Policies Towards Foreign Direct Investment

Estonia is currently open for FDI and foreign investors are treated on an equal footing with local investors, though the government is developing a screening mechanism to adhere to the EU Foreign Investment Screening Regulation (https://eur-lex.europa.eu/eli/reg/2019/452/oj) that entered into force on April 10, 2019. This new regulation is applicable from October 11, 2020 and creates an information-sharing mechanism between Member States and allows Member States and the European Commission to comment on foreign investments foreseen in other Member States.

The Estonian Investment Agency (EIA), a part of Enterprise Estonia, is a government agency promoting foreign investments in Estonia and assisting international companies in finding business opportunities in Estonia. EIA offers comprehensive, one-stop investment consultancy services, free of charge. The agency’s goal is to increase awareness of business opportunities in Estonia and promote the image of Estonia as an attractive country for investments. More info: http://www.investinestonia.com/en/estonian-investment-agency/about-the-agency

Limits on Foreign Control and Right to Private Ownership and Establishment

Estonia’s government has not set limitations on foreign ownership. Licenses are required for foreign investors to enter the following sectors: mining, energy, gas and water supply, railroad and transport, waterways, ports, dams and other water-related structures and telecommunications and communication networks. The Estonian Financial Supervision Authority issues licenses for foreign interests seeking to invest in or establish a bank. Additionally, the Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investment and export-oriented companies. Creating favorable conditions for FDI and openness to foreign trade has been the foundation of Estonia’s economic strategy. Existing requirements are not intended to restrict foreign ownership but rather to regulate it and establish clear ownership responsibilities.

Other Investment Policy Reviews

Since becoming a member of the EU, Estonia is included in WTO Trade Policy Reviews (TPRs) of the EU/EC. The fourteenth review of the trade policies and practices of the European Union took place in February 2020. Full report available here: WTO | Trade policy review -European Union (formerly EC) 2020.

Business Facilitation

The World Bank’s Ease of Doing Business report ranks Estonia in 18^th place out of 190 countries on the ease of Starting a Business. Economic freedom, ease of doing business, per capita investments, low national debt, euro zone membership, and low corruption scores – all these factors play a role in fostering a good climate for business facilitation.

In Estonia there are two ways to register your business:

• Electronic registration via the e-Commercial Register’s Company registration portal (rik.ee) (takes between 5 minutes and 1 business day).
• Through a notary (takes 2-3 business days)

More info on registering the business entity and link to the Register: https://www.eesti.ee/en/doing-business/establishing-a-company/comparison-of-each-form-of-business/

On July 1, 2014, an amended Taxation Act establishing the employment register entered into force, requiring all natural and legal employers to register the persons employed by them with the Estonian Tax and Customs Board.  The company must register itself as a value-added taxpayer if the taxable turnover of the company, excluding imports of goods, exceeds EUR 40,000 as calculated from the beginning of the calendar year.

There are certain areas of activity (like construction, electrical works, fire safety, financial services, security services, etc.) in which business operation requires an additional registration in the Register of Economic Activities (MTR), but this can be done after registration of the company in the Commercial Register: https://mtr.mkm.ee/

Outward Investment

Estonia does not restrict domestic investors from investing abroad nor does it promote outward investment. Estonia companies have invested abroad about USD 10 billion, mostly into EU countries. The main sectors for outward investments are services, manufacturing, real estate and financial.

Estonian BITs with third countries are available at the following link:

https://investmentpolicy.unctad.org/international-investment-agreements/countries/66/estonia

A Bilateral Taxation Treaty with the U.S. came into force on January 1, 2000. The United States and Estonia signed a Foreign Account Tax Compliance Act (FATCA) agreement in April 2014.

A list of agreements with the United States can be found at: http://www.vm.ee/en/countries/united-states-america?display=relations#agreements

Transparency of the Regulatory System

The Government of Estonia has set transparent policies and effective laws to foster competition and establish “clear rules of the game.” Despite these measures, due to the small size of Estonia’s commercial community, instances of favoritism are not uncommon.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms. Financial statements should be prepared in accordance with either:

• accounting principles generally accepted in Estonia; or
• International Financial Reporting Standards (IFRS) as adopted by the EU.

Listed companies and financial institutions are required to prepare financial statements in accordance with IFRS as adopted by the EU.

The Estonian Generally Accepted Accounting Principles (GAAP) are written by the Estonian Accounting Standards Board (EASB).  Estonian GAAP, effective since 2013, is based on IFRS for Small and Medium-sized Entities (IFRS for SMEs) with limited differences from IFRS for SMEs with regard to accounting policies as well as disclosure requirements. More info: https://investinestonia.com/business-in-estonia/establishing-company/accounting-requirements/

The Minister of Justice has responsibility for promoting regulatory reform. The Legislative Quality Division of the Ministry of Justice provides an oversight and coordination function for Regulatory Impact Analysis (RIA) and evaluations with regards to primary legislation. For government strategies, EU negotiations and subordinate regulations, oversight responsibilities lie within the Government Office.

The government of Estonia has placed a strong focus on accessibility and transparency of regulatory policy by making use of online tools. There is an up-to-date database of all primary and subordinate regulations (https://www.riigiteataja.ee/en/) in an easily searchable format. An online information system tracks all legislative developments and makes available RIAs and documents of legislative intent (http://eelnoud.valitsus.ee/main). Estonia also established the website www.osale.ee, an interactive website of all ongoing consultations where every member of the public can submit comments and review comments made by others. Regulations are reviewed on the basis of scientific and data-driven assessments.

