Country Project -

Israel
Group Members
Mayand Kumar - 1302-083
Mayank Kumar - 1302-084
Rahul Gupta - 1302-113
Rahul Panthri - 1302-114
Rajeev Tibarewal - 1302-116
Ravi Kumar - 1302-120
Overview
Introduction
History
Geography
Economic Analysis
International Trade Agreements
Major Exports and Imports
Gravity Model
Factors affecting Trade
Trade Barriers and its Impact
Introduction
Created on 14 May 1948 after expiration of British Mandate
1948 Arab-Israel war commenced on next day
Joined UN as a member on 11 May 1949
Geography:
Lebanon (north)
Syria (north-east)
Jordan and West Bank (east)
Mediterranean Sea and Gaza Strip (west)
Egypt (south-west)
Red Sea (south)

Introduction
Important cities: Jerusalem (capital) and Tel Aviv (financial center)
Latitude: 31 30 north
Longitude: 34 45 east
Stretch: 424 km from north to south and 114 km from west to east


Economic Analysis
Fiscal Consolidation Strategy
Impact
Economic overview
Major industries include
High technology products
Metal products
Electronics and biomedical equipment
Agricultural products
Transport equipment
Telecommunication and semi-conductor
Diamond industry is known for worlds center for diamond cutting and
polishing

Gross Domestic Product
Soviet union crash create massive influx(.71 million) of
Russian Jews to Israel with 60% of new arrival with college
education.
Promoting venture capitalism with Yozma program a
$100 million venture capital fund. Program convinced
foreign venture capitalist backing hundred of startups a
year by 2000.


Foreign Direct Investment
Establishing the image of High-Tech industry
Berkshire Hathaway making its first ever acquisition
purchasing 80% of Israel company Iscar
Eric Schmidt, Googles Executive Chairman, has been a
frequent investor in Israels high-tech via his own private
venture capital fund and has established a large
engineering and sales operation in Israel

Intel has led the pack of some 400 global high tech giants which
operate in Israel. Intel features, in Israel, four research and development
centers, two manufacturing plants and investments in 64 Israeli start ups
Cisco just made its 11th Israeli acquisition, acquiring IntuCell for $475MN;
IBM acquired WorkLight for $60MN, its 11th Israeli acquisition

Inflation

Spending huge amount on security; financing the
expenditures and spending on settlements in the
West Bank and on welfare payments to the ultra-
Orthodox community
Persistent problem with balance of payment
International Trade Agreements
Israel has free trade agreements with Canada, Mexico, USA, European Union (EU), European Free
Trade Association (EFTA) and MERCOSUR
Qualified Industrial Zone (QIZ) agreement with Egypt and Jordan
Protection of investment agreements with multiple nations like Argentina, China, Germany, India,
Poland and South Africa
Avoidance of double taxation agreements with nearly 50 countries like Austria, Brazil, Canada,
Denmark, France, India, Japan, Singapore etc.
Research and development agreements with India, Canada, US, UK, Belgium, China, France,
Spain, Portugal etc.
Israel also has MFN (most favored nation) agreements with non-WTO members like Kazakhstan,
Ukraine, Russian Federation and Uzbekistan
Major Exports and Imports
Major Exports and Imports
Major exported products:
Cut diamonds
Packaged and unpackaged medicaments
Refined petroleum
Software
Chemicals
Agricultural products
Machinery and equipment
Textiles and apparel

Major Exports and Imports
Major imported products:
Rough diamonds
Crude petroleum
Military equipment
Grains
Consumer goods

Gravity Model
Regression Equation:
yi=o + ixi+i Where i=1 to n

Dependent variable is Exports

Independent variables are FTA with countries, GDP, Population, Export and Human
Development Index (HDI)









