Tourism Investment in Israel

Transcription

1 Tourism Investment in Israel Where Unique Heritage Assets Meet a Solid Business Environment All rights reserved Israel Ministry of Tourism Published by the Israel Ministry of Tourism / Infrastructure Development & Investments Administration / Business Projects Promotion Center Editor: Merav Peleg, Ministry of Tourism Copy Editing and Graphic Design: Quality Translations (QT)

2 Tourism Investment in Israel Where Unique Heritage Assets Meet a Solid Business Environment

3 table of contents Israel Overview...5 Economic Context...9 Some Highlights...10 General Trends...14 Tourism...17 Tourism Assets...18 Tourism Facts and Numbers...19 Gateways to Israel...23 Domestic Tourism...23 Government Policy on Tourism Investment...25 Hotel Rooms Target Numbers...26 Main Government Support Channels...27 Government Assistance for New Tourism Projects...28 Categories of Assistance...28 Corporations Eligible for Assistance...28 Authorities Involved in the Approval Procedure...29 Grants...29 Tax Benefits...30

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5 Israel Overview

6 Israel Overview 1 Official languages: Hebrew, Arabic. Currency: The New Israeli Sheqel (NIS), which is divided into 100 agorot (as of January 1986). Capital: Jerusalem Governing system: Democratic parliamentary. Area of the country: 22,072 sq. km. Distance between farthest points: 465 km. (290 miles), north to south. Coastline: Length of Mediterranean Sea coast 194 km. Length of Red Sea coast about 12 km. Lowest point: The Dead Sea, 420 m. below sea level (lowest spot on Earth). Highest point: Mount Hermon, 2,224 m. Climate: Israel is on a climatic crossroads, between an arid climate in the south and east and a temperate Mediterranean climate in the rest of the country. Population: In May about 7.8 million inhabitants (Jews and others approx. 80%, Arabs approx. 20%). Another point of interest Newsweek magazine s Best Countries survey has ranked Israel among the best countries to live in, at the 22nd spot. Israel scored a total of 79 points out of a possible 100. The magazine rated 100 countries by how well they scored in five categories, namely: education, health, quality of life, economic dynamism, and political environment. The rankings were based on, among others, economic indicators, the Gini coefficient, the Innovation Index, and the Global Peace Index. Forbes magazine in its Gallup poll has rated Israel as the world s 8th happiest country. 1 Source: Israel Central Bureau of Statistics; Israel Ministry of Industry, Trade and Labor 6

7 Israel Overview 7

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9 Economic Context

10 Economic Context Some Highlights 1 Israel joined the OECD in May The Swiss Institute for Management Development (IMD) ranked Israel 17th out of the world s 58 most economically developed nations in its 2010 World Competitiveness Yearbook, raising it by seven spots from its 2009 ranking. Israel holds the No. 1 position, among other things, in resilience of the economy. The world s three largest rating agencies, Moody s, Fitch, and Standard & Poor s, in a vote of confidence in the Israeli economy, maintained a high credit rating for Israel at a time when the economy s resilience was put to the test, mainly by the latest global economic crisis. While Israel is not immune to the effects of the global credit crunch, as its main trading partners have been hit by the crisis, the country s sound macroeconomic fundamentals and strict fiscal policy have served as a buffer to dampen the impact of financial wobbles. Though Israel is a small country with limited resources, it stands out as one of the world s most competitive economies. In fact, The World Economic Forum (WEF) ranked Israel as the 24th most competitive economy (out of 139) in its Global Competitive Index. In the criterion of favorable financial environment, Israel was ranked in the 14th place, and in availability of venture capital it came in 10th place. 1 Source: Invest in Israel Investment Promotion Center, Ministry of Industry, Trade & Labor; Ministry of Finance, International Affairs Department 10