Estonia, an OECD member country, has committed at the highest political level to an explicit whole-of-government policy for regulatory quality and has established sufficient regulatory oversight. Estonia scores the same as the United States on the World Bank`s Global Indicators of Regulatory Governance on whether governments publish or consult with public about proposed regulations: http://rulemaking.worldbank.org/en/data/explorecountries/estonia  Estonia’s widely-praised “e-governance” solutions and other bureaucratic procedures are generally far more streamlined and transparent than those of other countries in the region and are among the easiest to use globally. In addition, Estonia’s budget and debt obligations are widely and easily accessible to the general public on the Ministry of Finance website.

International Regulatory Considerations

Estonia is a member of the EU.  An EU regulation is a legal act of the European Union that becomes immediately enforceable as law in all member states simultaneously. Regulations can be distinguished from directives which, at least in principle, need to be transposed into national law. Regulations can be adopted by means of a variety of legislative procedures depending on their subject matter. European Standards are under the responsibility of the European Standardization Organizations (CEN, CENELEC, ETSI) and can be used to support EU legislation and policies.

Estonia has been a member of WTO since November 13, 1999. Estonia is a signatory to the Trade Facilitation Agreement (TFA) since 2015.

Legal System and Judicial Independence

Estonia’s judiciary is independent and insulated from government influence. The legal system in Estonia is based on the Continental European civil law model and has been influenced by the German legal system. In contrast to common law countries, Estonia has detailed codifications.

Estonian law is divided into private and public law. Generally, private law consists of civil law and commercial law. Public law consists of international law, constitutional law, administrative law, criminal law, financial law, and procedural law.

Estonian arbitral tribunals can decide in cases of civil matters that have not previously been settled in court. More on Estonian court system: https://www.riigikohus.ee/en.  Arbitration is usually employed because it is less time consuming and cheaper than court settlements. The following disputes can be settled in arbitral tribunals:

• Labor disputes;
• Lease disputes;
• Consumer complaints arguments;
• Insurance conflicts;
• Public procurement disputes;
• Commercial and industrial disputes.

Recognition of court rulings of EU Member States is regulated by EU legislation. More: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(2015)509988_EN.pdf

Laws and Regulations on Foreign Direct Investment

Estonia is part of the Continental European legal system (civil law system). The most important sources of law are legal instruments such as the Constitution, European Union law, international agreements and Acts and Regulations. Major laws affecting incoming foreign investment include the Commercial Code, Taxation Act, Income Tax Act, Value Added Tax Act, Social Tax Act, and Unemployment Insurance Payment Act. More information is available at https://www.riigiteataja.ee/en/.  An overview of the investment-related regulations can be found here: http://www.investinestonia.com/en/investment-guide/legal-framework

Competition and Anti-Trust Laws

The Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

More info on specific competition cases: https://www.konkurentsiamet.ee/en

Expropriation and Compensation

Private property rights are observed in Estonia. The government has the right to expropriate for public interest related to policing the borders, public ports and airports, public streets and roads, supply to public water catchments, etc. Compensation is offered based on market value. Cases of expropriation are extremely rare in Estonia, and the Embassy is not aware of any expropriation cases involving discrimination against foreign owners.

Dispute Settlement

ICSID Convention and New York Convention

Estonia has been a member of the International Center for the Settlement of Investment Disputes (ICSID) since 1992 and a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1993, meaning local courts are obliged to enforce international arbitration awards that meet certain criteria.

Investor-State Dispute Settlement

The Embassy is not aware of any claims under Estonia’s Bilateral Investment Treaty (BIT) with the United States. Investment disputes concerning U.S. or other foreign investors in Estonia are rare.

International Commercial Arbitration and Foreign Courts

The Arbitration Court of the Estonian Chamber of Commerce and Industry (https://www.koda.ee/en/about-chamber/court-arbitration) is a permanent arbitration court which settles disputes arising from contractual and other civil law relationships, including foreign trade and other international economic relations. More info: http://www.lawyersestonia.com/arbitration-in-estonia

Local courts recognize and enforce foreign arbitral awards. The Embassy is not aware of any investment disputes involving SOEs.

Bankruptcy Regulations

Bankruptcy is not criminalized in Estonia.  Bankruptcy procedures in Estonia fall under the regulations of Bankruptcy Act that came into force in February 1997. The Estonian Bankruptcy Act focuses on the protection of the debtors and creditors’ rights. According to the Act, bankruptcy proceedings in Estonia can be compulsory, in which case a court will decide to commence the procedures for debt collection, or voluntarily by company reorganization. More info on bankruptcy procedures: http://www.lawyersestonia.com/bankruptcy-procedures-in-estonia

Detailed information about creditor’s rights: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/504072016002/consolide

More info from World Bank’s Doing Business Report on Estonian ranking for ease of “resolving insolvency:” https://www.doingbusiness.org/en/data/exploreeconomies/estonia#DB_ri

Investment Incentives

Estonia is open for FDI and foreign investors are treated on an equal footing with local investors with respect to incentives. There are no investment incentives or government guarantees available to foreign investors.

