Israel

Bureau of Economic and Business Affairs
Report
June 29, 2017

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Executive SummaryShare    

Israel has an entrepreneurial spirit and a creative, highly-educated, skilled, and diverse workforce. Israel is a leader in innovation in a variety of sectors, and many Israeli start-ups find good partners in American companies. Israel, popularly known as the “start-up nation,” invests heavily in education and scientific research, and many leading multinational companies have established research and development (R&D) centers here. U.S. firms account for nearly two-thirds of the more than 300 foreign-invested research and development centers in Israel. Israeli firms represent the second-largest source of foreign listings on the NASDAQ. Various Israeli Government agencies, led by the newly established Israel Innovation Authority, fund incubators for early stage technology start-ups, and Israel provides extensive support for new ideas and technologies and also seeks to develop more traditional industries. Private venture capital funds have flourished in Israel in recent years.

The fundamentals of the Israeli economy are strong, and the economy proved flexible and adaptable through the worldwide financial crisis. With low inflation, relatively low unemployment, and fiscal deficits that have usually met targets, Israeli Government economic policies are considered by most analysts as generally sound and supportive of growth. Israel seeks to provide supportive conditions for companies looking to invest in Israel, through laws that encourage capital and industrial R&D investment. Incentives and benefits include grants, reduced tax rates, tax exemptions, and other tax-related benefits.

The U.S.-Israeli bilateral economic and commercial relationship is strong, anchored by two-way goods which reached $35 billion in 2016, according to the U.S. Census Bureau, and extensive commercial ties, particularly in high tech and research and development. Israel invested close to $24 billion in 2016 in the United States, nearly triple what it was a decade ago according to the U.S. Census Bureau. This year marks the 32nd anniversary of the U.S.-Israel Free Trade Agreement (FTA), the United States’ first ever FTA. Since the signing of the FTA, the Israeli economy has undergone a dramatic transformation, moving from a protected, low-end manufacturing and agriculture-led economy to one that is diverse, open, and led by a cutting edge high-technology sector.

The Government generally continues to take actions to remove trade barriers and encourage capital investment, including foreign investment. However, several constraints exist in the economy that have contributed significantly to growing public concerns over the high cost of living and the lack of competition in key sectors. With regards to trade, the Israeli government often adopts restrictive policies , usually in favor of domestic producers. These policies often limit competition, resulting in the concentration of market share to a handful of major companies in key sectors.

Table 1

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2016

28 of 175

http://www.transparency.org/
research/cpi/overview

World Bank’s Doing Business Report “Ease of Doing Business”

2017

52 of 190

doingbusiness.org/rankings

Global Innovation Index

2016

21 of 128

https://www.globalinnovationindex.org/
analysis-indicator

U.S. FDI in partner country ($B USD, stock positions)

2015

10, 300

http://www.bea.gov/
international/factsheet/

World Bank GNI per capita

2015

35,770

http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Policies Towards Foreign Direct Investment

Israel is open to foreign investment, and the government actively encourages and supports the inflow of foreign capital. The Investment Promotion Center of the Ministry of Economy seeks to attract potential investors to Israel. The Center stresses Israel’s developed infrastructure, educated work force, open economy, and ties to the United States and Europe as Israel’s main competitive advantages. The Center provides additional information about the various government-backed incentives available to potential investors in Israel.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Israeli legal system protects the right of both foreign and domestic entities to establish and own business enterprises, as well as the right to engage in remunerative activity. Private enterprises are free to establish, acquire, and dispose of interests in business enterprises. As part of its current privatization efforts, the Israeli government actively encourages foreign investment in privatizing government-owned entities.

It is government policy to equalize competition between private and public enterprises, although the existence of monopolies and oligopolies in several sectors stifles competition. In the case of designated monopolies, defined as entities that supply more than 50% of the market, the government controls prices.

Investments in regulated industries (e.g. banking, insurance) require prior government approval. Investments in certain sectors may require a government license. Other regulations may apply, usually on a national treatment basis.

