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Originally published:
Dec-28-2006
Table of Contents
Parliamentary democracy with three branches: Executive -- president (chief of state); prime minister (head of government); Legislative -- unicameral Knesset; Judicial -- Supreme Court. Israel does not have a constitution. However, the Declaration of Establishment (1948), the Basic Laws of the parliament (the Knesset), and the Israeli citizenship law fill many of the functions of a constitution.
Israel has a modern legal system based on a mixture of English common law, British Mandate regulations, and, in personal matters, Jewish, Christian, and Muslim legal systems. In December 1985, Israel informed the UN Secretariat that it would no longer accept compulsory International Court of Justice jurisdiction.
Courts are independent. Israeli civil procedures provide that judgments of foreign courts may be accepted and enforced by local courts. Israel has a written and consistently applied commercial law based on the British Companies Act of 1948 as amended. The body of commercial law contains standard provisions governing company bankruptcy and liquidation. Personal bankruptcy is covered by a separate bankruptcy ordinance. Monetary judgments are always awarded in local currency.
Israel is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
- Population: 6.9 million (2006)
- Population growth rate: 1.2% (2006)
- Languages: Hebrew (official), Arabic (official), English, Russian
Israel has a diversified, technologically advanced economy with substantial, but decreasing, government ownership and a strong high-tech sector. The work force is highly skilled and well educated. In recent years Israel has been a central player in the fields of technology and biotechnology. Despite the repeated regional conflicts of the past decade, in 2005 Israel was ranked in 1st place for investment in R&D as a percentage of the GDP.
Israel has limited natural resources and, thus, has intensively developed its agricultural and industrial sectors over the past 20 years. The country imports substantial quantities of grain, but is largely self-sufficient in other agricultural products.
The Israeli economy is very open: the country has signed free trade agreements with both the United States and European Union. While unemployment remains high, reaching 10.4% of the active population in 2004, the general consensus among economists is that Israel’s economy is very strong and that its growth potential is in the 4% to 5% range.
Currency: Israeli New Shekel (ILS) – 100 agorot = 1 shekel
- ILS per USD: 4.21020 (1/3/07)
- ILS per EUR: 5.57990 (1/3/07)
Leading Markets (2005): US 36.5%, Belgium 8.7%, Hong Kong 5.6%
Leading Exports-commodities: machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel
Leading Suppliers (2005): US 13.4%, Belgium 10.1%, Germany 6.4%, UK 5.7%, Switzerland 5.5%, China 4.2%
Leading Imports-commodities: raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods
Top Industries: high-technology projects (including aviation, communications, computer-aided design and manufactures, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, tobacco, caustic soda, cement, construction, plastics, chemical products, diamond cutting and polishing, metal products, textiles, and footwear.
| |
2002 |
2003 |
2004 |
2005 |
2006(e) |
2007(f) |
| GDP (USD billion) |
104.2 |
110.2 |
117.5 |
124.1 |
125.4 |
|
| GDP per capita (USD) |
17,359 |
17,298 |
17,752 |
18,464 |
18,263 |
|
| Real GDP growTD: (%) |
-0.7 |
1.3 |
4.3 |
5.2 |
4.3 |
4.2 |
| Inflation (%) |
5.6 |
0.7 |
-0.4 |
1.2 |
2.9 |
2.7 |
| Unemployment rate (%) |
10.3 |
10.7 |
10.3 |
9.1 |
8.5 |
|
| Exports (USD billions) |
27.3 |
30.2 |
36.6 |
39.7 |
42.1 |
45.5 |
| Imports (USD billions) |
31.2 |
32.3 |
39.5 |
43.8 |
47.3 |
51.3 |
| Foreign debt (% of GDP) |
66.3 |
65.3 |
64.8 |
61.2 |
59.3 |
56.0 |
| Foreign currency reserves (in monTDs of imports) |
5.9 |
6.2 |
5.5 |
5.2 |
4.9 |
4.6 |
| Exchange rates (ILS per USD) |
4.74 |
4.55 |
4.48 |
4.49 |
4.47 |
|
| Exchange rates (ILS per EUR) |
4.48 |
5.15 |
5.58 |
5.59 |
5.61 |
|
(e) estimate (f) forecast
| |
Israel |
Egypt |
Jordan |
Lebanon |
Syria |
Saudi Arabia |
| Population (millions 2006) |
6.9 |
78.9 |
5.9 |
3.9 |
18.9 |
27.0 |
| Population growth (% 2006) |
1.2 |
1.8 |
2.5 |
1.2 |
2.3 |
2.2 |
| GDP (USD billion) |
124.1 |
90.71 |
12.54 |
22.2 |
27.0 |
314.2 |
| GDP per capita (USD) |
18,464 |
1,283 |
2,163 |
5,829 |
1,447 |
13,594 |
| Real GDP growth: (%) |
5.2 |
5.3(e) |
5.0 |
0.0 |
3.5 |
6.0 |
| Inflation (%) |
1.2 |
8.8 |
3.7 |
0.3(f) |
10.0 |
1.0 |
| Unemployment rate (%) |
9.1 |
9.5 |
30.0(e04) |
18.0(e02) |
12.3(e04) |
25.0(e04) |
| Exports (USD billions) |
39.7 |
16.0(e) |
4.3(e) |
1.9(f) |
5.7(f) |
185.3(f) |
| Imports (USD billions) |
43.8 |
26.6 |
9.2(e) |
9.3(f) |
7.1(f) |
47.0(f) |
| Foreign debt (% of GDP) |
61.2 |
29.8(e) |
65.7 |
113.4(f) |
42.2(f) |
11.6(f) |
| Exchange rates (per USD) |
4.49 |
5.83 |
0.71 |
1,515.94 |
52.98 |
3.75 |
| Exchange rates (per EUR) |
5.59 |
7.27 |
0.89 |
1,888.29 |
66.01 |
4.67 |
(e) estimate (e##) estimate in year (f) forecast
Regulations: It is government policy to encourage increased competition through market liberalization and deregulation, but tax, labor, health, and safety laws can be impediments to the foreign investor. Although the current trend is towards deregulation, Israel's bureaucracy can still be difficult to navigate, especially for the foreign investor unfamiliar with the system. It is important that potential investors get approvals or other commitments made by regulatory officials in writing before proceeding, rather than relying on unofficial oral promises.
