Israel: Business environment at a glance

2009 Update of Investing in Israel.

Policy towards private enterprise and competition

2009-10: Privatisation is put on hold, except in the ports sector. "Open skies" policy is extended.

2011-13: Deregulation of electricity sector. Partial land reform. Competition increases in the financial services, energy, telecommunications and seaport sectors. Private involvement in major infrastructure projects increases.

Policy towards foreign investment

2009-10: Investment incentives, including tax breaks, are enhanced for foreign direct investment (FDI), but the global slowdown leads to falling inflows. New standards in banking and accounting as well as OECD benchmarks are adopted.

2011-13: Efforts to attract foreign investors continue, with a focus on the high- and clean-tech sectors and life sciences.

Foreign trade and exchange controls

2009-10: Shekel's value is pushed lower through foreign-exchange market intervention. Government supports exporters.

2011-13: Trade and investment links with emerging economies increased. The Bank of Israel (the central bank) may undertake limited interventions to limit a rapid rise in the shekel's value.

Taxes

2009-10: Planned reductions in personal and corporate income tax for 2009 are implemented, but 2010 changes are postponed. The rate of value-added tax (VAT) is raised to 16.5%. The earned-income tax credit programme is broadened.

2011-13: New tax reduction programme is launched, focused on corporate taxes and mid-range household incomes, financed by elimination of tax breaks, although its extent will be determined by the need to finance significant deficits.

Financing

2009-10: Further reforms in the financial sector are delayed, with the focus switching to enhanced regulation—including tougher measures to promote competition between financial institutions. New debt and equity instruments are launched.

2011-13: Further pension and capital market reforms lead to renewed rapid expansion of domestic financial markets.

The labour market

2009-10: The global and domestic recessions lead to higher unemployment and lower wages.

2011-13: Technology and other export industries are caught between rising demand and slow growth in the supply of skilled technology workers. Emerging skills shortages spur reforms in education at all levels.

Infrastructure

2009-10: Government launches expanded programme of public-private infrastructure ventures, but bureaucracy and scarce credit delay implementation. Offshore natural gas projects move towards completion.

2011-13: Natural gas becomes the primary energy source. The electricity sector is deregulated. Transport investment grows, as construction of the Jerusalem light rail project continues and work on the Tel Aviv light rail project begins.

More information on Invest in Israel Agency.