iem

1. A
COUNTRY STUDY AND REPORT
ON
Overview of Business & Trade of Israel at International Level
&
Overview of India-Israel Bilateral Trade and Economic
Relations Since 1991
Submitted to
G.H.PATEL POST GRADUATE INSTITUTE OF BUSINESS MANAMENT
Faculty Guide
Prof. Dr.Y.C.Joshi
Submitted by
Dhaval Adesra - 11013
Jayesh Sonagara - 11018
Prakash suthar - 11028
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2. INTRODUCTION
Overview of Business & Trade of Israel at International Level
The economy of Israel is a technologically advanced market
economy, including a rapidly-developing high-tech and service sectors. As
of 2010, Israel has the 24th largest economy in the world, and ranks 15th
among 169 world nations on the UN's Human Development Index, which
places it in the category of "Very Highly Developed".
The major industrial sectors include metal products, electronic and
biomedical equipment, processed foods, chemicals, and transport
equipment. Israel diamond industry is one of the world's centers for
diamond cutting and polishing. Relatively poor in natural resources, Israel
depends on imports of petroleum, coal, food, uncut diamonds and
production inputs, though the country's nearly total reliance on energy
imports may change with recent discoveries of large natural gas reserves
off its coast. Israel is a world leader in software, telecommunication and
semiconductors development. The high concentration of high-tech
industries in Israel, which are backed by a strong venture capital industry,
gave it the nickname "Silicon Wadi", which is considered second in
importance only to its Californian counterpart. The country was the
destination for Berkshire Hathaway's first investment outside the US when
it purchased ISCAR Metalworking, and the first research and development
centers outside the USA for companies including Intel and Microsoft. Israel
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3. is also a major tourist destination, with 3.45 million foreign tourists visiting
in 2010.
In September 2010, Israel was invited to join the OECD. Israel has
also signed free trade agreements with the European Union, the United
States, the European Free Trade Association, Turkey, Mexico, Canada,
Jordan, Egypt, and on 18 December 2007, became the first non-Latin-
American country to sign a free trade agreement with the Marcos trade
bloc.
For 2006, Israeli exports grew by 11%, to just over $29 billion; the hi-
tech sector accounted for $14 billion, a 20% increase from the previous
year.
The United States is Israel's largest trading partner; two-way trade
totaled some $24.5 billion in 2010, up from $12.7 billion in 1997. The
principal U.S. exports to Israel include computers, integrated circuits,
aircraft parts and other defense equipment, wheat, and automobiles.
Israel's chief exports to the U.S. include cut diamonds, printing machinery,
and telecommunications equipment. The two countries signed a free trade
agreement (FTA) in 1985 that progressively eliminated tariffs on most
goods traded between the two countries over the following ten years. An
agricultural trade accord was signed in November 1996, which addressed
the remaining goods not covered in the FTA. Some non-tariff barriers and
tariffs on goods remain, however. Israel also has trade and cooperation
agreements in place with the European Union and Canada, and is seeking
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4. to conclude such agreements with a number of other countries, including
Turkey, Jordan and several countries in Eastern Europe.
Until 1995, Israel's trade with the Arab world was minimal due to the
Arab League boycott. Beginning in 1945, Arab nations not only refused to
have direct trade with Israel (the primary boycott), but they also refused to
do business with any corporation that operated in Israel (secondary
boycott), or any corporation that did business with a corporation that did
business with Israel (tertiary boycott).
Israel is one of the world's major exporters of military equipment,
accounting for 10% of the world total in 2007.
FDI in Figures
The investment system in Israel is liberal and most of the activities
are open to private national and foreign investors. According to a report of
the Bank of Israel, the flow of foreign direct investment (FDI) into Israel
totaled USD 3.7 billion in 2009, which means a decrease of more than
50% compared to 2007, and they have remained weak in 2010. This strong
decline can be explained by the context of the global economy and most of
all, the American economy because Israeli start-ups depend very much on
the situation of the other side of the Atlantic. Nevertheless, Israel benefits
from these assets: a strong R&D activity and a high-skilled and multilingual
workforce. However, the country suffers from a particularly unstable
geopolitical environment.