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Property Rights: Secured interests in property are recognized and enforced by the Israeli judicial system. Patent protection is provided for twenty years from filing. Both product and process patent protection for pharmaceuticals are permitted. Israel employs compulsory licensing in very limited circumstances. In 2002 the Knesset passed into law amendments to the copyright laws that increase penalties for copyright violations and simplify the ability of police and prosecutors to bring changes against persons suspected of copyright infringements. However, the new copyright amendments exclude corporate end-user piracy from criminal liability.
Conversion and Transfer Policies: Foreign-currency controls have been completely abolished, and the shekel has become freely convertible. Foreign investors can open shekel accounts that allow them to invest freely in Israeli companies and securities. These shekel accounts are fully convertible into foreign exchange.
Corruption: Bribery and other forms of corruption are illegal under several Israeli laws and Civil Service regulations.
Political Violence: Israel is a parliamentary democracy with a stable domestic environment. Nonetheless, the unresolved conflict between Israel and the Palestinians means that the potential for politically inspired violence and terrorism exists.
The business environment and style in Israel will seem familiar to American businesses, but personal relationships can play a relatively larger role than in the United States. Israeli society is what is referred to as a polychronic culture (relationship-oriented), in contrast to American, British or German culture which is monochronic (rule-oriented).
Appointments and Punctuality: Business culture is generally very modern and western and most companies follow international codes of business behavior. Punctuality is very important. In case of a delay, it is important to announce in advance that you will not be there on time.
Business Attire: Israeli businesspeople expect their business guests to be dressed well, as a sign of a serious approach and out of respect. It is always best to err on the formal and conservative side until you are familiar with how your Israeli counterparts are dressing, which will often be less formal.
Names and Titles: In business, people should be addressed by title and surname, as in the West. In writing, use their full names. For those without professional titles, use courtesy titles such as "Mr.", "Mrs.", or "Miss." However, Israelis are not formal, so don’t be offended if you are called by your first name, and do invite them to address you by your first name as well.
Introductions: Business cards are considered important in this culture and should be printed in English. As an added touch, some visitors have the reverse side printed in Hebrew.
Building Business Rapport: An Israeli Arab will do business only after a cordial personal relationship has been established. Among other Israelis there is somewhat less of an emphasis on building rapport and the more social aspects of conducting business.
Language: English is the language of Israeli business culture. Therefore, it is not necessary to translate promotional material into Hebrew.
Gifts: In many companies and organizations, gift giving and accepting is not allowed. Generally acceptable gifts are business promotional items such as pens or desk items with company logos.
Meetings and Negotiations: Middle Eastern business meetings customarily get off to a slow start, mainly because of an insistence on making prolonged inquiries regarding the health and journey of the visiting participants. Refrain from bringing up the subject of family during business meetings. Most Israelis tend to be confrontational and, at times, intensely emotional negotiators. It's also acceptable for you to exhibit similar behavior. During a meeting, the Israeli may take telephone calls and allow others into his office or the meeting room. Interruptions such as these are not considered rude, impolite or arrogant in Israeli culture. Rather, they are an indication of the informality of Israel’s society.
Acceptable Public Conduct: Israel is comprised of multi-level cultures and ethnic groups. Therefore, do not expect all businesspeople to behave under the same codes of business etiquette. In many sections of the Israeli economy, you will find the European or American behavior codes. On the other hand, you might face Middle Eastern customs in some places. Israel has a large Arabic population that behaves in traditional Middle Eastern ways. Israelis speak at a much closer distance than North Americans may be accustomed to; do not move away as this will be perceived negatively. There is also more physical contact, and conversations often involve touching. Nevertheless, women business travelers should avoid initiating physical contact of any kind, especially with Israeli men, who may misinterpret the intention.
Gesturing during conversations is acceptable, but refrain from any gesture that requires you to extend the thumb (i.e. "thumbs up"/"thumbs down" signs, etc.), and never point. Showing the bottom of your foot to an Arab is considered gravely offensive.
- Collection Experience: Fair
- Exchange Delays: 4+ months
- Preferred Credit Terms: Unconfirmed letter of credit
- Minimum Credit Terms: Unconfirmed letter of credit
Coface Country Risk Rating: A4 -- An already patchy payment record could be further worsened by a deteriorating political and economic environment. Nevertheless, the probability of a default is still acceptable.
Ducroire Delcredere Political Risk Rating: 3 – medium low risk
Ducroire Delcredere Commercial Risk Rating: B – medium risk
Doing Business in Israel 2006, BDO Ziv Haft: 164-page overview of Israel’s economy and business environment by this accounting and financial advisory firm. (PDF format)
The Federation of Israeli Chambers of Commerce: The web site includes helpful information on entering the Israeli marketplace including a searchable section on business opportunities.
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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Belgium. For further information, contact info@abc-amega.com.
This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, U.S. Commercial Service, CIA World Factbook, Federation of International Trade Associations, and Economist Country Briefings.
Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere
Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," September 2006.
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