The State of Israel (Hebrew: מְדִינַת יִשְׂרָאֵל, Medinat Yisra'el; Arabic: دَوْلَةْ إِسْرَائِيل, Dawlat Isrā'īl) is a country in the Western Asian Levant, on the southeastern edge of the Mediterranean Sea. It borders Lebanon on the north, Syria and Jordan on the east, and Egypt on the south-west. The State of Israel was created in 1948. With a diverse population currently exceeding seven million citizens of primarily Jewish background and religion, it is the world's only Jewish state. Jerusalem is the capital city and seat of government. Israel is the only country in the Middle East considered to be a liberal democracy, having a broad array of political rights and civil liberties present. In addition, Israel is considered the most advanced in the region in terms of freedom of the press,business regulations, economic competition,economic freedom,and overall human development.
Economy
Israel has a technologically advanced market economy with substantial, though diminishing, government participation. It depends on imports of crude oil, grains, raw materials, and military equipment. Despite limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Israel imports substantial quantities of grain, but is largely self-sufficient in other agricultural products. Cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are the leading exports. Israel usually posts sizable trade deficits, which are covered by large transfer payments from abroad and by foreign loans. Roughly half of the government's external debt is owed to the US, which is its major source of economic and military aid. The bitter Israeli-Palestinian conflict; difficulties in the high-technology, construction, and tourist sectors; and fiscal austerity in the face of growing inflation led to small declines in GDP in 2001 and 2002. The economy rebounded in 2003-05, growing at a 4% to 5.2% rate each year, as the government tightened fiscal policy and implemented structural reforms to boost competition and efficiency in the markets. The conflict with Lebanon in summer 2006 slightly dampened GDP growth, but continuing strong foreign investment, tax revenue, and private consumption levels helped the economy recover quickly.
Market Overview
After growth of 6.2% in 2000, Israeli growth was negative in 2001 and 2002. Growth resumed in 2003 with GDP of 1.7%, and continued to grow by 4.4% in 2004, 5.2% in 2005 and 5.1% in 2006.
GDP per capita rose 2.6% in 2004 to $17,200. In 2005, GDP per capita increased by 3.4% to $17,800 and in 2006 the increase was 3.1% to 18,350. According to purchasing power parity, GDP per capita in 2005 was $ 26,200.
Inflation: 1.2% in 2004, 1.3% in 2005. In 2006 inflation was slightly negative.
Unemployment declined to 9% in 2005 from 10.4% in 2004. It continued to decline in 2006 to 8.5%.
Israel ranked 3rd in the world for U.S. patents per capita, following Japan and Taiwan.
Exports to Israel amounted to $10.964 billion, making Israel the 22nd largest export market in the world for U.S. goods and services. Imports from Israel amounted to $19,150 billion, creating a negative trade balance of over $8 billion.
The United States is Israel's largest single country trade partner, despite heavy European competition.
U.S. exports accounted for 11.7% of Israel's imports in 2006.
Locally or regionally produced U.S. brands contribute to an even higher profile for U.S. products among Israeli consumers and manufacturers.
Israel's commercial relationship with the United States has grown seven-fold since the signing the Free Trade Area Agreement (FTAA) in 1985.
Since 1995, nearly all tariffs on trade between U.S.-Israel have been eliminated.
The business environment and style here will seem familiar to Americans, but personal relationships sometimes play a relatively larger role.
Market Challenges
Competition from the EU is intense.
Agricultural trade issues, certain intellectual property rights protections, and a range
of technical standards issues remain active non-tariff trade barriers.
Frequently there is a tense political and security environment given the complex
geopolitical neighborhood and stagnation in the Peace Process.
Market Opportunities
Hi-tech and defense dominate Israel's trade numbers, and Israel remains a global center for hi-tech design and R&D.
Hi-tech continues to provide the best opportunities for U.S.-Israel commercial partnerships.
Other promising sectors include safety and security equipment and services, defense equipment, medical technologies and biotechnology products, and educational services.
Proposed infrastructure and electricity projects, if implemented will provide solid opportunities for U.S. exporters: gas-driven independent power producers (IPPs), including cogeneration plants; renewable energy power stations, such as solar energy stations and wind driven turbine generators.
Projects in the railroad sector are expected to total $4.5 billion over the next six years.
The recent devaluation of the US dollar against the shekel bodes well for U.S. exports to the Israeli market.
Road technology and infrastructure projects could offer millions of dollars worth of export opportunities for U.S. firms over the next five years.