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5. Foreign Trade Overview
The Israeli economy is extremely open. Israel's exports represent
around 24% of the GNP. They are the backbone of the country's growth.
In 2009, Israel's trade balance, which was previously in deficit,
recorded a historical surplus due to a strong drop on imports. The situation
was again reversed in 2010, a trend that should continue in 2011.
The main customers and suppliers of Israel are the European Union,
the United States, Turkey, Japan, India and China. The main goods imported
by the Israeli state are raw materials and half-finished products,
hydrocarbons, consumption goods (food products and drinks, electrical
equipment, transport equipment, etc.) and investment products. The main
national exports are manufactured goods which are often high technology
products (computer equipment, electronic components, aeronautics,
electronic communication equipment, verification products and
pharmaceutical products)
Trade Barriers in Israel
In general, Israel offers a good commercial environment for U.S.
companies. The United States-Israel Free Trade Agreement (FTA) has
eliminated almost all tariffs, leaving Israel's agricultural sector as the only
one with substantial barriers. The FTA also provides for a joint committee
comprised of representatives from both countries to review the functioning
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6. of the agreement (the committee last met in October 2007). Israel is a
member of the World Trade Organization (WTO).
A 1996 Agreement on Trade in Agricultural Products (ATAP) with the
United States permits Israel to maintain non-tariff protection for certain
agricultural products. This framework expired at the end of 2001 but the
signed agreement was extended until the end of 2009. Under the
agreement, Israel permits free access to a long list of food products and
duty-free access for certain quantities of a list of U.S. products under tariff
rate quotas (TRQ). American exporters and Israeli importers, however,
complain that these TRQs provide an insufficient duty-free quota for many
fruits and other products, and very high fees on additional quantities
(above quota). Israel excludes some U.S. fruits, including, citrus, peaches,
and nectarines, on phytosanitary grounds. Israel is revising its phytosanitary
restrictions making them consistent with WTO requirements.
The U.S. Embassy in Tel Aviv is very actively pursuing much-needed
improvements in the export and investment climate for U.S. firms in Israel.
The efforts are focused in three specific areas: incorporating technical
standards in Israel that do not discriminate against U.S. products,
protecting intellectual property rights, and establishing greater
transparency in Israel’s public procurement process. For further
information about how these issues may affect your export prospects in
Israel, please contact the Commercial Service in Israel.
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7. Regarding intellectual Property Rights, while there has been
improvement in the level of illegal production, importation, and sale of
copyrighted and trademarked goods, serious problems still exist.
Overview of India-Israel Bilateral Trade and Economic Relations
Since establishment of diplomatic relations in 1992, bilateral trade
and economic relations have progressed rapidly. From a base of US$ 200
million in 1992 (comprising primarily of diamonds), merchandise trade has
diversified and reached US$ 5.15 billion in 2011.
In 2011, India was the 8th largest trade partner of Israel in the world, and
3rd largest trade partner in Asia following China and Hong Kong (trade data
includes diamonds). Although bilateral trade increased in 2011, as
compared to 2010, India’s position among Israel’s trading partners fell from
sixth to eighth. India is the 11th largest import source of Israel including
diamonds, and 16th largest import source excluding diamonds (in Jan-Dec
2011). India is the 5th largest export destination of Israel (including
diamonds) and 7th largest excluding diamonds (Jan-Dec 2011). While India's
exports to Israel in areas other than diamonds have increased over the
years, Diamonds still constituted around 49% of the bilateral trade in the
year 2010.
India-Israel two-way trade in 2011 increased by 8.8% from US$ 4.73
billion in January-December 2010 to US$5.15 billion in January-December
2011. However balance of trade was in Israel’s favor by US$844 million.
Although India’s exports to Israel in areas other than diamonds increased
over the years, diamonds continue to be an important segment at 56.4% of
total bilateral trade in 2011 (US$ 2.91 billion out of US$ 5.153 billion).