Regression Analysis







Countries Export(billion dollars) FTA GDP(billion USD)(Israel) GDP POPULATION(in Millions)(Israel) POPULATION( millions) Distance(km) HDI(Israel) United States 17.33 1 243.93 14991.3 7.91 315.085 10872.21 0.9 Turkey 1.71 1 243.93 774.8 7.91 75.620 882.11 0.9 Canada 1.14 1 243.93 1777.8 7.91 35.060 9660.7 0.9 United Kingdom 3.55 1 243.93 2431.59 7.91 63.260 4035.02 0.9 Russia 1.3 0 243.93 1899.1 7.91 143.700 5,994 0.9 India 2.57 0 243.93 1872.9 7.91 1,217.000 4539.2 0.9 Japan 1.4 0 243.93 5900 7.91 127.515 9094.53 0.9 Switzerland 0.56 1 243.93 659.3 7.91 7.950 2874.02 0.9 Netherlands 2.3 1 243.93 836.1 7.91 16.730 4099.75 0.9 China 2.68 1 243.93 7,320 7.91 1,354.040 6326.75 0.9 United States 22.6 1 217.334 14419.4 7.76 312.810 10872.21 0.899 Turkey 2.04 1 217.334 731.1 7.76 74.700 882.11 0.899 Canada 1.1 1 217.334 1577 7.76 34.480 9660.7 0.899 United Kingdom 3.73 1 217.334 2260 7.76 62.510 4035.02 0.899 Russia 1.13 0 217.334 1524.9 7.76 141.930 5,994 0.899 India 2.66 0 217.334 1710.9 7.76 1,202.000 4539.2 0.899 Japan 1.08 0 217.334 5500 7.76 127.799 9094.53 0.899 Switzerland 0.96 1 217.334 552.2 7.76 7.870 2874.02 0.899 Netherlands 2.6 1 217.334 774.7 7.76 16.650 4099.75 0.899 China 3.51 1 217.334 5,930 7.76 1,347.350 6326.75 0.899 United States 21.1 1 195.39 13898.3 7.62 310.540 10872.21 0.896 Turkey 1.49 1 195.39 614.6 7.62 72.750 882.11 0.896 Canada 0.99 1 195.39 1337.6 7.62 34.120 9660.7 0.896 United Kingdom 2.23 1 195.39 2173.154 7.62 62.030 4035.02 0.896 Russia 0.85 0 195.39 1222.7 7.62 141.920 5,994 0.896 India 2.06 0 195.39 1365.4 7.62 1,186.000 4539.2 0.896 Japan 0.87 0 195.39 5040 7.62 128.058 9094.53 0.896 Switzerland 0.72 1 195.39 509.5 7.62 7.780 2874.02 0.896 Netherlands 2.1 1 195.39 796.3 7.62 16.570 4099.75 0.896
Regression Analysis







SUMMARY OUTPUT
Regression Statistics Multiple R 0.93278012 R Square 0.870078753 Adjusted R Square 0.783285629 Standard Error 2.381063662 Observations 30
ANOVA df SS MS F Significance F Regression 8 835.3011484 104.4126435 21.04762145 2.19843E-08 Residual 22 124.7282115 5.669464161 Total 30 960.0293599
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept -455.2169063 670.4800913 -0.67894172 0.504255358 -1845.707504 935.2736912 -1845.707504 935.2736912 X Variable 1 2.450940878 1.277824657 1.918057274 0.068175375 -0.199105251 5.100987007 -0.199105251 5.100987007 X Variable 2 -0.45755172 0.619416372 -0.738681992 0.467908185 -1.742142646 0.827039206 -1.742142646 0.827039206 X Variable 3 0.001502523 0.00016684 9.005794976 7.82936E-09 0.001156519 0.001848527 0.001156519 0.001848527 X Variable 4 73.35417605 103.8160003 0.706578715 0.487245032 -141.94703 288.6553821 -141.94703 288.6553821 X Variable 5 -0.005146085 0.002071396 -2.484356277 0.021074147 -0.009441896 -0.000850273 -0.009441896 -0.000850273 X Variable 6 -7.13299E-05 0.000270469 -0.263726533 0.794445194 -0.000632248 0.000489589 -0.000632248 0.000489589 X Variable 7 0 0 65535 #NUM! 0 0 0 0 X Variable 8 -18.59189726 9.541235028 -1.948583931 0.064212329 -38.37920752 1.195413008 -38.37920752 1.195413008
Regression Analysis
Free Trade agreements between countries are positively correlated

Population of Israel is positively correlated

Population of traded countries are negatively correlated

Geographic distance is negatively correlated

Human Development Index of other countries is negatively
correlated
Factors affecting Trade
2004 US-Israel Free Trade Agreement
2006 Blockade Of Gaza Strip
2008 Global Recession
2010 EU-Israel Association Agreement includes agricultural trade
2010 Israel reclassified as a developed market from emerging market
2011 Foreign investors exited the stock exchange
2013 Irans hampered trade with US and EU redirects trade towards Israel
Exchange Rate

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Exchange Rate
Average Rate
Exports
Imports
Balance of Trade
Capital Account
Current Account
Trade Barriers and its Impact
Quotas
Israel has eliminated most of its tariff quotas except for 12 agricultural product groups.
Tariffs
Bound Tariffs on 75% of total
High Tariffs on agricultural products average 73.3%
MFN tariffs average 7%(on agriculture goods 24.5%)
Other duties and charges bound to zero on all products covered by tariff bindings
Trade Restrictions and its Impact
Import Taxes
VAT 16%(no VAT on fruits and vegetables)
Excise tax on fuel and cigarettes
TAMA for purchase tax
Licensing
203 items subject to licensing mainly for food and security concerns
Imports from 17 countries require special licensing
Agriculture and Chemical exports require licensing
Trade Restrictions and its Impact
Custom Duties
Import declaration
Commercial Invoice
Bill of Lading
Certificate of Origin
Packing List
Import License
Permit or Certificates
Trade Restrictions and its Impact
High Tariffs lead to low domestic competition especially in the
agriculture sector
Free Trade agreements help in enhancing competition No tax policy
have led to developments in service sector
FDI investments due to export incentives
Good relationships with EU and US
Struggles in regional trade due to geopolitical situation in the Middle-
East
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