Foreign Trade Zones/Free Ports/Trade Facilitation

Estonia’s Customs Act permits the government to establish free trade zones. Goods in a free trade zone are considered to be outside the customs territory. Value-added tax, excise, import and export duties, as well as possible fees for customs services, do not have to be paid on goods brought into free trade zones for later re-export.

In Estonia, there are four free trade zones: Muuga port (near Tallinn), Sillamae port (northeast Estonia), Paldiski north port (northwest Estonia) and in Valga (southern Estonia). All free trade zones are open for FDI on the same terms as Estonian investments.

Performance and Data Localization Requirements

There are no specific performance requirements for foreign investments that differ from those required of domestic investments. The Estonian government does not mandate local employment or follow “forced localization” in which foreign investors must use domestic content in goods or technology.

Estonia continues to refine its immigration policies and practices. More info on work permits, visas, residence permits in Estonia: https://www.politsei.ee/en

U.S. citizens are exempt from the quota regulating the number of immigration and residence permits issued, as are citizens of the EU and Switzerland.

There are no requirements for foreign IT service providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software or turning over keys for encryption) or to maintain a certain amount of data storage in Estonia. There is no general requirement to register data processing activities in Estonia. Registration is required only if the data processor handles sensitive personal data.

The EU General Data Protection Regulation (GDPR) entered into force on May 25, 2018, with the goal of harmonizing the already existing data protection laws across Europe. The Estonian Personal Data Protection Act came into force on January 15, 2019.  More info: https://e-estonia.com/how-to-be-compliant-gdpr-5-steps/

Restrictions on transfer of data offshore:

Information on data transfer is available at: https://www.riigiteataja.ee/en/eli/523012019001/consolide or by contacting:

Estonian Data Protection Inspectorate
39 Tatari Street, 10134
Tel: (+372) 627 4135
https://www.aki.ee/en

Real Property

Secured interests in property are recognized and enforced. Mortgages are quite common for both residential and commercial property, and leasing as a means of financing is widespread and efficient.

The legal system protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages. As of October 1, 2011, land reform in Estonia was almost complete.  Restitution and privatization of lands commenced in 1991, but in almost every municipality there remain several complicated cases to be settled. In total, less than 4 percent of the Estonian territory (waterbodies included) lacks a clear title.

Foreign individuals and companies are allowed to acquire real estate with the permission of the local authorities. There are legal restrictions on acquiring agricultural and woodland of 10 hectares or more, and permission from the county governor is needed. Foreign individuals are not allowed to acquire land located on smaller islands, or listed territories adjacent to the Russian border.

Property may be taken from the owner without the owner`s consent only in the public interest, pursuant to a procedure provided by law, and for fair and immediate compensation. Everyone whose property has been taken from them without consent has the right to bring an action in the courts to contest the taking of the property, the compensation, or the amount of the compensation.

More info: http://www.globalpropertyguide.com/Europe/Estonia/Buying-Guide

http://www.doingbusiness.org/en/data/exploreeconomies/estonia/registering-property#DB_rp

http://www.lawyersestonia.com/purchase-a-property-in-estonia

Intellectual Property Rights

Estonia maintains a robust intellectual property rights (IPR) regime. The quality of IPR protection in legal structures is strong, enforcement is good, and infringements and theft are uncommon. Estonia adheres to the World Intellectual Property Organization’s (WIPO’s) Berne Convention, the Rome Convention, the Geneva Convention, and the World Trade Organization’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Estonian legislation fully complies with EU directives granting protection to authors, performing artists, record producers, and broadcasting organizations. Equal protection against unauthorized use is provided via international conventions and treaties to foreign and Estonian authors.

Companies should recognize that IPR is protected differently in Estonia than in the United States, and U.S. trademark and patent registrations will not protect IPR in Estonia. Registration of patents and trademarks are on a first-in-time, first-in-right basis, so companies should consider applying for trademark and patent protection before selling products or services in the Estonian market.  IPR are primarily a private right, and the U.S. government generally cannot enforce rights for private individuals in Estonia. It is the responsibility of the rights’ holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IPR consultants.

Estonia is not included in USTR’s Special 301 Report or Notorious Markets List.

Estonian Customs tracks and reports periodically on seizures of counterfeit goods. In 2020, the Estonian Tax and Customs Board processed 408 cases involving counterfeit goods resulting in seizures of 14,500 items, primarily footwear, clothes, bags, toys, electronics. Most of the infringed goods were detected in mail, and the volume of goods seized by case was small. The biggest case involved seizure of 1,800 packages (one kilo) of hookah tobacco. In Estonia, IPR crimes are prosecuted.

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

Capital Markets and Portfolio Investment

Estonia is a member of the Euro zone. Estonia’s financial sector is modern and efficient. Credit is allocated on market terms and foreign investors are able to obtain credit on the local market. The private sector has access to an expanding range of credit instruments similar in variety to those offered by banks in Estonia’s Nordic neighbors, Finland, and Sweden.

Legal, regulatory, and accounting systems are transparent and consistent with international norms.

The Security Market Law complies with EU requirements and enables EU securities brokerage firms to deal in the market without establishing a local subsidiary. The NASDAQ OMX stock exchanges in Tallinn, Riga, and Vilnius form the Baltic Market, which facilitates cross-border trading and attracting more investments to the region. This includes sharing the same trading system and harmonizing rules and market practices, all with the aim of reducing the costs of cross-border trading in the Baltic region.

