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Official Name: State of Israel

Internet Domain: .il
International Dialing Code: +972

Table of Contents

Location and Size Credit and Collections
Government Risk Assessment
Legal System Business Climate
Interesting Facts Business Protocol
Economy Other Sources of Information
Comparative Economic Indicators

Location and Size

Israel is a Middle Eastern country located between Egypt and Lebanon. It borders the Mediterranean Sea and its land area is 20,330 sq.km – slightly larger than the state of New Jersey. It is the 100th smallest country in the world and has 1/1000th of the world's population.

Government

Israel is a parliamentary democracy made up of six districts.

Executive Branch:

  • Chief of State: President Shimon Peres
  • Head of Government: Prime Minister Binyamin Netanyahu
  • Cabinet: selected by the prime minister and approved by the Knesset

Legislative Branch: unicarmeral Knesset of 120 seats

Judicial Branch: Supreme Court, justices are appointed by a Judicial Selection Committee made up of all three branches of the government

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Legal System

Israel has a mixed legal system comprised of English common law, British Mandate regulations, and Jewish, Christian and Muslim religious law.

Israel has not submitted an International Court of Justice (ICJ) declaration.

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10 Interesting Facts About Israel

  • Motorola's largest development center, which developed the cell phone, is located in Israel
  • Voice mail technology was developed in Israel
  • Israel has the fourth largest air force in the world (after USA, Russia, China)
  • Israel produces more scientific papers per capita than any other nation
  • Israel is the only country that entered the 21st century with a net gain in its number of trees
  • Israeli bank notes are imprinted with brail characters so they can be identified by the blind
  • Israel's $100 billion economy is larger than all of its immediate neighbors combined
  • The first PC anti-virus program was developed in Israel in 1979
  • Both Microsoft and Cisco built their only non-US R&D facilities in Israel
  • In 2000, Moody assigned Israel a credit rating of A with a short-term credit rating of P1, the highest rating available for short-term credit

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Economy

The global financial crisis of 2008-09 spurred a brief recession in Israel. The Israeli Government responded by implementing a modest fiscal stimulus package and an aggressive expansionary monetary policy - including cutting interest rates to record lows, purchasing government bonds, and intervening in the foreign currency market.

Israel recovered quickly in 2010 buoyed by domestic demand, consumption and private investment, which benefited from their expansionary fiscal policy, and a marked improvement in foreign demand.

Economic growth is expected to decelerate somewhat in 2011 due to the likely slow down in demand from the main trading partners, the European Union and the United States.

Leading Markets (2009): US 35%, Hong Kong 6%, Belgium 5%

Leading Exports-commodities: machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel

Leading Suppliers (2009): US 12.3%, China 7.4%, Germany 7.1%, Switzerland 6.9%, Belgium 5.4%, Italy 4.5%, UK 4%

Leading Imports-commodities: raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods

Top Industries: high-technology products (including aviation, communications, computer-aided design and manufactures, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, tobacco, caustic soda, cement, construction, metals products, chemical products, plastics, diamond cutting, textiles, footwear

Top Agricultural Products: citrus, vegetables, cotton; beef, poultry, dairy products

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Comparative Economic Indicators - 2010 est.

Israel Lebanon Syria Jordan Egypt Turkey
Population*
(millions)
7.5 4.1 22.5 6.5 82.1 78.8
Population growth rate* (%) 1.6 0.2 0.9 1.0 2.0 1.2
Age Structure (%)
(15 to 64 years old)
62.2 68.0 61.0 59.9 62.8 67.1
Literacy (%) 97.1 87.4 79.6 89.9 71.4 87.4
Unemployment rate (%) 6.4 NA 8.3 13.4 9.7 12.4
Inflation (%) 2.6 3.7 5.9 4.4 12.8 8.7
Population below poverty line (%) 23.6 28.0 11.9 14.2 20.0 17.11
GDP**
(USD billions)
219.4 59.4 107.4 34.5 497.8 960.5
GDP real growth rate (%) 4.6 7.5 3.2 3.1 5.1 8.2
GDP per capita** (USD) 29,800.0 14,400.0 4,800.0 5,400.0 6,200.0 12,300.0
Public debt (% of GDP) 77.3 150.7 29.8 61.4 80.5 48.1
Exports (USD billions) 54.3 5.2 12.8 7.3 25.3 117.4
Imports (USD billions) 55.6 18.0 13.9 13.0 46.5 166.3
Reserves of foreign exchange and gold (USD billions) 67.0 41.6 18.0 12.6 35.7 78.0
Currency New Shekel
ILS
Pound
LBP
Pound
SYP
Dinar
JOD
Pound
EGP
Lira
TRY
Exchange rates (per USD) 07/22/2011 3.4 1,512.2 46.6 0.7 5.9 1.7
Exchange rates (per EUR) 07/22/2011 4.9 2,145.0 66.1 1.0 8.4 2.4
Rating in 2010 Corruptions Perception Index*** 6.1 2.5 2.5 4.7 3.1 4.4
Rating in 2011 Index of Economic Freedom**** 68.5 60.1 51.3 68.9 59.1 53.2
* July, 2010 estimates
** PPP -- Purchasing Power Parity
*** 2010 Corruption Index: 10=Very Clean; 0=Highly Corrupt
**** 2011 Index of Economic Freedom: 100-80=Free; 49.9-0-Repressed
Economic Data from CIA World Factbook
2010 Corruption Perceptions Index, Transparency International
2011 Index of Economic Freedom, Heritage Foundation

Credit and Collections

ABC-Amega’s collection experience in Israel

Israel has a vibrant economy driven by the hi-tech sector (see Interesting Facts About Israel) and an excellent legal environment based upon the British model.