Other Investment Policy Reviews
The World Trade Organization conducted its fourth and latest trade policy review of Israel in November 2012. In the past three years the Israeli Government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

The Israeli government is fairly open and receptive to companies wishing to register businesses in Israel. Israel ranked 41st in the “Starting a Business” category of the World Bank’s 2017 Doing Business Report, jumping nine places from 2016. According to the World Bank, Israeli reforms currently underway are making it easier to do business in Israel but some challenges remain.

The business registration process in Israel is fairly clear and straightforward. Four procedures are required to register a standard private limited company and can take on average 12 days to complete according to the Ministry of Finance. The foreign investor must obtain company registration documents through a recognized attorney with the Ministry of Justice and obtain a tax identification number for company taxation and for value added taxes (VAT) from the Ministry of Finance. The cost to register a company averages around $1,000 depending on attorney and legal fees.

The Israeli Ministry of Economy and Industry’s “Invest in Israel” website provides useful information for companies interested in starting a business or investing in Israel. The website is: http://www.investinisrael.gov.il/join_the_best.html

Outward Investment

In general, there are no restrictions on domestic investors from investing abroad. However, investing abroad may be restricted on national security grounds or in certain countries or sectors deemed by the Israeli government to not be in the national interest.

2. Bilateral Investment Agreements and Taxation TreatiesShare    

Israel has protection of investment agreements with Albania, Argentina, Armenia, Azerbaijan, Belarus, Bulgaria (amending protocol), China, Croatia, Cyprus, Czech Republic, El Salvador, Estonia, Ethiopia, Georgia, Germany, Guatemala, Hungary (treaty terminated in 2007, existing investments are protected for ten years after termination), India, Kazakhstan, Latvia, Lithuania, Macedonia, FYR initialed, Moldova, Mongolia, Montenegro, Poland, Romania (amending protocol), Serbia, Slovakia, Slovenia (terminated 2007, existing investments protected for ten years after termination), South Africa (pending ratification, Israel ratified the agreement in March 2009), South Korea, Thailand, Turkey, Turkmenistan, Ukraine, Uruguay, and Uzbekistan.

The U.S.-Israel FTA was signed in 1985. A complete list of Israel’s BITs and FTAs can be found at:

http://www.financeisrael.mof.gov.il/FinanceIsrael/Pages/en/EconomicData/InternationalAgreements.aspx

Israel has a bilateral tax treaty with United States. The Income Tax Treaty and the Technical Explanation of the Treaty were signed in 1975. A complete list of Israel’s international tax agreements and treaties can be found at:

http://www.financeisrael.mof.gov.il/FinanceIsrael/pages/En/EconomicData/DoubleTaXPreventionAgreements.aspx

3. Legal RegimeShare    

Transparency of the Regulatory System

Israel promotes open governance and has joined the International Open Government Partnership. The government’s policy is to pursue the goals of transparency and active reporting to the public, public participation, and accountability.

Israel’s regulatory system is transparent. Ministries and regulatory agencies give notice of proposed regulations to the public on a government web site: http://www.knesset.gov.il. The text of proposed regulations is also published on this web site. The government requests comments from the general public about proposed regulations.

Israel is a signatory to the WTO Agreement on Government Procurement (GPA), which covers most Israeli government entities and government-owned corporations. Most of the country’s open international public tenders are published in the local press. However, government-owned corporations make extensive use of selective tendering procedures. In addition, the lack of transparency in the public procurement process discourages U.S. companies from participating in major projects and disadvantages those that choose to compete. Enforcement of the public procurement laws and regulations is not consistent.

Israel is a member of UNCTAD’s international network of transparent investment procedures. (http://unctad.org/en/pages/home.aspx). Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.

International Regulatory Considerations

Israel is not a member of any major economic bloc but maintains strong economic relations with other economic blocs. For example, the EU is Israel’s largest trade partner and this partnership is codified in their bilateral free trade agreement, the EU-Israel Association Agreement, signed in 2000. Israel has a bilateral agreement with four members of the European Free Trade Association Agreement, a group of non-EU European countries. In recent years, Israel has actively sought bilateral trade agreements with its international trade partners throughout the world principally in Asia and in the Americas.