Certain investment services and products may be limited to U.S. persons in Estonia due to financial institutions’ response to the U.S. Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Estonian financial services market overview:  https://www.fi.ee/en?id=12737

IMF report on Estonia: https://www.imf.org/en/Publications/CR/Issues/2020/01/21/Republic-of-Estonia-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-48963

Money and Banking System

Estonia’s banking system has consolidated rapidly. The banking sector is dominated by two major commercial banks, Swedbank and SEB, both owned by Swedish banking groups. These two banks control approximately 65 percent of the financial services market. The third largest bank is Luminor Bank. There are no state-owned commercial banks or other credit institutions.

More information on banks’ assets is available at: http://statistika.eestipank.ee/#/en/p/FINANTSSEKTOR/147/645

The Scandinavian-dominated Estonian banking system is modern and efficient. Local and international banks in Estonia provide both domestic and international services (including internet and mobile banking) at competitive rates, as well as a full range of financial, insurance, accounting, and legal services. Estonia has a highly advanced internet banking system: currently 98 percent of banking transactions are conducted via the internet.

The Bank of Estonia (Eesti Pank) is Estonia’s independent central bank. As Estonia is part of the Euro zone, the core tasks of the Bank are to help to define the monetary policy of the European Community and to implement the monetary policy of the European Central Bank, including the circulation of cash in Estonia. Eesti Pank is also responsible for holding and managing Estonian official foreign exchange reserves as well as supervising overall financial stability and maintaining reliable and well-functioning payment systems. Neither the Central Bank nor the government hold shares in the banking sector.

EU legislation requires Estonia to make its AML regime compliant with EU directives. Estonia has passed legislation that makes its AML regime compliant with EU legislation. After large-scale money laundering cases through Estonian branches of Nordic banks came to light in Estonia, regulatory and government officials are taking steps to improve the AML oversight regime. The recent changes included transformation of supervisory structures and roles as well as amendment of laws governing them. Due to strict anti-money laundering (AML) regulations and bank compliance practices, it can be difficult for non-residents to open a bank account.

More info on opening a bank account for non-resident investors:

https://transferwise.com/gb/blog/opening-a-bank-account-in-estonia

https://www.lhv.ee/en/non-residents

Foreign Exchange and Remittances

Foreign Exchange Policies

Estonia has been a member of the euro currency area since 2011. There are no restrictions on currency transfers or conversion.

Remittance Policies

There are no restrictions, limitations or delays involved in converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into other currencies at market rates. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records. If a foreign company ceases to operate in Estonia, all its assets may be repatriated without restriction. These policies are long-standing; there is no indication that they will be altered in the future. Foreign exchange is readily available for any purpose.

Sovereign Wealth Funds

There are no sovereign wealth funds or state-owned investment funds in Estonia.

In Estonia SOEs are primarily engaged in the provision of services of strategic importance.

In early 2020, the Republic of Estonia held an interest in 29 companies of which 27 were solely owned by the state. The largest SOE`s are Eesti Energia (electricity production), Elering (electricity TSO), Estonian Railways, Tallinn Airport, and the Port of Tallinn.

The full list of SOEs is available at: https://www.eesti.ee/eng/contacts/riigi_osalusega_ariuhingud_1/riigi_osalusega_ariuhingud_2

SOEs have assets worth over 7 billion euros, and they employ about 13,400 people. Sales of the SOEs in 2018 was 1.8 billion euros.

Public enterprises operate on the same legal basis as private enterprises. Until recently SOEs had politically appointed boards, but today board members are appointed by an independent committee. SOEs are governed by different ministries.

Competition and public procurement of SOEs is subject to EU law. All SOEs have audited accounts. Large SOEs’ audits are publicly available on their websites. The activities of SOEs are also audited by the National Audit Office of Estonia, which conducts assessments and provides recommendations directly to the Parliament.

Privatization Program

Estonia’s privatization program is largely complete. Only a small number of enterprises remain wholly state-owned. There have been recent discussions on the political level about the possible listing of additional SOEs, such as Port of Tallinn and part of Eesti Energia.

The majority of OECD Guidelines for Multinational Enterprises are incorporated into Estonian legislation. The non-profit organization, Responsible Business Forum in Estonia, aims to further corporate social responsibility (CSR) in Estonia, and is a partner in the CSR360 Global Partner Network. CSR360 (www.csr360gpn.org) is a network of independent organizations, which work as the interface of business and society to mobilize business towards socially responsible aims.

The Estonian Ministry of Economy and Communication works closely with CSR on educating private businesses and SOEs on responsible business conduct, recognizing best practices, and factoring RBC policies or practices into its procurement decisions. The American Chamber of Commerce in Estonia also maintains a Corporate Social Responsibility committee.

Government in general enforces the labor, human rights, employment rights, consumer protection, and environmental protection related laws effectively and these requirements cannot be waived to attract foreign investment. These laws apply also to the private security industry. Estonia has adhered to the OECD Guidelines for Multinational Enterprises since 2001. The National Contact Point can be accessed here:

https://www.mkm.ee/en/objectives-activities/economic-development/oecd-guidelines-and-surveillance%20

Natural resource extraction related revenues, including mining licenses, are less than 0.6 percent of government budget revenues and less than 0.3 percent of the GDP.  The revenues are reflected in the national budget.