11 Economic Context The effectiveness of Israel s fiscal and monetary policy is reflected in the performance of its economy. Since 2003, gross public debt has been on a consistent downward trend, interrupted only by the global economic crisis in 2009, and it stands at about 80% of the GDP. At the same time, unemployment has declined and price stability has been maintained. The annual inflation rate in the last several years has remained steady around 3%, in line with expectations. Economic growth has been fueled by a steady increase in exports and foreign investment. In 2008 foreign direct investment in Israel was close to $10 billion. The Bank of Israel forecasts 3.8% growth for Israel is a preferred choice among leading global players. After the United States, Israel has the largest number of companies listed on the NASDAQ of any country, and more than 60 Israeli companies are traded on various European exchanges. The long list of multinationals that run core activities in Israel includes: Microsoft, Motorola, Intel, HP, Siemens, Samsung, GE, Philips, Lucent, AOL, Cisco, Applied Materials, IBM, and many others. Israel became the first non-european state to head the EUREKA Network, the leading industrial R&D initiative in Europe and the largest of its kind in the world, with investments of 1.5 billion euros every year. Israel s Chief Scientist assumed the chairmanship of the organization in June 2010 for the year The World Intellectual Property Organization (WIPO), a specialized agency of the United Nations, has recently recognized Israel as an international center for the search and testing of patents. Israel will be added to the list of 15 leading countries in this field, and patent applications recognized in Israel will be accepted internationally as well. Israel s Economic Indicators Criteria E GDP (current prices in $ B) GDP Real Growth Rate (%) 5.2% 5.4% 4.0% 0.7% 4.1% GDP per Capita (PPP adjusted) GDP per Capita Growth Rate (%, Current prices) $24,271 $27,395 $28,473 $28,160 $28, % 3.5% 2.1% -1.1% 2.3% Exports (Goods & Services) $B (As Percentage of GDP) (43.5%) (43.4%) (40.3%) (36%) (40.7%) Imports (Goods & Services) $B (As Percentage of GDP) (43.2%) (45.1%) (42.2%) (37.4%) (42.2%) Unemployment Rate (%) 8.4% 7.3% 6.1% 7.6% 7.2% Source: Ministry of Finance, Bank of Israel and Central Bureau of Statistics 11

12 Economic Context Weizmann Institute of Science 12

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14 Economic Context General Trends 1 Development towards a modern and open business environment in Israel has been underpinned by comprehensive deregulation across all sectors of the economy. Legal frameworks have been reformed in areas that affect conditions for operating a business. There are no special approval requirements or operating permits for foreign-controlled enterprises 2. In the past several years, the Israeli economy has been undergoing a comprehensive pro-market, pro-competition structural reform program: reducing government expenditures, cutting taxes, breaking up monopolies, privatizing state-owned companies and banks, promoting competition, reforming the pension system, reforming the capital market, and dozens of other reforms. As a result, according to the World Bank s Doing Business in 2006, Israel was found particularly attractive for investor protection legislation, and for ease in trading across borders, getting credit and starting a business. On January 19, 2007 the IMF (International Monetary Fund) Executive Director for Israel published the following statement: The economy s high degree of development together with the authorities commitment to maintain a market-based economy, good governance and democratic pluralism, place Israel as a natural candidate for OECD membership In 2010, Israel has indeed joined the OECD. Israel enjoys high levels of freedom in trade, investment, monetary controls and labor. The economy is open to foreign investment in almost all sectors. Tariff rates are low, so is inflation, and the labor market is highly flexible. Israel s relatively advanced high-technology sector was largely responsible for the country s annual average GDP growth of 5% during the 1990s. In its December 13, 2006 issue, The Economist published its emerging markets survey which placed Israel as one of the five fastest growing emerging markets in the past 20 years. Photo: Ilan Malester Photo: Alex Kaplan Foreign direct investment (FDI), insignificant before the 1990s, has taken on a significant role in the development of the Israeli economy. Towards the mid-1990s, rapid expansion of the country s high-tech sector, in conjunction with the opening up of the financial and telecommunications sectors, attracted large amounts of both foreign direct and portfolio investment. Direct investment was boosted by a number of large acquisitions, including Warren Buffet s US$4.4 billion acquisition of an 80% controlling stake in Iscar Metalworking Companies. Israel has developed into one of the world s leading technology hubs. Home-grown innovations in high-tech industries especially software, telecommunications, and Internet technologies and bioscience have driven the country s economy over the past two decades. 1 Source: Israel: Ready for the OECD, Ministry of Finance International Affairs Department, April OECD Investment Policy Reviews: Israel, September 2002 OECD Directorate for Financial, Fiscal and Enterprise Affairs, p.7 14