Of particular interest is the fiscal wisdom Israel demonstrates in controlling its consumer debt. Any use of a consumer credit card is required to be paid in full net-30. This keeps their national debt-to-savings ratio in excellent condition.

One caution: We get several claims per year from creditors around the world who think their delinquent buyer is located in Israel when, in fact, they are in the West Bank or Gaza. These debtors are not governed by Israeli laws or courts and collecting these debts is typically not possible.

Jeff Tharnish, International Account Manager, adds:

The statute of limitations on open accounts in Israel is seven years.

Creditors located outside Israel that file suits against their debtors in the Israeli courts, generally have to post a substantial bond as collateral in the event the court rules in favor of the debtor.

Dispute Resolution

Israel has a written and consistently applied commercial law based on the British Companies Act of 1948. Its commercial law contains standard provisions governing company bankruptcy and liquidation. The country 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.

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Risk Assessment

Coface Country Rating: A3 -- Changes in generally good but somewhat volatile political and economic environment can affect corporate payment behavior, giving rise to occasional company difficulties in making payments. However, in general, corporate default probability is quite acceptable.

Coface Business Climate Rating: A2 -- The political and economic situation is good. This basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low.

Coface: Israeli companies in general proved resilient to the global crisis and the credit crunch, the increase in bankruptcies notwithstanding. As the economy recovered, their financial position firmed up accordingly especially with their generally prudent management policies having prompted them to set aside reserves. In this context, Coface monitoring records reflect improvement in the payment behavior of Israeli companies, which is expected to remain satisfactory and better than the world average.

Ducroire Delcredere Political Risk: 3 – Fairly low
Ducroire Delcredere Commercial Risk: A – Low

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Business Climate

Despite the challenging global economic environment, Israel’s economy has been on a path of well-balanced recovery. With an increasingly diversified product base and ongoing structural reforms, annual growth has been close to 4% for the past five years. Israel’s economic competitiveness is anchored in strong protection of property rights and relatively low levels of corruption, as well as openness to global trade and investment.

Economic Freedom: Israel’s economic freedom score is 68.5, making its economy the 43rd freest in the 2011 Index. Israel is ranked 5th out of 17 countries in the Middle East/North Africa region. (2011 Index of Economic Freedom).

Regulatory System: It is government policy to encourage increased competition through market liberalization and deregulation, but tax, labor, health, and safety laws can be impediments to the foreign investor. Despite the current trend towards deregulation, Israel's bureaucracy can be difficult to navigate, especially for foreign investors unfamiliar with the system. It is important that potential investors get approvals or other commitments in writing from regulatory officials.

Intellectual Property Rights: 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 has also implemented the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Despite the above, intellectual property protection against unfair commercial use in the pharmaceuticals industry is inadequate. In February of 2010, Israel reached agreement with the U.S. to modify its Intellectual Property laws to address shortcomings in its treatment of new pharmaceutical products related to data exclusivity, patent term extension and publication of patent applications. Unfortunately, Israel has yet to enact the legislation and there are industry concerns that the draft legislation under consideration falls short of the terms of the 2010 agreement.

As a result of the deficiencies of Israel’s intellectual property regime, it was placed on the United States Trade Representative’s (USTR’s) Special 301 “Priority Watch List” in 2005 and Israel remains on the list in 2011.

Exchange Control: Foreign-currency controls have been completely abolished, and the Israeli shekel has become a freely convertible currency.

Corruption: Israel’s government and public organizations are fairly free from corruption. 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. Transparency International’s 2010 Corruption Perceptions Index ranks Israel at number 30 (score 6.1) out of the 178 countries included in the Index.

Political Violence: Israel is a parliamentary democracy with a stable domestic environment. Nonetheless, the unresolved conflict between Israel and the Palestinians means that the potential for politically inspired violence and terrorism exists. The State Department web site provides updated information on travel advisories: http://travel.state.gov.

For more detailed information on these topics, visit the 2011 Investment Climate Statement – Israel, of the U.S. Department of State.

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Business Protocol in Israel

  • Maintain direct eye contact. If the Israeli is standing a little too close - invading your private space - it's normal. Taking one step back may make you feel more comfortable but your communication will not be as well received.
  • Business dress in Israel is in general Euro-American and usually classified as casual. Having said that, Israelis expect foreign guests to dress in higher quality, visibly branded items that reflect their own country’s standards for high-end business-casual attire.
  • Israel’s culture and society operate on a “first name basis” so any business or personal relationship, given the atmosphere is friendly and cooperative, will quickly move to a first name basis.
  • Israeli business style and culture is primarily American/West European and visiting businesspersons will encounter few challenges and cultural anxieties when interacting with Israelis. While connections, business acquaintances and referrals are always an asset, Israelis are globally oriented and value international relationships to a degree that rarely requires third party “introductions” as a crucial facilitative mechanism.

More information on Business Protocol: Executive Planet

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Sources for further information on doing business in Israel

Association of America-Israel Chambers of Commerce

Doing Business in Israel, U.S. Commercial Service Israel

Embassy of the United States, Tel Aviv

Embassy of Israel, Washington, DC

Israel-America Chamber of Commerce & Industry

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Israel. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Coface Country Rating and Ducroire/Delcredere.

Exchange Rates: OANDA.com The Currency Site.

Other information is provided by sites including FITA.