Israeli regulatory bodies, such as the Ministry of Economy (Standards Institute of Israel), Ministry of Health (Food Control Services), and the Ministry of Agriculture (Veterinary Services and the Plant Protection Service), often adopt standards developed by European standards organizations rather than international standards, which results in the market exclusion of certain U.S. products and added costs to U.S. exports to Israel.

Israel became a WTO member in 1995. The Ministry of Economy and Industry Standardization Administration are responsible for notifying the WTO Committee on Technical Barriers to Trade, and they regularly do so.

Legal System and Judicial Independence

Israel has a modern legal system based on British common law that provides effective means for enforcing property and contractual rights. This system operates inside Green Line Israel (i.e., within Israel’s pre-1967 borders), but not in the Occupied Territories. Courts are independent, though businesses complain about the length of time required to obtain judgments. 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 Supreme Court is an appellate court which also functions as the High Court of Justice. Israel does not employ a jury system. Other tribunals have been established to regulate specific issues and disputes in a specific area of law including labor courts, antitrust issues, and intellectual property related issues.

Laws and Regulations on Foreign Direct Investment

There are few restrictions on foreign investors, except for parts of defense or other industries closed to outside investors on national security grounds. Foreign investors are welcome to participate in Israel's privatization program.

Israeli courts exercise authority in cases within the jurisdiction of Israel. However, if an agreement between involved parties contains an exclusively foreign jurisdiction, the Israeli courts will generally decline to exercise their authority.

Israel’s Ministry of Economy sponsors the web site “Invest in Israel” at www.investinisrael.gov.il.

The Investment Promotion Center of the Ministry of Economy seeks to encourage investment in Israel. The Center stresses Israel’s developed infrastructure, educated work force, open economy, and ties to the United States and Europe, and additionally provides information about investment incentives available in Israel.

Competition and Anti-Trust Laws

Israel adopted its comprehensive competition law in 1988. The Israel Antitrust Authority (IAA) was created in 1994 to enforce the competition law. After a protracted public debate and the High Court’s intervention in the Noble Energy case centered on the IAA’s finding that Noble and its Israel partner’s original investment plan was anti-competitive, the Israeli Cabinet agreed on a revised Gas Framework in May 2016 paving the way for Noble Energy’s development of the Leviathan gas field.

Expropriation and Compensation

There have been no expropriations of U.S.-owned businesses in Israel in the recent past. Israeli law requires adequate payment, with interest from the day of expropriation until final payment, in cases of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

The Israeli government accepts binding international arbitration of investment disputes between foreign investors and the state. 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. Israel’s arbitration law is governed and enforced primarily via the Arbitration Law of 1968, which was most recently amended by the Israeli Knesset in 2008.

Investor-State Dispute Settlement

Israel’s arbitration law is governed primarily by the Arbitration Law of 1968. The Arbitration Law governs both domestic and international arbitration proceedings. The law was most recently amended by the Israeli Knesset in 2008. Israel ratified the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 in 1959. There is no known extrajudicial action against foreign investors. There is little case law concerning the enforcement of foreign arbitral awards, including awards issued against the government, but the attitude of Israeli courts towards the enforcement of foreign arbitral awards is to adhere strictly to the provisions of the Convention and not to interpret the grounds for refusal of enforcement widely.

International Commercial Arbitration and Foreign Courts

Mediation was formally institutionalized in Israel in 1992 with the amendment of the Courts Law of 1984. The amendment granted courts the authority to refer civil disputes to mediation or arbitration with party consent. The Israeli courts tend to uphold and enforce arbitration agreements. Israel’s Arbitration Law predates the UNCITRAL model law.

Bankruptcy Regulations

Israeli Law is based on several layers, some of them based on the Common Law and in particular the laws of England, as Palestine was under the British mandate in 1917-1948. Bankruptcy Law in Israel is mostly based on English Law, as enacted in Palestine in 1936 during the British mandate.

Bankruptcy proceedings are based on the bankruptcy ordinance (1980), which replaced the mandatory ordinance that was enacted in 1936. Therefore, the bankruptcy law in Israel resembles the English law as it was more or less in 1936. Israel is 31st in the World Bank’s 2017 Doing Business Report’s “resolving insolvency” category.

