ISRAEL TRADE AND INVESTMENT BRIEF
Israel is a remarkable success story for British exporters.UK exports have grown steadily. Bilateral trade has consistently been in excess of £2 billion over the last 10 years and should reach £4 billion by 2013.
With Israel’s strong economic performance in terms of GDP growth, low inflation, and falling unemployment, it continues to be a growing export market for UK companies. Israel has an excellent reputation for innovation and invention and is a world centre for R&D.
UKTI’s key objectives are:
UKTI has prioritised the following sectors in Israel as being important for UK interest: Energy, Life Sciences (specifically biotechnology, medical devices and healthcare); Information & Communications Technologies (ICT); Aviation and Financial Services.
For 2012-14 UKTI Israel’s proactive trade work will focus on Energy and Life Sciences with the objectives of raising UK awareness to opportunities in these sectors in Israel. Its inward investment work will focus on persuading major Israeli exporters to set up operations in the UK and on existing investors to expand their operations in the UK.
Another key objective is to reach two way trade of £4.5 billion by 2014.
Israel is considered one of the most advanced Middle East countries in terms of economic and industrial development. Israel joined the OECD in 2010. The rate of investment in R&D (4.7% of GDP) is one of the highest in the world. Israel is one of the five emergent markets whose growth has been sustained for the past 20 years. Israel’s economy is stable and mature and is supported by an efficient public sector. Its high technology sector has grown consistently for 10 years.
Opportunities in Market
ICT: The Israeli communications industry is recognized as the second most important after the US Silicon Valley (with multinational technology giants such as Cisco, IBM, HP, Intel, Microsoft and Google which invest heavily in R&D inIsrael). The ICT sector, which has grown 11% annually over the last 10 years, represents nearly 20% of the added value Israel offers.
Infrastructure: The implementation of a long-term road, rail and ports infrastructure, electricity production plant and distribution, water treatment facilities, and telecommunications networks modernization program all present opportunities for UK companies.
Security: Opportunities exist for manufacturers of leading-edge equipment and components that can be integrated in Israeli systems. The market offers good opportunities for sophisticated detection material, CCTV, sensors, biometric solutions, X-ray and defence systems.
Environment: Opportunities exist for UK energy and renewable energy companies as by 2020, the Israeli government hopes to produce 10% of its electricity through renewable energy to achieve a 20% saving in energy usage. The goal for 2020 is to reduce the use of coal in electricity production substituting it for renewable energies (10%) and natural gas (45%). The use of oil will be totally phased out by 2020.
Venture capital: There is a strong demand for venture capital to support an ever increasing technology industry. Israel is currently the 2nd largest venture capital market in the world.
Challenges in Market
Israel maintains a strong trading partnership in the context of the Association Agreement with the EU and is one of the most dynamic economic partners of the EU in the region.
Israel’s accession process to the OECD in 2010 provided considerable leverage with regard to two main market access barriers (IPR issues and taxation of alcoholic spirits), while substantial progress was made on sanitary issues (BSE import restrictions, prohibition of lanolin and animal vaccines).
But perhaps the major challenge facing UK companies looking to export to Israel is competing on price. There is no automatic market acceptance of a product just because it is made in the UK and, while UK products generally enjoy a reputation for quality, the market is price sensitive and there is a limit to how much more the customer is willing to pay for the quality characteristic.
Bilateral Trade Background
Israel was the UK’s 32nd largest export market in 2011. UK exports are rising year on year.
Trade in Goods
UK exports in 2011 were £1,567m, an 18% increase compared to 2010.
UK imports in 2011 were £2,186m, a 48% increase compared to 2010.
Trade in Services (latest figures available 2010)
UK exports of services in 2010 were £527m, a 19% increase compared to 2009.
UK imports of services in 2010 were £324m, a 17% increase compared to 2009.
The UK’s market share in 2011 compared to other countries:
USA: US$18.5bn (31.7%); Hong Kong: US$9bn (6.7%);Belgium: US$3.1bn (5.3%);India: US$2.9bn (4.9%);UK: US$2.27bn (3.9%).
USA: $6.7bn (11.3%); China U$£4.7bn (8.0%); Germany $3.7bn (6.2%); Belgium $3.6bn (6.0%); Switzerland: US$3.2bn (5.4%); Italy: US$2.43 (4.1%); UK US$2.25bn (3.8%).
Bilateral Investment Background
Over 250 Israeli companies have a physical presence (office, warehouse, service centre, plant etc.) in the UK providing thousands of jobs and covering a range of sectors, notably pharmaceutical, defence, ICT, mining, food processing and plastics manufacturing.
Recent UK investments in Israel include CSR plc, a supplier of wireless connectivity and location chips such as Bluetooth, GPS, Wi-Fi and other audio devices, which purchased the Israeli imaging and video chip company Zoran for US$679m; and Accessorise which has opened their 16th store in Israel and intends to increase the number of stores in Israel to 30 within the next few years.