Here you can find a summary of the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain:  http://www.doingbusiness.org/data/exploreeconomies/estonia/protecting-minority-investors/

Additional Resources 

Department of State:

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-report/);
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf).

Department of Labor:

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings);
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

Estonia has laws, regulations, and penalties to combat corruption, and while corruption is not unknown, it has generally not been reported to pose a major problem for foreign investors. Both offering and taking bribes are criminal offenses which can bring imprisonment of up to five years. While “payments” that exceed the services rendered are not unknown, and “conflict of interest” is not a well-understood issue, surveys of American and other non-Estonian businesses have shown the issue of corruption is not a serious concern.

In 2020, Transparency International (TI) ranked Estonia 17th out of 180 countries on its Corruption Perceptions Index.

Anti-corruption policy and implementation are coordinated by the Ministry of Justice and the strategy is implemented by all ministries and local governments.  The Internal Security Service is effective in investigating corruption offences and criminal misconduct, leading to the conviction of several high-ranking state officials. Until recently corruption was most commonly associated with public sector activities. Recently the government-initiated efforts to educate private sector businesses about the risks of business-to-business corruption, for example within procurement activities.

Estonia cooperates in fighting corruption at the international level and is a member of GRECO (Group of States Against Corruption). Estonia is a party to both the Council of Europe (CoE) Criminal Law Convention on Corruption and the Civil Law Convention. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and accounting offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia.

More info on the corruption level in different sectors in Estonia can be found at: Estonia – Transparency.org

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The UN Anticorruption Convention entered into force in Estonia in 2010. Estonia has been a full participant in the OECD Working Group on Bribery in International Business since 2004; the underlying Convention entered into force in Estonia in 2005. The Convention obligates Parties to criminalize bribery of foreign public officials in the conduct of international business.

The United States meets its international obligations under the OECD Anti-bribery Convention through the U.S. Foreign Corrupt Practices Act.

Resources to Report Corruption

Government agency contacts responsible for combating corruption:

+372 6123657 Central Criminal Police corruption hotline

Or e-mail: korruptsioonivihje@politsei.ee

Transparency International in Estonia: Estonia – Transparency.org

Civil unrest generally is not a problem in Estonia, and there have been no incidents of terrorism. Public gatherings and demonstrations may occur on occasion in response to political issues, but these have proceeded, with very few exceptions, without incidence of violence in the past.

Estonia has a small population – 1.31 million people. The average monthly Estonian salary at the end of 2020 was about USD 1,730. About 75 percent of the workforce is employed in the services sector. With an aging population and a negative birth rate, Estonia, like many other countries of Central and Eastern Europe, faces demographic challenges affecting its long-term supply of labor. Improving labor efficiency is a key focus for Estonia in the short-to-mid-term.  At the end of 2020, the unemployment rate was 7.4 percent, higher than usual due to the COVID-19 crisis.  More on the labor market: http://www.eestipank.ee/en/publications/series/labour-market-review

The Law of Obligations Act, the Individual Labor Dispute Resolution Act and the Occupational Health and Safety Act address employment and labor issues.  Labor laws may not be waived in order to attract or retain investment. Labor laws are generally strict, and the principle of employee protection is applied in which the worker is considered the economically weaker party. Upon termination of an employment contract due to a lay-off, an employer must pay an employee compensation in the amount of one month’s average wage. In addition, an insurance benefit shall be paid to an employee by the Estonian Unemployment Insurance Fund depending on the length of service. More info: https://www.oecd.org/els/emp/Estonia.pdf

Trade union membership remains low compared to most countries in the EU. Estonia has ratified all eight ILO Core Conventions.

Estonian labor regulations on labor abuses, health and safety standards, labor disputes etc. are effectively monitored by the Estonian Labor Inspectorate: http://www.ti.ee/en/

Estonia does not qualify for DFC programs as a high-income country.

* Source for Host Country Data: Bank of Estonia https://www.eestipank.ee/en/statistics

Source: CDIS Table 1: Direct Investment Positions (Inward and Outward) – IMF Data

Source: Coordinated Portfolio Investment Survey – Portfolio Investment Assets – IMF Data

Reene Moschella, Economic/Commercial Specialist
United States Embassy
Kentmanni 20
15099 Tallinn, Estonia
Tel: 372 668 8100
Moschellar@state.gov

Policies Towards Foreign Direct Investment

Israel is open to foreign investment and the government actively encourages and supports the inflow of foreign capital.

The Israeli Ministry of Economy and Industry’s ‘Invest in Israel’ office serves as the government’s investment promotion agency facilitating foreign investment. ‘Invest in Israel’ offers a wide range of services including guidance on Israeli laws, regulation, taxes, incentives, and costs, and facilitation of business connections with peer companies and industry leaders for new investors. ‘Invest in Israel’ also organizes familiarization tours for potential investors and employs a team of advisors for each region of the world.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Israeli legal system protects the rights 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 ongoing privatization efforts, the Israeli government encourages foreign investment in privatizing government-owned entities.

