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In this page: FDI in Figures | What to consider if you invest in Israel | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information

 

FDI in Figures

Israel has a liberal investment system and most activities are open to both private national and foreign investors, ranking the country 12th among the top 20 host countries. According to UNCTAD's World Investment Report 2021, Israel's investment flow increased by 30% between 2019 and 2020, reaching USD 25 billion in 2020, despite the Covid-19 pandemic. Investments were largely driven by M&A sales in electronics, which increased by 31% to USD 7.3 billion, e.g. NVidia (US) acquired Mellanox for USD 6.9 billion. The stock of FDI was about USD 189 billion in 2020. According to OECD data, FDI flows to Israel amounted to USD 14.8 billion in the first half of 2021. Israel’s main investing partners are the United States and the Netherlands. Most FDI stocks are directed towards manufacturing, information and communication, and financial and insurance activities. Chinese investment in Israel has grown rapidly in recent years, particularly in software, IT services and consumer electronics. Furthermore, the Chinese company Shanghai International Port Group (SIPG) will operate the Haifa Port - Israel's largest port - as of 2021 for 25 years whereas China Harbour Engineering Company won a tender to build a USD 1 billion port at Ashdod.

Israel has a number of assets, which appeal to foreign investors: a strong R&D sector and a high-skilled and multilingual workforce. The hi-tech sector, especially start-ups, has attracted a great deal of foreign investment. However, the country's geopolitical environment is particularly unstable because of tensions with the Palestinian territories and support for American policy by Israel. In the Doing Business 2020 report (latest report), Israel ranks 35th out of 190 economies ranked by the World Bank, up 14 places from the previous year's ranking. Significant progress has been made in particular in paying taxes and obtaining loans.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 17,36324,28329,615
FDI Stock (million USD) 161,397185,188235,593
Number of Greenfield Investments* 784779
Value of Greenfield Investments (million USD) 1,7501,5382,625

Source: UNCTAD, Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

FDI STOCKS BY COUNTRY AND INDUSTRY

Main Investing Countries 2019, in %
USA 19.3
Netherlands 7.8
Cayman Islands 7.5
Canada 3.2
Luxembourg 2.3
Singapore 1.9
United Kingdom 1.7
Main Invested Sectors 2019, in %
Manufacturing 24.3
Information and communication 22.4
Professional, scientific and technical activities 14.7
Financial and insurance activities 12.3
Administrative and support service activities 4.6
Real estate 4.1
Mining and quarrying 1.7
Wholesale and retail trade; repair of motor vehicles and motorcycles 1.5

Source: OECD's Statistics - Latest available data.

 
Form of Company Preferred By Foreign Investors
Public limited company
Form of Establishment Preferred By Foreign Investors
Subsidiary or branch.
Main Foreign Companies
Consult the "Success Stories" of foreign companies established in Israel, on the dedicated page on the website of Invest in Israel.
Sources of Statistics
Bank of Israel
Central Bureau Statistics

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What to consider if you invest in Israel

Strong Points

Israel has many strong advantages for FDI:

  • Israel is the country that invests the most in research and development in the world (5.4% of GDP in 2020, CBS)
  • Highly skilled workforce, particularly in engineering and high technology
  • Strong and stable private consumption
  • Rising real wages
  • Strong political stability due, on the one hand, to its stable democratic system and on the other hand to the political and financial support of the United States
  • Israel discovered significant offshore reserves of natural gas, which would enable the country to reduce its energy dependence and create new development opportunities
Weak Points

Main obstacles to the country's economic development:

  • Chronic instability linked to the regional political context. In particular, peace negotiations between Israel and the Palestinians are at a standstill
  • The Israeli state has a very large public debt
  • Labour costs are higher than the region's standards and a relatively high corporate tax are obstacles to investment in Israel
  • Relatively small internal market
Government Measures to Motivate or Restrict FDI
Foreign investment is encouraged in Israel by the recently revised Investment Promotion Act. The recent amendment to this law adds a tax incentive program.
The government in place is also seeking to provide the necessary support to entrepreneurs and the entrepreneurial ecosystem: many start-ups are emerging in Israel, particularly in information and communication technologies (ICT).
The Law for the Encouragement of Capital Investments provides assistance in the form of grants and tax breaks to companies classified as “Priority Enterprise”
For further information consult the Invest in Israel website, which provides guidance on Israeli laws, regulation, taxes, incentives, and costs, and facilitation of business connections.

