.

Israel government provides the necessary support to entrepreneurs.

COUNTRY WEAK POINTS

Corporate tax is relatively high.

The State of Israel has a significant public debt.

Manpower costs are higher than Asian or East European countries.

Israel suffers from great geopolitical instability due to the political

environment of the region.

FOREIGN TRADE OVERVIEW

The Israeli economy is extremely open. Israel's exports represent around 24% of the GNP. They

are the backbone of the country's growth.

In 2009, Israel's trade balance, which was previously in deficit, recorded a historical surplus due

to a strong drop on imports. 

The situation was again reversed in 2010, a trend that should continue in 2011. 

The main customers and suppliers of Israel are the European Union, the United States, Turkey,

Japan, India and China.

The main goods imported by the Israeli state are raw materials and half-finished products,

hydrocarbons, consumption goods (food products and drinks, electrical equipment, transport

equipment, etc.) and investment products.

The main national exports are manufactured goods which are often high technology products

(computer equipment, electronic components, aeronautics, electronic communication equipment,

verification products and pharmaceutical products).

RELATED ISRAELREPORTS

Market Opportunities of products and Services in Israel.

Export and investment sector opportunities in Israel.

Overview of Trade Regulations, Customs and Standards Israel.

Israel Investment guide for beginners.

Business and Project Financing in Israel.

Business Travel Advisory in Israel.

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