Israel: Investing

FDI in Figures

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% in two years, and they have remained weak since then. 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. Nevertheless, Israel benefits from these assets: a strong R&D activity and a high-skilled and multilingual workforce. However, the country suffers from a particularly unstable geopolitical environment.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	10,877	4,438	5,152
FDI Stock (million USD)	64,005	69,164	77,810
Performance Index*, Ranking on 141 Economies	54	80	-
Potential Index**, Ranking on 141 Economies	27	-	-
Number of Greenfield Investments***	41	20	-
FDI Inwards (in % of GFCF****)	30.0	28.5	-
FDI Stock (in % of GDP)	31.7	36.6	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2010, in %
USA	39.7
Caiman Islands	16.7
Canada	8.4
Italy	4.7
Switzerland	2.1

Main Invested Sectors	2010, in %
Research and development	16.1
Electronic components	15.5
Financial institutions	14.6
Metallurgy, equipment and machines	8.9
IT services	6.6
Business services	6.2

Source: Central Bureau of Statistics - Last Available Data.

Form of Company Preferred By Foreign Investors: Public limited company
Form of Establishment Preferred By Foreign Investors: Subsidiary or branch.
Main Foreign Companies: Consult the "Success Stories" of foreign companies established in Israel, on the website of the Investment Promotion Agency.
Sources of Statistics: Bureau of statistics
Bank of Israel

Why You Should Choose to Invest in Israel

Strong Points: Israel is the country which invests the most in research and development (4.8% of the GDP) in the world. The country has a highly qualified manpower, particularly in engineering. The country is ranked 2^nd place in world, with regard to availability of venture capital. The government provides the necessary support to entrepreneurs.
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. Lastly, Israel suffers from great geopolitical instability due to the political environment of the region.
Government Measures to Motivate or Restrict FDI: 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.
For further information consult Invest in Israel.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Israel: Israel has signed bilateral agreements with 37 countries.
To see the list of the countries click here.
To view the agreements, click here.
Organizations Offering Their Assistance in Case of Disagreement: ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Israel is a signatory of the MIGA Convention.

Country Comparison For the Protection of Investors

	Israel	Middle East & North Africa	الولايات المتحدة	Germany
Index of Transaction Transparency*	7.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	9.0	4.6	9.0	5.0
Index of Shareholders’ Power***	9.0	3.4	9.0	5.0
Index of Investor Protection****	8.3	4.8	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: There are no restrictions on foreign investments except in the industry sectors of defence and telecommunications.
Acquisition of Holdings: Any settlement concerning mergers and acquisitions or takeovers which differ from these that Israelis should follow .
Obligation to Declare: Investment in Israel in neither subjected to authorisation nor registration except if the company wants to gain from certain advantages.

Office Real Estate and Land Ownership

The Possibility of Buying Land and Industrial and Commercial Buildings: Purchase of buildings and land is free.
Risk of Expropriation: There are very little risk of expropriation. In case of expropriation, the company will benefit from complete and non-arbitrary compensations.

Investment Aid

Forms of Aid: Assistance is going to depend on the location of the investment and the nature of the project, amount of investment and the degree of foreign participation. This will be for financial assistance, financial incentives, grants, depreciation on diminishing values or loan guarantees.
Privileged Domains: Research and development, industry, tourism, employment generation, jobs for emigrants and training.
Privileged Geographical Zones: The first zone constitutes the North of country (the most favored), Galilee, Golan, Jerusalem (for high technology industries),Beer Sheva, south of Neguev and Eilat. The second consists of Jerusalem (for all other industries), St Jean d'Acre, Kyriat Malachi, Kyriat Gat and Yokneam. The last covers the coastal plain and the center of the country.
Free Zones: Eilat in the country's south.
Organizations Which Finance: Israel Investment Center (IIC)

Office of the Chief Scientist (OCS) of the Ministry of Industry and Trade

Investment Opportunities

The Key Sectors of the National Economy

Value added sectors: high-tech, aeronautics, electronics, telecommunications, information technology, biotechnologies, etc.
Security;: biometry, surveillance and protection.

High Potential Sectors

Chemical industry, agro-technologies, semi-conductor industry, communication, environment, biotechnologies, security;.

Privatization Programs

Privatization program for ports and banks.

Tenders, Projects and Public Procurement

Israeli Government, Tenders
Tenders Info, Tenders in Israel
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Electricity
Sectors in Decline: Agriculture.

Finding Assistance For Further Information

Investment Aid Agency: Ministry of Industry and Trade
Israel's Investment Promotion Center
Other Useful Resources: Business Opportunities of the Ministry of Foreign Affairs
Doing Business Guides: The Leximundi guide « Doing Business » in Israel
Israel Investment climate - Buy USA

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