4. Industrial PoliciesShare    

Investment Incentives

The State of Israel encourages both local and foreign investment by offering a wide range of incentives and benefits to investors in industry, tourism, and real estate. Special emphasis is given to hi-tech companies and R&D activities.

Most benefits available to Israelis are also available to foreign investors. Investment incentives are outlined in the Law for the Encouragement of Capital Investment and are coordinated by the Israel Investment Center (IIC).

For complete information, potential investors should contact:

Investment Promotion Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036
Tel: 972-2-666-2607
www.investinisrael.gov.il
Investinisrael@moital.gov.il

Israel Investment Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036 490
Tel: 972-2-666-2236
http://www.moital.gov.il/NR/exeres/111C2143-2296-44C0-96F9-C29C082A19CC.htm

Foreign Trade Zones/Free Ports/Trade Facilitation

Israel has bilateral Qualified Industrial Zone (QIZ) Agreements with Egypt and Jordan. Exports from geographically recognized industrial zones in Egypt and Jordan that contain at least a specified proportion of Israeli content can be exported to the United States duty free. More information is available at the Ministry of Economy’s Foreign Trade Administration website:

http://economy.gov.il/English/InternationalAffairs/ForeignTradeAdministration/Pages/RegionalCooperation.aspx

Israel has one free trade zone, the Red Sea port city of Eilat.

Performance and Data Localization Requirements

There are no universal performance requirements on investments, but performance requirements, including inbound investment “offset” requirements, are often included in sales contracts with the government. In some sectors, there is a requirement that Israelis own a percentage of a company. Israel’s visa and residency requirements are transparent. The Israeli government does not impose preferential policies on exports by foreign investors.

5. Protection of Property RightsShare    

Real Property

Secured interests in property are recognized and enforced by the Israeli judicial system. A reliable system of recording such security interests exists. There are a few restrictions relating to foreigners in Israel. Property transactions are registered by the Israel Land Administration, which manages land in Israel on behalf of the government, Israel currently ranks 126th out of 189 countries in “registering property” according to the World Bank’s 2017 Doing Business Report.

Intellectual Property Rights

The Israel Patent Office (ILPO) within the Ministry of Justice is the principal government authority overseeing the legal protection and enforcement of intellectual property rights (IPR) in Israel. IPR in Israel has undergone many changes recently as the Israeli economy has rapidly transformed into a knowledge-based economy.

In recent years, Israel has revised its IPR legal framework several times in order to comply with new international treaties it has signed. Israel has taken stronger, more comprehensive steps towards protecting IPR, and the government acknowledges that IPR theft costs rights holders millions of dollars per year, reducing tax revenues and slowing economic growth.

The United States removed Israel from the Special 301 Report in 2014 after Israel passed patent legislation that satisfied the remaining commitments Israel made in a Memorandum of Understanding with the United States in 2010 concerning several longstanding issues regarding Israel’s intellectual property rights regime for pharmaceutical products. These reforms improved the transparency and efficacy of the country's patent system, bringing it in line with international standards, and reflected Israel's commitment to being a knowledge-based and innovative economy.

The United States remains concerned with the limitations of Israel’s copyright legislation, particularly related to digital copyright matters and with Israel’s interpretation of its commitments for protection of confidential test and other data related to marketing approval of biologic pharmaceuticals. The Ministry of Justice recently introduced a draft government bill on piracy to increase rights holders' ability to combat copyright infringement on the internet.

While several recent legislative improvements have been instituted, the United States continues to urge Israel to strengthen and improve its IPR enforcement regime. Israel lacks specialized judicial courts and Special Police Units designed to enforce IPR, common in other countries with advanced IPR regimes. Cases in Israel are typically adjudicated in general civil or administrative courts.

IPR theft in Israel is fairly common and involves a high-level of sophistication. The EU ranks Israel as a "third tier" priority country with regards to the level of IPR protection and/or enforcement. The EU cites inadequate protection of innovative pharmaceutical products and end-user software piracy as the main issues with IPR enforcement in Israel.

