Israel Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Within the EU, Israel’s main trading partners (exports and imports) are Germany, Belgium, the Netherlands, Italy, Great Britain, and France. In 2014, the European Commission proceeded to tighten the conditions for the import of certain food products into the EU with a place of origin designation outside the internationally recognized borders of Israel. At the political level, relations with European countries are the subject of frequent disputes, which are generated mainly from Israel’s attitude to the Middle East peace process. The framework of mutual relations is determined by the Association Agreement, which virtually completely liberalized trade between the EU and Israel. The EC warned that an attempt to circumvent the measures, for example by moving goods for processing outside the controversial territory, could mean a blanket ban on the import of certain food products.

  • Allcountrylist: Overview of major industries in Israel, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 20,054.30 19,420.70 20,076.10 19,491.40 24,247.70
Imports into the EU (million EUR) 13,576.90 12,472.20 13,055.70 11,529.30 12,598.00
Balance with the EU (million EUR) -6,477.5 -6,948.5 -7,020.4 -7,962.1 -11,649.7

Source: EC

Trade relations with the Czech Republic

Trade between the Czech Republic and Israel is practically completely liberalized. The market is limited by its relatively small size and long transport distance. The Czech Republic is not one of Israel’s largest trading partners (in trade, however, it significantly exceeds Poland, Austria, Hungary and Slovakia), but the highly positive trade balance in favor of the Czech Republic indicates that Czech exporters are able to establish themselves in this demanding market. For comparison, Czech companies export half as many goods to Israel as to India, or several times more than to Canada or Brazil.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 6.5 22.1 21.9 18.4 ON
Imports to the Czech Republic (billion CZK) 24.2 6.1 5.8 5.4 ON
Balance with the Czech Republic (billion CZK) 18 -16 -16.1 -12.9 ON

Source: CZSO

Trade relations with countries outside the EU

Trade with countries outside the EU is characterized by a high deficit in Israel’s trade balance. The latter is the highest in trade with China, the largest importer. On the other hand, Israel manages to maintain a positive trade balance with the USA and Britain. Other important trading partners include Hong Kong, India, Turkey, Brazil, Japan and Russia.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 25,050.4 26,446.9 23,827.3 20,875.2 23,592.9
Imports to countries outside the EU (million EUR) 44,230.0 51,970.8 51,384.2 46,906.1 63 134.8
Balance with non-EU countries (million EUR) -19,179.6 -25,523.9 -27,556.9 -26,030.9 -39,541.9

Source: EIU, Eurostat

Foreign direct investment

Thanks to the liberal investment system, the Israeli economy is open to both domestic and foreign investment. According to data from the United Nations Conference on Trade and Development, the volume of foreign direct investment increased by 30% between 2019 and 2020, despite the covid pandemic. The total amount thus reached the level of USD 25 billion. The increase was mainly due to mergers and acquisitions. For example, Nvidia acquired Israel’s Mellanox Technologies for USD billion. Between 2018-20, FDI amounted to 4.4-6% of Israel’s GDP.

The USA and the Netherlands have long been the largest investment partners. Most of the investments go to the production, ICT, finance and insurance sectors. In recent years, there has been significant growth in Chinese investment. These mainly affect the areas of software, ICT and consumer electronics. Chinese investments also go into transport infrastructure. Shanghai International Port Group will operate Haifa Port for the next 25 years; another Chinese company will then build a $1 billion port in the city of Ashdod.

Entry of Czech investors into Israeli companies is rather a sporadic matter. Nevertheless, the Springtide Venture fund belonging to Karel Komárek’s KKCG investment group was responsible for this year’s significant Czech investment. After last year’s investment in the cyber security company Shield-IoT, the fund entered the technology companies Source Defense and NetOp.Cloud for a sum of approximately 250 million crowns, for which it acquired significant shares and, in the case of Source Defense, a seat on the board of directors. Source Defense develops software to detect security vulnerabilities in applications delivered by third parties to corporate websites. NetOp.Cloud then focuses on using artificial intelligence to automate network traffic problem solving.

