Opportunities for Israel as an investment location and export market

Israel is a small country with around 9 million inhabitants in a geopolitically difficult environment and is actually only seen as an attractive production location in the semiconductor and armaments sector. German companies and corporations have therefore not built up any significant production capacities in the country. The situation is different with investments, however. As Israel became one of the leading high-tech and innovation hubs in the world, it has become an investment destination for most multinational companies. Israel has become a magnet for foreign direct investment and is number one in the world in terms of venture capital per capita.

Location advantages / investment climate

Israel is not in Europe, but it is certainly from Europe. The four-hour flight distance, the cultural and linguistic diversity, the legal certainty and the Mediterranean savoir-vivre turn out to be clear locational advantages for many Europeans when it comes to investment considerations. But that alone is not enough. The country’s culture of innovation, the presence of young, experienced, well-trained and highly motivated talents have become a real locational advantage when it comes to disruptive approaches, technologies and business models of digitization.

Israel as an export market

The Israeli domestic market is about as big as Austria’s. With a GDP per capita of over 40,000 US dollars, purchasing power is only marginally lower. Israelis are price-conscious, but also appreciate quality and style. In this respect, it is not surprising that the country has become an attractive target market for thousands of German companies, in both the consumer and capital goods sectors. Cars, household appliances, measurement and control technology, food, products from the chemical industry, construction and planning services “Made in Germany” are always in demand. Germany ranks fourth among the countries of origin of Israeli imports – seven percent of all imports come from Germany.

The recently concluded normalization agreements with the United Arab Emirates and Bahrain offer Israel excellent opportunities for German exporters, including those who have so far kept their distance from Israel due to regional tensions. In addition, there are now completely new perspectives for serving the Israeli market through branches in Dubai and Abu Dhabi (United Arab Emirates), which was unthinkable until recently.

Particularities of the Israeli market. What do I have to consider?

Israel is a country of immigration with a classic multi-cultural society in which countless ethnic and religious groups come together. In this respect, the more than nine million Israelis cannot be lumped together – “one size fits all” does not apply here. The Israeli-Arab population is to be distinguished from the Jewish metropolitan population, who serve more than one million Russian-born residents differently than the million Orthodox Jews.

In this respect, the success of a commitment in the Israeli market always depends on the skills of a local partner, importer or representative. The German-Israeli Chamber of Commerce and Industry is the first address when it comes to identifying and establishing contact with such partners.

What are the challenges in dealing with business?

Because of their political island situation, Israelis orient themselves outwards anyway, across the small pond to Europe or the larger to America and Southeast Asia. They are polyglot and agile – quick and direct to deal with. Personal performance and success count more than hierarchy and status symbol. First names are common, although the distinction between private and professional life, which is still very important in Germany, is quickly eliminated in Israel.

Anyone who approaches the Israelis not as an evaluator but as an explorer and lets curiosity rule instead of fear of foreigners will find tough negotiating and reliable business partners in the Israelis.

Are there any legal specifics that need to be observed?

Israel is a western, democratic constitutional state, with the legal system consisting of a mixture of Anglo-Saxon and continental law. Corporate law is largely modeled on German law. It is important to also consult an Israeli lawyer when concluding the contract in order to be able to consider and answer questions about the place of jurisdiction, the law of representatives and other aspects in the mutual interest.

This Article was published first on: www.mittelstandsbund.de

About the author

Charme Rykower
Senior Executive at German-Israeli Chamber of Commerce and Industry (AHK Israel)

Charme Rykower is Senior Executive at the German-Israeli Chamber of Commerce and Industry (AHK Israel) in Tel Aviv and has been an integral part of the Israeli ecosystem in various technological sectors for more than 15 years.