Israel’s policies aim to equalize competition between private and public enterprises, although the existence of monopolies and oligopolies in several sectors, including communications infrastructure, food manufacturing and marketing, and some manufacturing segments, stifles competition. In the case of designated monopolies, defined as entities that supply more than 50 percent of the market, the government controls prices.

Israel established a centralized investment screening (approval) mechanism for certain inbound foreign investments in October 2019. Investments in regulated industries (e.g., banking and insurance) require approval by the relevant regulator. 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 (WTO) conducted its fifth and latest trade policy review of Israel in July 2018. 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). The OECD concluded an Economic Survey of Israel in 2020.

The 2020 OECD Economic Survey of Israel can be found at https://www.gov.il/BlobFolder/news/press_23092020_b/he/PressReleases_files_press_23092020_b_file.pdf 

Business Facilitation

The Israeli government is fairly open and receptive to companies wishing to register businesses in Israel. Israel ranked 28th in the “Starting a Business” category of the World Bank’s 2020 Doing Business Report, rising seventeen places from its 2019 ranking. Israel continues to institute reforms to make it easier to do business in Israel, but some challenges remain.

The business registration process in Israel is relatively clear and straightforward. Four procedures are required to register a standard private limited company and take 12 days to complete, on average, according to the Israeli Ministry of Finance. The foreign investor must obtain company registration documents through a recognized attorney with the Israeli Ministry of Justice and obtain a tax identification number for company taxation and for value added taxes (VAT) from the Israeli Ministry of Finance. The cost to register a company averages around USD 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/Pages/default.aspx .

The Israel Export and International Cooperation Institute is an Israeli government agency operating independently, under the Ministry of Economy, that helps facilitate trade and business opportunities between Israeli and foreign companies. More information on their activities is available at http://www.export.gov.il/eng/About/About/ .

In general, there are no restrictions on Israeli investors seeking to invest abroad. However, investing abroad may be restricted on national security grounds or in certain countries or sectors where the Israeli government deems such investment is not in the national interest.

Israel has bilateral investment treaties in force with Japan, Myanmar, Ukraine, Azerbaijan, Guatemala, China, Ethiopia, Serbia, Montenegro, Uruguay, Mongolia, Thailand, Belarus, Romania, Croatia, El Salvador, Armenia, Slovakia, South Korea, Cyprus, Slovenia, Czech Republic, Moldova, Turkey, Argentina, Kazakhstan, Albania, Georgia, Turkmenistan, Uzbekistan, Bulgaria, Lithuania, Estonia, Latvia, and Poland. Israel has signed bilateral investment treaties with the United Arab Emirates, South Africa, and Germany that are not yet in force.

Israel has free trade agreements with the European Union (EU), European Free Trade Association (a regional trade organization and free trade area consisting of Iceland, Liechtenstein, Norway, and Switzerland), Turkey, Mexico, Canada, Jordan, Egypt, Panama, Ukraine, Colombia, the United Kingdom, and Mercosur (an economic and political bloc comprising Argentina, Brazil, Paraguay, and Uruguay).

The United States and Israel signed a free trade agreement in 1985.

Israel has a bilateral tax treaty with United States. Israel signed its Income Tax Treaty with the United States in 1975.

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 texts of proposed regulations are also published (in Hebrew) on this web site. The government requests comments from the 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. U.S. companies have won a limited number of government tenders, notably in the energy and communications sectors. 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 basis 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.

Israeli regulatory bodies in 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. Israel’s adoption of European standards rather than international standards results in the market exclusion of certain U.S. products and added costs for U.S. exports to Israel.

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

Legal System and Judicial Independence

Israel has a written and consistently applied commercial law based on the British Companies Act of 1948, as amended. The judiciary is independent, but businesses complain about the length of time required to obtain judgments. The Supreme Court is an appellate court that also functions as the High Court of Justice. Israel does not employ a jury system. Israel established other tribunals 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 high marks in innovation, entrepreneurship, and Israel’s creative, skilled, and ambitious workforce. The center also promotes Israel’s strong ties to the United States and Europe.

Competition and Antitrust Laws

Israel adopted its comprehensive competition law in 1988. Israel created the Israel Competition Authority (originally called the Israel Antitrust Authority) in 1994 to enforce the competition law.

Expropriation and Compensation

There have been no known expropriations of U.S.-owned businesses in Israel. 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

Israel is a member of the International Center for the Settlement of Investment Disputes (ICSID) of the World Bank and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Israel ratified the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 in 1959.

Investor-State Dispute Settlement

The Israeli government accepts binding international arbitration of investment disputes between foreign investors and the state. Israel’s Arbitration Law of 1968 governs both domestic and international arbitration proceedings in the country. The Israeli Knesset amended the law most recently in 2008. There are no known extrajudicial actions against foreign investors.

International Commercial Arbitration and Foreign Courts

Israel formally institutionalized mediation 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 United Nations Commission on International Trade Law.

Bankruptcy Regulations

Israeli Bankruptcy Law is based on several layers, some rooted in Common Law, when Palestine was under the British mandate in 1917-1948. Bankruptcy Law in Israel is mostly based on British law enacted in Palestine in 1936 during the British mandate.

Bankruptcy proceedings are based on the bankruptcy ordinance (1980), which replaced the mandatory ordinance enacted in 1936. Therefore, the bankruptcy law in Israel resembles the British law as it was more or less in 1936. Israel ranks 29th in the World Bank’s 2020 Doing Business Report’s “resolving insolvency” category.