Israel is a member of the WTO and the World Intellectual Property Organization (WIPO). It is a signatory to the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention, the Paris Convention for the Protection of Industrial Property, and the Patent Cooperation Treaty. Israel was obligated to implement the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) by January 1, 2000 but has failed to do so to date. Implementation remains under consideration by the government.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

6. Financial SectorShare    

Capital Markets and Portfolio Investment

The government is supportive of foreign portfolio investment. The Tel Aviv Stock Exchange (TASE) is Israel’s only public stock exchange.

Credit is ostensibly allocated according to market terms. Up to 70 percent of credit in Israel, however, is issued to a handful of individuals and corporate entities, some of whom own controlling interests in banks. Furthermore, the primary profit centers for banks are various consumer banking fees, so banks often extend credit on preferential terms. Various credit instruments are available to the private sector, and foreign investors can receive credit on the local market. Legal, regulatory, and accounting systems are transparent and conform to international norms, although the prevalence of inflation-adjusted accounting means that there are differences from U.S. accounting principles.

In the case of publicly traded firms where ownership is widely dispersed, the practice of "cross-shareholding" and "stable shareholder" arrangements to prevent mergers and acquisitions is common, but not directed in particular at preventing potential foreign investment. While, until now, a number of companies have had “pyramidal–like” structures, the business concentrations law, which was approved by the Knesset at the end of 2013, is intended to alleviate this in the future. Israel has no laws or regulations regarding the adoption by private firms of articles of incorporation or association that limit or prohibit foreign investment, participation, or control.

Money and Banking System

The Bank of Israel is Israel’s Central Bank and regulates all banking activity and monetary policy. In general, Israel has a healthy banking system and offers many of the same services as the U.S. banking system. However, services and fees for normal banking transactions in general do not compare to U.S. standards. As of 2017 there were 16 registered commercial banks in Israel. Of the 16, five major banks dominate the majority of the market led by Bank Hapoalim and Bank Leumi, the two largest banks, followed by the Israel Discount Bank. Together these banks account for over 75 percent of the market and control combined assets estimated at over $400 billion according to the most recent Bank of Israel data. Israeli banks have all been privatized except for Leumi, with 6 percent of shares remaining in the hands of the State of Israel. Given the high concentration of ownership of most firms, hostile takeovers are a virtually unknown phenomenon in Israel. There are five foreign banks operating in Israel.

Foreign Exchange and Remittances

Foreign Exchange

The representative exchange rate, calculated daily by the Bank of Israel, is based on an average of buying and selling prices published by local banks. The Bank of Israel maintains and occasionally exercises the option to intervene in foreign currency trading in situations of extraordinary movements in the exchange rate that are not in line with fundamental economic conditions, or when the foreign exchange market is not in its view functioning appropriately.

Israel’s foreign exchange liberalization process was completed on January 1, 2003, when the last restrictions on the freedom of institutional investors to invest abroad were removed. Foreign currency controls have been completely abolished and the Israeli shekel is a freely convertible currency. Israeli individuals can invest without restriction in foreign markets. 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. Total foreign reserves held at the Bank of Israel stood at $102 billion at the end of February 2017.

Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7)

Remittance Policies

Most transactions must be carried out through an authorized dealer. An authorized dealer is a banking institution licensed to arrange, inter alia, foreign currency transactions for its clients. The authorized dealer must report large foreign exchange transactions to the Controller of Foreign Currency. There are no limitations or significant delays in the remittance of profits, debt service, or capital gains.

Sovereign Wealth Funds

In 2014 Israel passed legislation to establish the Israel Citizens’ Wealth Fund, a sovereign wealth fund. Expenditures of the Israel Citizens’ Wealth Fund will not be funded by the national budget process, but the expenditures will be listed in the national budget once royalty revenue from all natural resources reaches NIS 1 billion or approximately $275 million, a threshold that has not yet been reached.

7. State-Owned EnterprisesShare    

According to the most recent OECD data, Israel ranked 13th in “Governance of State-owned Enterprises,” just below the OECD average. The Government Companies Authority (GCA) was established and operates under the Government Companies Law. This is an auxiliary unit of the Ministry of Finance. The GCA is the administrative agency for state-owned companies in charge of supervision, privatization, and implementation of structural changes.

