doing business in israel and the west bank jonathan m. heimer, senior commercial officer, u.s....

Doing Business in Israel and the West Bank

Jonathan M. Heimer, Senior Commercial Officer, U.S. Embassy Tel Aviv

ISRAEL: WORLD INNOVATOR ISRAEL: WORLD INNOVATOR

http://www.cincinnatichamber.com/default.aspx

Israel at a Glance

Copyright US Commercial Services 2009 2

Population 7.5 million

Population growth rate: Almost 2%, fastest in developed world (2x US rate)

Religious Affiliation: 75% Jews; 17% Muslims; 2% Christians (mostly Arabs); 6% other

Official Languages: Hebrew and Arabic (English not official but widely used)

Government: Parliamentary Democracy

Year of Independence: 1948

GDP: About $215 billion

Per capita GDP: >$30,000

Geography:Intersection of three continents; borders: Jordan, West Bank/ Gaza, Egypt, Lebanon and Syria; large desert, thin plain.

Cultural Context:Universal suffrage; numerous parties; free media; national health care; universal education; culturally highly diverse.

Size: About 1/6 of Ohio, but more than half is Negev Desert

Leading Industries: ICT, Life sciences, Defense, HLS, Cleantech, Gas

Other basics:Work Sunday-mid Friday; time: +6 or 7 hours from East Coast; Israelis need visas to US, but Americans don’t need for Israel.

2010

Crossroad for 3 Continents


Egypt

Lebanon

Algeria

Morocco

Libya

Tunisia

Israel

Turkey

Syria

Iraq

Jordan

Saudi Arabia

Yemen

Oman

Kuwait

Qatar

Bahrain

U.A.E

Italy

Greece

France

Spain

Iran

Political Environment: Robust & Complex

Nationally, individuals vote for PartyParties: low threshold for joining Knesset

high number of parties need for coalition governments

outsized influence of right-wing parties shifting coalitions high turnover at Minister and Deputy Minister level

excess influence of technocrats

Independent judiciary, open press, open internet, highly educated population, multi-cultural backgrounds, numerous NGOs, important issues extremely vigorous debate


Business Culture & Practices: Western w/ a Twist

Comfortable and familiar to Americans, with some key differences: Less formality in speech and dress. More direct, more chutzpa. “Fear of being the freier” (sucker). 2 degrees of separation.

Some positives: English; knowledge of US: 250K US expats, Israel’s #1 trade/FTA partner. Modern banking and logistics systems (ports, airports, roads). Very clean and safe (minimal personal risk); great connectivity. Numerous Free Trade Agreements, including with US. Excellent entry to E. Europe and Africa.

$3.6 billion in trade w/E. Europe; $1.7 billion w/ Africa.

Some challenges: High local IP content. Market maturity. Size of market. EU regulatory and business orientation; EU and Asian competition.


Why Israel:

Why choose Israel? To access Israelis:

perhaps the world’s most educated, entrepreneurial, innovative society: college graduates, PCs, Nobel Prize winners, civilian R&D, GMAT takers, start-ups,

international patents, scientific papers, VC funding, NASDAQ-listed companies, leading edge R&D centers: Google, Intel, Microsoft, HP, Medtronic, Motorola, IBM,

Cisco, Pfizer, GE Healthcare, Applied Materials, J&J, GM, Invented or key contributions: instant messaging, firewall software, flash drive, Pentium

chip, heart stent, video pill, VOIP.

they will tell you why you’re wrong and how you can do it right! great adapters.

To know what is going on in key technology sectors:

ICT, healthcare, electric vehicles, water, solar, defense and HLS. To access Eastern Europe and Africa. Natural gas and electricity projects. Youth.


Israel’s Economy: Very Strong


Despite the global economic slowdown, Israel’s economy has performed very well:

Israel’s banks almost completely avoided CDOs.

Israel completely isolated from Dubai World.

Israel’s central bank was the first in the world to raise interest rates.

2009 GDP growth was 0.7%, and is estimated to grow 3.5% in 2010.

Inflation is expected to be under 3% for 2010.

The unemployment rate ended 2009 at 7.4%, within a “normal band.”

Government spending within budget, government debt low.

Personal debt low as well, as banks control credit cards.

Challenges in Israel

Demographic: Arab-Israeli and ultra-religious groups growing most rapidly

relatively low social integration, low educational achievement and low economic output but requiring high fiscal costs.

Less mainstream political views.

Educational: Israeli youth ever-worsening in international educational comparisons.

Geopolitical: Constant tensions and risk of flare-up, terrorism and confrontation

That said, commercial relations with much of ANESA is good. $1.1 billion w/ Arab Countries; $1.7 billion w/ Africa; $4 Billion w/ India.

And US ExIm Bank ranks Israel very low for non-repayment risk.

Macroeconomic Israel’s economy highly interconnected to Europe and US, and thus subject to external shocks.

Fiscal: Above demographic challenges, plus constant pressure to upgrade social services/benefits.