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. Israel’s Ministry of Economy places a priority on investments in hi-tech companies and R&D activities.

Most investment incentives available to Israeli citizens are also available to foreign investors. Israel’s Encouragement of Capital Investments Law, 5719-1959, outlines Israel’s investment incentive programs. The Israel Investment Center (IIC) coordinates the country’s investment incentive programs.

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
Website: www.investinisrael.gov.il 
E-mail: investinisrael@economy.gov.il 

Israel Investment Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036 490
http://economy.gov.il/English/About/Units/Pages/IsraelInvestmentCenter.aspx 
Tel: +972-2-666-2828
Fax: +972-2-666-2905

Foreign Trade Zones/Free Ports/Trade Facilitation

Israel has bilateral Qualifying Industrial Zone (QIZ) Agreements with Egypt and Jordan. The QIZ initiative allows Egypt and Jordan to export products to the United States duty-free, as long as these products contain inputs from Israel (8 percent in the Israel-Jordan QIZ agreement, 10.5 percent in the Israel-Egypt QIZ agreement). Products manufactured in QIZs must comply with strict rules of origin. More information is available at the Israeli 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. More information on the Eilat Free Zone is available at: http://economy.gov.il/English/Industry/DevelopmentZoneIndustryPromotion/ZoneIndustryInfo/Pages/EilatNShachoret.aspx  

Performance and Data Localization Requirements

There are no universal performance requirements on investments, but “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.

Real Property

Israel has a modern legal system based on British common law that provides effective means for enforcing property and contractual rights. Courts are independent. Israeli civil procedures provide that judgments of foreign courts may be accepted and enforced by local courts. The Israeli judicial system recognizes and enforces secured interests in property. A reliable system of recording such secured interests exists. The Israeli Land Administration, which manages land in Israel on behalf of the government, registers property transactions. Registering or obtaining land rights is a cumbersome process and Israel currently ranks 75th in “Registering Property” according to the World Bank’s 2020 Doing Business Report.

Intellectual Property Rights

The Intellectual Property Law Division and the Israel Patent Office (ILPO), both within the Ministry of Justice, are the principal government authorities overseeing the legal protection and enforcement of intellectual property rights (IPR) in Israel. IPR protection in Israel has undergone many changes in recent decades as the Israeli economy has rapidly transformed into a knowledge-based economy.

In recent years, Israel revised its IPR legal framework several times to comply with newly signed international treaties. Israel took 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 United States Trade Representative (USTR) 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 IPR regime for pharmaceutical products. Israel has not been included in the Special 301 Report or the Notorious Markets List since.

Israel’s Knesset approved Amendment No. 5 to Israel’s Copyright Law of 2007 on January 1, 2019. The amendment aims to establish measures to combat copyright infringement on the internet while preserving the balance among copyright owners, internet users, and the free flow of information and free speech.

In July 2017, the Israeli Knesset passed the New Designs Bill, replacing Israel’s existing but obsolete ordinance governing industrial design. The bill, which came into force in August 2018, brings Israel into compliance with The Hague System for International Registration of Industrial designs.

Nevertheless, 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 commitment to protect data derived from pharmaceutical testing conducted in anticipation of the future marketing of biological products, also known as biologics.

While Israel has instituted several legislative improvements in recent years, the United States continues to urge Israel to strengthen and improve its IPR enforcement regime. Israel lacks specialized courts, common in other countries with advanced IPR regimes. General civil or administrative courts in Israel typically adjudicate IPR cases.

IPR theft, including trade secret misappropriation, can be common and relatively sophisticated in Israel. The European Commission “closely monitors” IP enforcement in Israel. The EC 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.

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/ 

Resources for Rights Holders

Mr. Peter Mehravari
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi
Tel: +965 2259 1455
E-mail: Peter.Mehravari@trade.gov 

Capital Markets and Portfolio Investment

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

Financial institutions in Israel allocate credit on market terms. For many years, banks issued credit to only a handful of individuals and corporate entities, some of whom held controlling interests in banks. However, in recent years, banks significantly reduced their exposure to large borrowers following the introduction of stronger regulatory restrictions on preferential lending practices.

The primary profit center for Israeli banks is consumer-banking fees. 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 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 particularly at preventing potential foreign investment. 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 (BOI) is Israel’s Central Bank and regulates all banking activity and monetary policy. In general, Israel has a healthy banking system that offers most of the same services as the U.S. banking system. Fees for normal banking transactions are significantly higher in Israel than in the United States and some services do not meet U.S. standards. There are 12 commercial banks and four foreign banks operating in Israel, according to the BOI. Five major banks, led by Bank Hapoalim and Bank Leumi, the two largest banks, dominate Israel’s banking sector. Bank Hapoalim and Bank Leumi control nearly 60 percent of Israel’s credit market. The State of Israel holds 6 percent of Bank Leumi’s shares. All of Israel’s other banks are privatized.

Foreign Exchange and Remittances

Foreign Exchange

Israel completed its foreign exchange liberalization process on January 1, 2003, when it removed the last restrictions on the freedom of institutional investors to invest abroad. The Israeli shekel is a freely convertible currency and there are no foreign currency controls. The BOI maintains the option to intervene in foreign currency trading in the event of movements in the exchange rate not in line with fundamental economic conditions, or if the BOI assesses the foreign exchange market is not functioning appropriately. Israeli citizens 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. Israel’s foreign exchange reserves totaled USD 185 billion at the end of February 2021.

