Fewer buildings were erected and unemployment increased. Israel was forced to embark on a military operation in Gaza at the end of 2008 and beginning of 2009 and this did not bring good tidings to the Israel economy; one of the immediate effects being that tourism slumped. On the other hand, the Government was not called to step in to bail out any insurance company, bank or any other major company. With the exception of one of the countries major banks that were forced to write off major amounts in US based mortgage securities; Israel’s banks have largely kept their heads above water. Projects involving infrastructure are widespread and growing. These include new roads and bridges, tunnel from one side of Haifa to the other (600 Chinese foreign workers built this), extensions of the rail network and the stated objective of these large scale projects is to create jobs and hence decrease unemployment.
Israel’s economy has proved itself to be responsible and resilient and one of the reasons for this appears to be level headed economic leadership from both the Government and the Central Bank and also due to cooperation between the different bodies. The country`s market economy can be characterized as resilient, globally oriented and technologically advanced. Over the last two decades, Israel has become famous for its high-tech capacity, particularly in telecommunications, information technology, electronics and life sciences. Over the past 20 years, the country – with a population of only 7 million – has ranked as one of the world`s five fastest growing emerging markets.
ISRAEL’S ECONOMY AT A GLANCE
Currency: New Israeli Shekel (NIS)
Fiscal Year: Calendar Year
Trade organizations: BIS, EBRD, IADB, ICC, IMF, ISO, ITUC, OECD (admitted June 2010), WCO, WFTU, UNWTO, WTO
GDP: $206.9 billion
GDP growth: 4.2%
GDP per capita: $28,900 (2008)
Inflation (CPI): 3.9% (2009)
Labor force by occupation: Agriculture (2%), Industry (16%), Services (82%) Unemployment: 7.2% (2010)
Main industries: High technology projects (including aviation, communications, computer-aided design and manufacture, medical electronics, fiber optics) wood and paper products, potash and phosphates, food, beverages and tobacco, cement, construction, metal products, chemical products, plastics, diamond cutting, textiles and footwear
Economy predictions for 2011:
Israel, which weathered the global financial disaster better than most countries, will be one of the leaders in economic growth in 2010/2011, according to leading investment analysts. The value of the shekel is likely to increase against the other major currencies. The gross domestic product (GDP) is expected to soar to 3 percent in 2010, compared with near zero in 2009. Financial analysts also think that Israel`s growth will jump another 50 percent in 2011, reaching a healthy rate of 4.7 percent, helped by increased consumer purchases and projected increases in exports and imports. Most analysts expect that the rate of inflation will continue to rise and reach 3 or 4 percent in the next two years. Bank of Israel has forecast a shekel-dollar rate as low as 3.40, slightly above the 12-year low of last year. Analysts expect it to rise above four shekels to the dollar and today it stands just above 3.8. A lower rate might adversely affect exports, leaving companies with fewer shekels for their dollars and Euros that they receive from overseas.
The Real-Estate and property market:
Efforts by the government to bring down rising property prices in Israel are not yet showing much success. Figures published by the Central Bureau of Statistics shows that house prices in Israel have been on a steady increase in the 18 months since the beginning of 2009 rising by 17.4%. Government has in recent months announced plans to help relieve the housing shortage in the Israel real estate market which has kept prices on a rising trend as demand continues to outstrip supply. As part of these efforts, land tenders are offered to contactors and purchasing groups to flood the market with an initial 6,533 apartments which is aimed at lowering prices and to reverse the trend. Looking ahead to trends in the Israeli property market in 2011, developers and contractors expect housing prices to increase more moderately in the center of the country compared with the previous year and to increase more in the periphery of the country. Israel’s real estate agents and contractor’s project prices for residential housing to grow by an average of 10% to 15% this year as efforts by the government to cope with the shortage of supply will take a few more years to have a real and lasting impact. As a direct derivative of the housing purchase market, there has also been a steady increase in the rental market with more people selling their properties, (due to increased demand) rather than putting them up for rental. Rental prices in the cities of Tel Aviv and Jerusalem have skyrocketed over the past year with more moderate increases in other cities such as Haifa, Herzliya and Ashdod. A recent report indicated that rental prices in some parts of Tel Aviv have actually surpassed rental prices in Manhattan, NYC. Seasonal influences are also very much evident with prices in July and August reaching record prices.