The GCA oversees some 100 companies, including commercial and noncommercial companies, government subsidiaries, and companies under mixed government-private ownership. Among these companies are some of the biggest and most complex in the Israeli economy, such as the Israel Electric Corporation, Israel Aerospace Industries, Rafael Advanced Defense Systems, Israel Postal Company, Mekorot Israel National Water Company, Israel Natural Gas Lines, the Ashdod, Haifa, and Eilat Port Companies, Israel Railways, Petroleum and Energy Infrastructures, Israel National Roads Company, advanced study funds, and housing companies.

Israel is party to the Government Procurement Agreement (GPA) of the World Trade Organization.

Privatization Program

In late 2014, Israel's cabinet approved a privatization plan which would allow the government to issue minority stakes of up to 49 percent in state-owned companies on the Tel Aviv Stock Exchange over a three-year period, a plan estimated to increase government revenue by USD 4.1 billion. The plan aims to sell stakes in Israel's electric company, water provider, railway, post office and some defense-related contractors. While the terms may vary according to the company being privatized, minority stakes are typically offered in a public bidding process, without formal restrictions on participation by foreign investors (though such restrictions could be possible in the case of companies deemed to be of strategic significance).

8. Responsible Business ConductShare    

There is awareness of responsible business conduct among enterprises and civil society. Israel adheres to the OECD Guidelines for Multinational Enterprises and a National Contact Point is operating in the Foreign Trade Administration.

9. CorruptionShare    

Bribery and other forms of corruption are illegal under several Israeli laws and Civil Service regulations. Israel became a signatory to the OECD Bribery convention in November 2008 and became a full member of the OECD in May 2010. Israel ranks 28 out of 176 countries in Transparency International’s 2016 Corruption Perceptions Index. There are several NGOs that focus on public sector ethics. Transparency International has a local chapter in Israel.

Israel is a member of the OECD Anti-Bribery Convention, which entered into force in February 1999. Israel is a signatory to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

The National Police, the state comptroller, the attorney general, and the accountant general are responsible for combating official corruption. These entities operate effectively and independently, and are sufficiently resourced. NGOs that focus on anticorruption efforts operate freely without government interference.

The international NGO Transparency International closely monitors corruption in Israel.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:

Ministry of Justice

Office of the Director General
29 Salah a-Din Street Jerusalem
02-6466533, 02-6466534, 02-6466535
mancal@justice.gov.il

Contact at "watchdog" organization

Transparency International Israel
Ms. Ifat Zamir
Tel Aviv University, Faculty of Management
+972 3 640 9176
ifat@ti-israel.org

10. Political and Security EnvironmentShare    

The security situation remains complex in Israel and the West Bank, and can change quickly depending on the political environment, recent events, and geographic location. U.S. citizens should exercise caution and remain aware of their surroundings when traveling to areas where there are heightened tensions and security risks. The Government of Israel and the Palestinian Authority both make considerable efforts to police major tourist attractions and ensure security, particularly in areas where foreigners frequently travel. This replaces the Travel Warning issued December 15, 2015.

Gaza is under the control of Hamas, a foreign terrorist organization. The security environment within Gaza and on its borders is dangerous and volatile. Violent demonstrations and shootings occur on a frequent basis and the collateral risks are high. While Israel and Hamas continue to observe the temporary cease-fire that ended the Gaza conflict in 2014, sporadic mortar or rocket fire and corresponding Israeli military response continue to occur.

Within Israel and the West Bank, a rise in political and religious tension beginning in October 2015 led to a spike in violence in which U.S. citizens were killed and wounded. There is no indication that U.S. citizens were specifically targeted based on nationality. Perceived religious affiliation was a factor in some of the attacks. Attacks were carried out using knives, vehicles, and guns. Israeli security forces reacted with deadly force, which resulted in some bystanders being injured or killed in the crossfire. While the frequency of attacks has abated significantly since April 2016, the possibility of random violence continues to exist and can happen without warning. U.S. citizens should stay abreast of current events and know what areas to avoid when traveling throughout the region.