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Protection of Foreign Investment

Bilateral Investment Conventions Signed By Israel
To see the list of investment treaties signed by Israel, consult UNCTAD's International Investment Agreements Navigator.
International Controversies Registered By UNCTAD
Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement
ICCWBO , International Court of Arbitration, International Chamber of Commerce
ICSID , International Center for Settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency
Israel is a signatory of the MIGA Convention.
 
Country Comparison For the Protection of Investors Israel Middle East & North Africa United States Germany
Index of Transaction Transparency* 7.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 9.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 9.0 4.7 9.0 5.0

Source: Doing Business - Latest available data.

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

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Procedures Relative to Foreign Investment

Freedom of Establishment
There are no restrictions on foreign investments except for sectors considered vital for national security, such as the defence and telecommunications sectors.
Acquisition of Holdings
Rules regarding mergers and acquisitions or takeovers are the same as for Israelis.
Obligation to Declare
Foreign investors are not under any obligation to receive prior authorisation from the Government, except for regulated industries (such as banking) or to register, except if the company wants to benefit from certain advantages. Investments in certain sectors may require a government license.
Competent Organisation For the Declaration
Invest in Israel
The Authority for Investments and Development of the Industry and Economy
Requests For Specific Authorisations
In October 2019, the Israeli government established a centralized investment screening mechanism for certain inbound foreign investments. Such mechanism applies to investments in regulated industries (like banking and insurance), which have to obtain approval by the relevant regulator.

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Office Real Estate and Land Ownership

Possible Temporary Solutions
Consult Instant Offices, CoWorker, Regus.
The Possibility of Buying Land and Industrial and Commercial Buildings
Purchase of buildings and land is open to foreign investors. However, registering or obtaining land rights is a cumbersome process (Israel ranks 75th in “Registering Property” according to the World Bank’s 2020 Doing Business Report).
Risk of Expropriation
There are very little risk of expropriation, as the Israeli judicial system recognizes and enforces secured interests in property. In case of expropriation, the company will benefit from complete and non-arbitrary compensations, with interest from the day of expropriation until final payment.

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Investment Aid

Forms of Aid
Assistance is going to depend on the location of the investment and the nature of the project, amount of investment and the degree of foreign participation. This will be for financial assistance, financial incentives, grants, depreciation on diminishing values or loan guarantees, reduced tax rates, tax exemptions, and other tax-related benefits.
For detailed information, consult the dedicated page on the website of Invest in Israel.
Privileged Domains
Incentives are available for research and development, employment generation, jobs for emigrants and training. For further details, refer to the dedicated page on Invest in Israel's portal.
Privileged Geographical Zones
For a detailed description of sector-specific incentives, consult the dedicated page on Invest in Israel's website.
Free-trade zones
Grants are accorded at up to 20% of the amount of investment in fixed assets, production equipment or facilities. For investments in the Negev area in south Israel, an addition of up to 10% may be applied.
Furthermore, Israel has bilateral Qualifying Industrial Zone (QIZ) agreements with Egypt and Jordan.
Public aid and funding organisations
The Investment Authority is entrusted with capital grants, while the Tax Authority manages the tax benefits.
 
 

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Investment Opportunities

The Key Sectors of the National Economy
Value added sectors: high-tech, aeronautics, electronics, telecommunications, information, biotechnologies, etc. 
Security: biometry, surveillance and protection. Resources: treatment of raw water and desalination of water.
Furthermore, Israel is ranked 1st for medical device patents and 2nd for medical device solutions per capita.
High Potential Sectors
Chemical industry, agro-technologies, semi-conductor industry, communication, environment, biotechnologies, security, natural gas.
Privatization Programmes
The Government Companies Authority (GCA) is the administrative agency for state-owned companies in charge of supervision, privatization, and implementation of structural changes. After several years of stalled progress, the provatization program has been revived since 2020. Among the sectors concerned are defence (Israel Aerospace Industries), transport (Portof Haifa) and postal service (Israel Post).
Tenders, Projects and Public Procurement
Ministry of Economy and Industry, Mandatory Tenders Regulations
Tenders Info, Tenders in Israel
DgMarket, Tenders Worldwide

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Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
Electricity.
In the case of designated monopolies, defined as entities that supply more than 50% of the market, the government controls prices. For further information consult the website of the Israel Competition Authority.

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Latest Update: November 2022