Opportunities: Best Prospects (1)

Automotive Aftermarket Parts & Equipment To service 2.3 million vehicles on the roads 600–700 importers of aftermarket products and around 20 local manufacturers American spare parts are recognized for their high quality. Of greatest interest: car security and anti-theft devices, Car body, Service parts,

Replacement parts, Vehicle accessories, electronic accessories, brand-name lubricants

Educational Services 30% of Israelis are under 15, with high interest in educational excellence. ~3000 Israeli students took the GMAT in 2008-2009, highest per capita rate in the world. Of greatest interest: degrees integrated with practical work experience, Exchange Programs

and Cooperative Agreements , collaborative research projects.

Electronic Components Total imports in 2009 were >$608 million, with nearly 30% coming from the U.S. Always looking for innovative technologies and components to enhance product features. Local and international demand for Israeli telecom, defense and homeland security markets

have increased demand Need technical support in this fast changing environment.



Electricity and Energy Wide variety of domestic projects and technology development. Israel is world leader in solar power, biofuels and electrical vehicle systems development, Independent Power Production (IPPs) expected to increase rapidly over next several years. Israel is rapidly developing several world-leading national gas discoveries Of most interest: cogeneration equipment, natural gas infrastructure, power generation,

transmission and distribution equipment.

Homeland Security and Defense Well-developed and sophisticated market, with imports also high: $700 million, of which 65% is

US. Often defense procurements made under FMS (Foreign Military Sales), i.e., US security aid. One of Israel’s fastest growing export industries. Of most interest: high-end equipment and components that can be integrated into Israeli systems.

Intelligent Transportation Systems (ITS) Israel moving towards an all-encompassing computer coordinated transportation system Of most interest: traffic safety devices and intelligent transportation systems.



Medical Equipment and Instruments U.S. equipment already accounts for 1/3 of medical imports. Dental care, eye laser surgery and plastic/aesthetic surgery are well-developed private sectors.

General healthcare and medical tourism are likely to demand further upgrades. Of greatest interest: imaging, cardiology, plastic surgery, dentistry and OR. Also, technologies for

wound and pain management, physiotherapy, as well as single use products, and diagnostics.

Telecommunications Among the world’s highest mobile and household broadband penetration rates Very competitive fixed-line voice, mobile communications broadband and digital media. All service providers seeking new/innovative value added services, applications and technologies.

Travel & Tourism The US is Israelis’ preferred destination; the USA’s 16th top tourist-generating country. Over 500 travel agents and 20 tour operators in the Israeli outbound travel market. Special packages and seasonal deals announced on an almost daily basis, especially around the

July-August summer vacation and the Jewish holidays in September, October and April. Of greatest interest: family vacations, eco-tourism, and charters to major cities including special

sports or cultural events, and business travel to major trade shows, combined with sightseeing.


Attracting Israel Investments

States and Municipalities with Representatives in IsraelDelaware OhioGeorgia New York Illinois PennsylvaniaNew Mexico FloridaDayton, OH Fairfax County, VA

Many other States and Cities actively recruiting investments.

Many “pitches” are well-targeted and professionally created.

Primary Drivers: Military Aid, Buy-in-USA Acts, HLSUS and Israeli military want to buy US-made goodsUS military aid to Israel is tiedUS is largest HLS market in world Israel HLS and military companies have gained significant scale


Business Basics – 1

Continued Presence Necessary!Need aggressive in-country sales people and good after-sales service.

Partner or own presence should have good industry contacts, proven reliability, loyalty and technical skills.

Government and state-owned buyers often require Israel agent.Most reps/agents have exclusivity because of Israel’s small size.

When are you ready for Israel?When you have something special.

The something special could be business method, brand, etc., not necessarily technology: Ikea and H&M are huge hits here.

Sometimes, though, mundane items are very successful.When you are ready, willing and able to hear suggestions for

improvements and localization.


Business Basics – 2

Common distribution channels – vary by product. For industrial equipment, raw materials and commodities: commissioned agents. Most consumer goods: importers and distributors,

but increasingly large retail chains import directly without intermediaries. Specialty shops, chain stores, and franchises: mall outlets (more than 200).

Payment terms Generally reliable and pay slightly late.

Of course, as there are always exceptions so please use common precautions. Cash Against Documents (CAD) is preferred by many Israeli importers. Advance payment or an irrevocable bank guarantee on a portion of the sale:

appropriate and recommended when no past relationship or experience with buyer. also appropriate for custom-ordered products.

L/C is common method of payment in very large sales. L/C and CAD combination issued for the same B/L is accepted by most local banks. Payment schedules vary:

For raw materials, components and semi-finished goods, credit is usually limited to 60 days. For equipment and machinery, extended schedules may range from six months to two

years.


U.S. Commercial Service Israel

Offices in Tel Aviv and Jerusalem.12 staff total.Many visitors.Assists hundreds of U.S. businesses annually.Significant interest to DC.

A few words about the West Bank.Covered by two staff.Small but growing very well.Development critical for future peace.Business leaders very competent. Industries: telecommunications, construction, consumer goods.


Toda!

Questions?Jonathan M. Heimer, Senior Commercial Officer

[email protected]

www.buyusa.gov/israel; www.buyusa.gov/westbank


mailto:[email protected]

mailto:[email protected]

http://www.buyusa.gov/israel

http://www.buyusa.gov/westbank