FTAs and treaties

Agreements with the Czech Republic and the EU

In connection with the accession of the Czech Republic to the EU, on May 1, 2004, those contractual documents that were in conflict with obligations arising from EU law were terminated. On the same date, the Czech Republic began to apply the trade articles of the Association Agreement between the European Union, its member states and the State of Israel (Euro-Mediterranean Agreement).

The following contracts are also in force:

  • Agreement between the government of the Czechoslovakia and the government of the State of Israel on air transport (Jerusalem, 24/04/1991).
  • Agreement between the Czech Republic and the State of Israel on the prevention of double taxation and the prevention of tax evasion in the field of income tax (Jerusalem, signature 12/12/1993, effective 12/23/1994).
  • Agreement on cooperation in agriculture between the government of the Czech Republic and the government of the State of Israel (Prague, signed on 12 January 1996, effective from 29 April 1996).
  • Agreement between the government of the Czech Republic and the State of Israel on mutual assistance in customs matters (Jerusalem, September 2, 1997).
  • Agreement between the government of the Czech Republic and the State of Israel on mutual support and protection of investments (Jerusalem, signed on 23/09/1997, effective from 16/03/1999) – its renegotiation is currently underway
  • Agreement between the government of the Czech Republic and the State of Israel on film co-production (Jerusalem, signed on November 8, 2017)
  • Agreement between the government of the Czech Republic and the government of the State of Israel on cooperation in the field of the environment (Jerusalem, signed on 27 November 2018)

In March 2009, the Agreement on cooperation in the support of industrial research and development in the private sector was signed, valid since September 2009. On the basis of this agreement, the MOST/GEŠER implementation program was launched on April 1, 2010, which enables financing of winning Czech-Israeli projects from government sources.

The relations between Israel and the EU are thus almost exclusively determined by the Association Agreement, or from 1.1.2010 by the so-called Agrarian Agreement, which deals with trade in agricultural commodities between the EU and Israel. An integral part of the agreements are free trade agreements, which eliminate tariffs in mutual trade.

Developmental cooperation

Israel is not a recipient of development aid, but participates in several economic cooperation programs, incl. Partnership for Peace (support of civil society), Technical cooperation and an instrument for information exchange, regional programs Euromed, Erasmus+, and others (the current list of projects is published at http://eeas.europa.eu/delegations/israel).

The Czech Republic does not provide development aid to Israel.

Prospective fields of study (MOP)

Transport industry and infrastructure

Due to the non-existence of significant steel plants in Israel, the market is significantly import-oriented. The same applies to the supply of means of transport (except passenger cars, e.g. locomotives, wagons, trams, buses) and related components (rails, signaling equipment). It is not very likely that Czech companies could win entire tenders, that is more the domain of domestic entities, especially when it comes to construction work. However, they can participate in subcontracts such as tunnel digging (in Israel, in principle, there is no company that can manage larger projects of this type), the supply of rails, new trains, etc. In 2018, we applied for a tender for the supply of trams to Jerusalem as a vehicle supplier for a consortium of companies together with an Israeli, Greek and American company. In the meantime, the first of the eight Tel Aviv-Jerusalem light rail lines was completed,

As part of the package to support the economy after the COVID-19 pandemic, Israel plans to promote and plan infrastructure projects, especially in the transport sector. The following projects will be involved: the establishment of 10 integrated transport centers in the central part of the country, a new tram line (Blue line) in Jerusalem, the connection of the Upper Galilee and the Jordan Valley with the national water supply network, the construction of a gas pipeline to increase the export of natural gas to Egypt, investments in drainage infrastructure to prevent flooding, acceleration of the railway electrification project, etc. The expansion of the existing airport in Haifa or the Alenby Terminal border crossing between Israel and Jordan is also planned. These projects could represent opportunities for Czech companies to participate in the post-crisis economic recovery of Israel.