11. Labor Policies and PracticesShare    

The most recent Central Bureau of Statistics data from January 2016 indicate there are nearly 4 million people in the labor force in Israel. Highly skilled and well-educated, the Israeli labor force is the economy’s major asset. According to the OECD, in 2014 Israel ranked fourth among OECD countries for all adults (46%) aged 25-64 that had attained a tertiary education. A large number of university students specialize in fields with high industrial R&D potential, including engineering, mathematics, physical sciences, and medicine. According to the Investment Promotion Center, there are more than 135 scientists out of every 100,000 workers, one of the highest rates in the world. The rapid growth of Israel's high-tech industries in the late 1990s increased the demand for workers with specialized skills.

Unemployment has been steadily decreasing over the last few years and declined from 5.9 precent in 2014, to 5.3 percent in 2015, to 4.5 percent in 2016. Unemployment is currently at a historic low and was 4.3 percent in February 2017, according to the Central Bureau of Statistics.

According to Israel’s Population and Immigration Authority, at the end of 2016 there were 84,485 foreign workers in Israel, compared with 77,192 at the end of 2015, of which nearly 15,660 were undocumented workers. Undocumented foreign workers were at similar levels in 2015 and 2016, with approximately 15,500 in both years. According to the Ministry of Finance, more than 72,000 permits were issued to Palestinian workers in 2016. A government decision at the end of December approved an increase of another 20,000 permits in 2017 for Palestinian workers.

The national labor federation, the Histadrut, organizes about one-third of all Israeli workers. Collective bargaining negotiations in the public sector take place between the Histadrut and representatives from the Ministry of Finance. The number of strikes has declined significantly as the public sector has gotten smaller. However, strikes remain a common and viable negotiating vehicle in many difficult wage negotiations.

Israel strictly observes the Friday afternoon to Saturday afternoon Jewish Sabbath and special permits must be obtained from the government authorizing Sabbath employment. At the age of 18, most Israelis are required to perform 2-3 years of national service. Until their mid-40s, Israeli males are required to perform about a month of military reserve duty annually, during which time they receive compensation from national insurance companies.

12. OPIC and Other Investment Insurance ProgramsShare    

OPIC is involved in several projects in Israel. It provided a USD 250 million construction loan for a 110MW concentrated solar power (CSP) project in the Negev. In addition, OPIC recently approved a political risk insurance policy that covers a portion of the costs of the development of Nobel’s Leviathan natural gas field. OPIC also finances projects sponsored by U.S. investors in Israel, but not in the Golan Heights. Israel is a member of the Multilateral Investment Guarantee Agency (MIGA).

13. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($M USD)

2014

$308,700

2015

$299,416

www.worldbank.org/en/country

Foreign Direct Investment

Host Country Statistical source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

2014

$9,705

2015

$10,297

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, Position, UBO)

2013

$27,306

2015

23,755

FDI Markets

Total inbound stock of FDI as % host GDP

2014

8.84

2015

7.93

N/A


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward (2014)

Amount

100%

Total Outward

Amount

100%

United States

14,651

15.7%

United States

31,633

39.9%

Netherlands

10,060

10.8%

Netherlands

10,876

13.7%

Cayman Islands

6,294

6.74%

Canada

2,468

3.11%

Canada

4,163

4.46%

United Kingdom

2,002

2.52%

Singapore

2,915

3.12%

Japan

1,652

2.08%

"0" reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars)

Total

Equity Securities

Total Debt Securities

All Countries

113,155

100%

All Countries

58,569

100%

All Countries

54,480

100%

United States

63,370

56.0%

United States

36,693

63%

United States

28,672

53%

Unspecified

20,808

18%

Luxemburg

7,955

14%

Unspecified

18,697

34%

Luxemburg

8,390

7%

United Kingdom

5,126

9%

United Kingdom

1,425

3%

United Kingdom

6,550

6%

Germany

2,144

4%

Germany

1,412

3%

Germany

3,560

3%

France

1,158

2%

Netherlands

824

2%

 

14. Contact for More InformationShare    

Charles Brown
Economic Officer
U.S. Embassy Tel Aviv
+972 03 519 7575
Browncl3@state.gov