Major exports from India to Israel include precious stones and metals,
chemical products, textile and textile articles, plants and vegetable
products, mineral products, rubber and plastic products, base metals and
machinery. Major exports from Israel to India include precious stones and
metals, chemical and mineral products, base metals, machinery, and
transport equipment.
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8. While the traditional business thrust in diamonds, agriculture,
chemicals, information & communication technology and pharmaceuticals
remained strong, there is a growing interest from Israeli companies in clean
energy, water technologies, biotech, nanotech, homeland security, real
estate, infrastructure and financial services.
Salient points of the bilateral trade figures during January–December
2010 (Central Bureau of Statistics of Israel) are as follows:
 India-Israel two-way trade during Jan-Dec 2010 increased by 59.92%
from US$ 2968.3 million in Jan-Dec 2009 to US$ 4747.1 million in
Jan-Dec 2010.
 Indian exports to Israel during January-December of 2010 increased
by 59.45% (from US$ 1157.4 million in Jan-Dec 2009 to US$ 1845.5
million in Jan-Dec 2010). Indian exports to Israel excluding diamonds
increased by 37.68% (from US$ 518.2 million in Jan-Dec 2009 to US$
713.5 million in Jan-Dec 2010).
 Israel exports to India during January-December of 2010 increased
by 60.22% (from US$ 1810.9 million in Jan-Dec 2009 to US$ 2901.6
million in Jan-Dec 2010). Israeli exports to India excluding diamonds
for this period increased by 41.05% (from US$ 1198.5 millions in
Jan-Dec 2009 to US$ 1690.6 millions in Jan-Dec 2010).
 There was an increase of 87.2% in diamonds traded between the
two countries during January-December of 2010 (from US$ 1251
millions in Jan-Dec 2009 to US$ 2343 millions in Jan-Dec 2010).
Exports of diamonds from India to Israel during this period
increased by 77.09% (from US$ 639.2 million in Jan-Dec 2009 to US$
1132 million in Jan-Dec 2010) while imports into India increased by
97.74% (from US$ 612.4 million in Jan-Dec 2009 to US$ 1211 million
in Jan-Dec 2010).
 Balance of trade during January-December of 2010 is in Israel’s
favor by US$ 1056.1 million.
 Israel’s two-way global trade during January-December of 2010
increased by 23.34% (from US$ 95,303.7 million in Jan-Dec 2009 to
US$ 117,553.0 million in Jan-Dec 2010). India’s share in Israel’s two
way global trade in this period increased from 3.11% (in Jan-Dec
2009) to 4.03% (in Jan-Dec 2010).
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9.  Share of India’s exports in Israel’s global imports (including
diamonds) for this period, increased from 2.44% (in Jan-Dec 2009)
to 3.12% (in Jan-Dec 2010).
 Share of India’s exports in Israel’s global imports (excluding
diamonds) for this period increased from 1.23% (in Jan-Dec 2009) to
1.4% (in Jan-Dec 2010).
 India is ranked 9th largest import source of Israel including
diamonds, and 14th largest import source excluding diamonds (in
Jan-Dec 2010).
 Share of Israel’s exports to India in Israel’s global exports (including
diamonds) for this period, increased from 3.77% (in Jan-Dec 2009)
to 4.96% (in Jan-Dec 2010).
 Share of Israel’s exports to India in Israel’s global exports (excluding
diamonds) for this period increased from 3.29% (in Jan-Dec 2009) to
4.02% (in Jan-Dec 2010).
 India is ranked 4th largest export destination of Israel (including
diamonds) and 5th when excluding diamonds (in Jan-Dec 2010).
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10. List of signed Bilateral Agreements
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11. Objectives of the study
1) To measure trade and business relationship of Israel with rest of the
world.
2) To measure bilateral trade and economic relations of India-Israel.
3) To identify international trade barriers in Israel.
4) To measure foreign direct investment in Israel.
Research Methodology
In this report we use exploratory research method to understand
trade and business relationship of Israel with rest of the World and with
India. We use secondary data for research.
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12. Bibliography
www.state.gov
www.israelimporter.com
www.indexmundi.com
www.finmin.nic.in
www.oecd.org
www.indembassy.co.in
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