Energy industry

The energy industry is one of the fastest growing in Israel. Israel now has more natural gas than it can use. The capacity of the Tamar deposit, which has been mined since 2013, can meet 98% of domestic demand. The start of natural gas extraction from the Tamar deposit was mainly reflected in the production of electricity. At the beginning of 2020, mining was started from the significantly larger Leviathan deposit, the output of which will be primarily intended for export. While in 2010, steam-gas power plants provided 40% of the power electricity in Israel, in 2021 it was 60%. The Israeli government anticipates that by 2030 the share of natural gas in electricity production will increase to 70%. The government plan also envisages increasing the share of renewable sources in the energy mix to 30%. The dominance of the state-owned power company Israel Electric Corporation in terms of production will gradually decline, opening up space for other private manufacturers and investors. For the above reasons, the energy sector is one of the most promising in terms of investment and business opportunities. These are mainly production and distribution/distribution parts, transformers, storage and backup systems, equipment for generating electricity (turbines, boilers, cooling towers), equipment and technologies for mining, storage, processing. and transportation of natural gas, construction and supply of equipment and components (pipes, fittings, compressors). Prospective investments will be made in distribution technologies, gas processing equipment (CNG, possibly liquefaction) or gas storage. It will be similar due to the growing share of renewable resources (especially

Aviation industry

The closure of Israeli skies due to the coronavirus pandemic has increased demand for private flights. Both businessmen and casual travelers are interested in traveling, but encounter a lack of airlines and companies that provide these services.

ICT

Israel ranks among the countries with the largest share of R&D investments in relation to GDP in the world – annually it invests around 4.8% of its GDP in civilian R&D, with almost 85% of these investments coming from the private sector. Israel is also nicknamed the “Start-up Nation”, as there are over 6,000 active start-ups in various stages of development (Seed, A round, B round, C round) operating in the country, it is home to 530 development centers of multinational corporations, including giants such as Intel or PayPal and operates on 490 private Venture Capital funds. Most investments are flowing into the ICT & Software development sector, within which the share of investments is increasing, especially in start-ups that focus on the field of cyber security, artificial intelligence, so-called big data analysis, the Internet of Things (IoT) and fin-tech tools. The number of start-ups in the segments of Industry 4.0, artificial intelligence, virtual reality and block-chain technology. Among other sectors, the field of natural sciences is also developing, especially in the segment of e-health and analyzes of large volumes of health data (including in connection with COVID-19). The number of companies in the field of so-called smart mobility is also growing rapidly. There is also an opportunity for Czech companies in the field of applied research. The Technology Agency of the Czech Republic, in cooperation with the Israel Innovation Authority, announces every year (usually in May) from 2018 a public competition for the submission of joint projects within the international cooperation program DELTA. The program enables Czech and Israeli companies to submit joint project applications in applied research.

Defense industry

Israel is one of the largest exporters of defense and security technology in the world. For Czech manufacturers, cooperation with the Israeli arms industry is both a great challenge and an opportunity, especially for technologies with high added value. In addition to currently implemented subcontracting, there is another possibility of cooperation in third markets, where one or the other party, for various reasons, finds it more difficult to establish themselves. At the same time, Israel is among the largest importers of military equipment. Israel’s defense spending is over USD 20 billion per year, of which USD billion (about 16%) is direct support from the United States under the FMF program and another USD 500 million is provided for missile defense development. Direct support is mainly used for strategic purchases of high-end military equipment from the USA. However, the export potential for Czech producers exists even without taking into account these imports, which are basically tied to one country. If it is possible to implement the contracted deliveries, among the main export items of military equipment from the Czech Republic to Israel will be mainly trucks, imaging reconnaissance equipment, large-caliber and small-caliber weapons and cartridges. Cyber ​​defense technologies and specialized software also have a perspective. Czech arms companies also have the opportunity to establish strategic partnerships with Israeli entities, both in the development of new complex defense systems and in the above-mentioned access to third markets where one of the parties has a stronger position. Cooperation with top Israeli companies often takes Czech companies to a higher technological level and thus strengthens their international competitiveness.

Israel Trade