Israel`s flourishing technology sector has earned the nickname "Silicon Valley11’ thanks to its powerful mix of pioneering high-tech and pharmaceutical companies and world-class research facilities such as the Weizmann Institute of Science and Technion-Israel Institute of Technology. The country has attracted global technology giants such as Intel, IBM, Microsoft, and Motorola, which run major engineering centers here, but also has produced scores of homegrown companies such as Teva, the world`s largest generic drug maker and other companies such as Elbit, Amdocs, Nice Systems, to name a few. Israel has the highest concentration of high-tech companies in the world outside Silicon Valley, and the most Nasdaq-listed companies of any country outside North America. This fact is partially due to a skilled and well educated labor pool; this being Israel’s richest and almost exclusive natural resource.
Immigration strategy and foreign workers:
Over recent years Government has launched a war on illegal foreign workers, numbering according to recent estimates at nearly 300,000. There are foreign workers in Israel today from a plethora of countries, mostly African and Asian but also from Eastern Europe. Sociologically, this phenomenon has created some interesting situations for Israeli society and the legal institutions, the most recent one being the petition of the children of illegal foreign workers who were born and raised in Israel, not to be deported from the country and returned to their home countries. One of the pillars on which the State of Israel was built is the concept of Israel’s citizens being self supporting and fulfilling the employment needs of the country and this has been challenged by the dearth of both legal and illegal foreign workers in Israel.
The Government is sure that as soon as the foreign workers leave the country, wages will rise and young Israeli’s, of which there is no shortage, will work in all kinds of jobs that today they balk at. This remains to be seen. Foreign workers in the categories of industry (mostly high-tech) need to have a work permit (B1) in order to work in Israel and their Israeli employers are expected to sponsor the application and to go through a rigorous and expensive process in order to receive permission to employ a ‘’foreign expert’’. One of the first things they need to prove is that the position cannot be filled by an Israeli employee and once proven they need to undertake a series of commitments, including paying the assignee at least double the average monthly income and seeing to it that the assignee is provided with accommodation and medical insurance. Visas are granted for one year and need to be extended each time and there is a limit of 5 years that the assignee can remain in Israel. Non-adherence to the immigration laws of the country carry severe ramifications to both the assignee and to the employer and can result in both fines and deportation.
Relocation in and out of Israel is well developed and takes place on a large scale. A lot of Israeli companies have their R&D sites based in Israel while their sales hub is based in Europe, Asia or in the United States. In recent years there has also been a tendency to transfer headquarters and management out of Israel. As a result of this, relocation is rife but this does not always mean that relocation services are used extensively. The economic situation of the past few years has further prompted companies to re-examine relocation and to consider alternative solutions to the traditional family based relocation of 2-3 years. Relocation to Israel is highly influenced by political and military events in the region, both on a micro and macro level and over the past decade there have been many such events such as wars in Iraq and Afghanistan and closer to home the uprisings in the Palestinian territories and the wars with both Hamas in Gaza and Hezbollah in Lebanon. Both assignees and companies are forced to reconsider relocation during times of crises in Israel and even though relocation activity has never ceased completely, there have been changes to the nature and the volume of relocation during these times. The assignee is often surprised at the fact that Israel is such a normal place to live in, devoid of the dangers and the tension that is described in the international press and media. Israel has all the ingredients for a successful and fulfilling relocation – good weather, beautiful country with a multitude of places to visit, holy sites for three religions, excellent accommodation options, good schooling opportunities, excellent health care and proximity to the Mediterranean islands and Europe. It is sometimes difficult to persuade the assignee to accept a relocation assignment to Israel and this sometimes requires some preparation work and a Preview Trip but it is more difficult to persuade the assignee to leave at the end of the assignment.
Israel is a small country that does not necessarily impact or influence world economy but on the other hand, is a country that is greatly influenced and impacted by the state of the world economy. Someone visiting Israel for the first time might be asked for his impressions of the country and his response might be that they have not yet finished building it! Construction is evident everywhere and this includes new roads and bridges, new cities, new train lines, new houses and apartments and new shopping malls and commercial centers. On the other hand, we live in a volatile country where one does not know what will happen from day to day. There is no shortage of threats to everyday existence but at the same time opportunities abound for business and investment. Mark Kedem (Director of Client Relations, Ocean Relocation, Israel) has worked in global mobility for the past 10 years and has been instrumental in building the relocation side of a traditionally international shipping company, Ocean Relocation. Today Ocean Relocation delivers a full basket of relocation services under one roof, enabling the client to relocate with the knowledge that all his professional needs are being catered to in the most efficient and cost effective manner. Mark hails originally from South Africa but has been living and working in Israel for the past 30 years. He holds the GMS accreditation and participates regularly in international relocation conference and meetings.
Mark Kedem (Director of Client Relations, Ocean Relocation, Israel) shares country specific information, established trends and predictions for forthcoming year.