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 foreign currency 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

Israel passed legislation to establish the Israel Citizens’ Fund, a sovereign wealth fund managed by the BOI, in 2014 to offset the effect of natural gas production on the exchange rate. The original date for beginning the fund’s operations was 2018 but has been postponed until late 2021. The law establishing the fund states that it will begin operating a month after the state’s tax revenues from natural gas exceed USD 307 million (1 billion New Israeli Shekels).

Israel established the Government Companies Authority (GCA) following the passage of the Government Companies Law. The GCA is an auxiliary unit of the Ministry of Finance. It is the administrative agency for state-owned companies in charge of supervision, privatization, and implementation of structural changes. The Israeli state only provides support for commercial SOEs in exceptional cases. The GCA leads the recruitment process for SOE board members. Board appointments are subject to the approval of a committee, which confirms whether candidates meet the minimum board member criteria set forth by law.

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 and the Israel National Roads Company. The GCA does not publish a publicly available list of SOEs.

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 allowing 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 aimed to sell stakes in Israel’s electric company, water provider, railway, post office and some defense-related contractors. The GCA will likely auction minority stakes in a public bidding process without formal restrictions on the participation of foreign investors. Restrictions on foreign investors could be possible in the case of companies deemed to be of strategic significance.

Israel’s interministerial privatization committee approved plans in January 2020 to sell off the Port of Haifa, Israel’s largest shipping hub. The privatization process is underway now. The incoming owner will be required to invest approximately USD 280 million (1 billion NIS) in the port, including the cost of upgrading infrastructure and financing the layoff of an estimated 200 workers. That same committee voted to enable private investment in Israel Post in an effort to sell up to 40 percent of the government’s shares in Israel Post.

There is awareness of responsible business conduct among enterprises and civil society in Israel. Israel adheres to the OECD Guidelines for Multinational Enterprises and a National Contact Point is operating in the Foreign Trade Administration. Israel is not a member of the Extractive Industries Transparency Initiative.

Israel’s National Contact Point sits in the Responsible Business Conduct unit in the OECD Department of the Foreign Trade Administration in the Ministry of Economy and Industry. An advisory committee, including representatives from the Ministries of Economy, Finance, Foreign Affairs, Justice, and the Environment, assist the National Contact Point. The National Contact Point also works in cooperation with the Manufacturer’s Association of Israel, workers’ organizations, and civil society to promote awareness of the guidelines.

Israel is not a signatory of the Montreux Document on Private Military and Security Companies. One Israeli company is a member of the International Code of Conduct for Private Security Service Providers’ Association.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

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 a full member of the OECD in May 2010. Israel ranks 35 out of 180 countries in Transparency International’s 2019 Corruption Perceptions Index, dropping one place from its 2018 ranking. Several Israeli NGOs focus on public sector ethics in Israel and Transparency International has a local chapter.

Israel is a signatory of the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

The Israeli National Police, state comptroller, Attorney General, and 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

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

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

For the latest safety and security information regarding Israel and the current travel advisory level, see the Travel Advisory for Israel, the West Bank, and Gaza ( https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/israel-west-bank-and-gaza-travel-advisory.html).

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. Terrorist groups and lone-wolf terrorists continue plotting possible attacks in Israel, the West Bank, and Gaza. Terrorists may attack with little or no warning, targeting tourist locations, transportation hubs, markets or shopping malls, and local government facilities. Violence can occur in Jerusalem and the West Bank without warning. Terror attacks in Jerusalem and the West Bank have resulted in the deaths and injury of U.S. citizens and others. Hamas, a U.S. government-designated foreign terrorist organization, controls security in Gaza. The security environment within Gaza and on its borders is dangerous and volatile.

The most recent Central Bureau of Statistics data from the fourth quarter of 2020 indicate there are 4.1 million people active in the Israeli labor force. According to OECD data, 48 percent of Israelis aged between 25 and 34 years have a tertiary education. Many university students specialize in fields with high industrial R&D potential, including engineering, computer science, mathematics, physical sciences, and medicine. According to the Investment Promotion Center, there are more than 145 scientists out of every 10,000 workers in Israel, one of the highest rates in the world. The rapid growth of Israel’s high-tech sector in the late 1990s increased the demand for workers with specialized skills.

The unemployment rate among 25-64 year-olds was 4.7 percent at the end of the fourth quarter of 2020, according to the Israeli Central Bureau of Statistics.

According to the Bank of Israel, at the end of the fourth quarter of 2020 there were 283,600 non-Israelis employed in Israel.

The national labor federation, the Histadrut, organizes about 17 percent 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 in the military or in select civilian institutions. 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.

* Source for Host Country Data:

Israel’s Central Bureau of Statistics released final 2018 FDI data on March 23, 2020.

https://www.cbs.gov.il/en/mediarelease/Pages/2020/Foreign-Direct-Investment-in-Israel-and-Direct-Investment-Abroad-by-Industries-and-Countries-2016-2018.aspx

Russ Headlee
Economic Officer
U.S. Embassy Jerusalem – Tel Aviv Branch Office
HeadleeRC@state.gov