15 Economic Context Israel is a worldwide leader in water resource management, and it is taking a significant place in the world of biotechnology. Israel also has one of the highest patent-to-gdp and patent-to-population ratios 1. In 1988 Israel launched its first satellite, using an Israeli-built launcher. By independently building and launching its own satellite, Israel joined an exclusive club, which includes a few countries only. Israel is a member in most international organizations, including the United Nations and its main bodies and commissions, the OECD, the World Bank Group, the International Monetary Fund, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. Israel has been a signatory to the General Agreement on Tariffs and Trade (GATT) of 1947 since 1962, and is a founding member of the World Trade Organization (WTO), since its inception in In addition, Israel actively participates in multilateral initiatives conducted within the framework of the WTO, such as the Government Procurement Agreement (GPA) and the Information Technology Agreement (ITA). Israel benefits from strong ties with the world s major economic powers and trading blocs. Israel has concluded free trade agreements (FTAs) with its major trading partners and belongs to a small group of countries having free trade agreements with the United States and the European Union. In addition, Israel has free trade agreements with the EFTA countries, Turkey, Canada, Mexico, Bulgaria, and Romania. In recent years, Israel, together with the US, has developed new regional trade agreements that stimulate economic cooperation between Israel and its neighbors in the Middle East. In order to step up its international economic cooperation and promote Israeli investments in emerging markets, Israel has entered into 40 Agreements for the Promotion and Protection of Investment and 44 Agreements on the Avoidance of Double Taxation, largely based on OECD models. Israel has undertaken to share its experience in nation-building with other states, by way of cooperation programs and technology transfer as well as by active participation in international forums. Nominal NIS/$ and NIS/ Exchange Rates * Real** and Nominal NIS/$ and NIS/ Exchange Rates * NIS/$ NIS/$ rate NIS/ rate * To April NIS/ NIS/$ Dollar rate 3.6 Real exchange rate /01/ /01/ /01/ /01/ /01/2009 NIS/ /01/2010 * To April ** The real effective exchange rate is the weighted geometric average of the exchange rate of the shekel against 28 currencies, representing 38 of Israel's main trading partners (weighted by the extent of Israel's trade with those countries), adjusted for the difference between the rate of inflation in Israel and the rates of inflation in those countries. Source: Bank of Israel, Research Department 1 Global overview of innovative activities from the patent indicators perspective, STI Working Paper 2006/3. 15

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17 Tourism

18 Tourism Tourism Assets Israel has some of the most important tourism sites in the world, ranging from religiously significant sites such as Jerusalem, with all its attractions, through national and international heritage sites such as Masada, to unique natural sites like the Dead Sea. Leading tourism centers in Israel are: Jerusalem the 3000-year-old city which is significant to billions across the globe. The New York-based Travel and Leisure magazine named Jerusalem as the best city in Africa and the Middle East in 2010, based on criteria such as sites, culture and arts, restaurants and food, people, shopping and value. In addition, readers of the popular travel website TripAdvisor ranked Jerusalem among the top 10 culture and sightseeing destinations in the world. Tel Aviv the exciting, non-stop urban center of business, culture and entertainment. The Lonely Planet travel guide named Tel Aviv as the third best city in the world. The National Geographic magazine included Tel Aviv among the world s top 10 beach cities. The city was also voted the third best city in Africa and the Middle East by the New York-based Travel + Leisure magazine and one of the world s top party cities by Forbes magazine, and was included in the Louis Vuitton 2010 European Cities Guide. Eilat the ever-sunny modern recreation city on the Red Sea coast. Tiberias a town on the Sea of Galilee (Lake Kinneret) shore, dating back to the times of Jesus, who lived and preached in its surroundings. The Dead Sea which ranks among the wonders of nature, due to its special attribute as the lowest place on Earth, as well as the enormous mineral wealth of its waters and the therapeutic qualities attributed to its waters, mud and air. The Dead Sea was indeed one of the 28 finalists in the New 7 Wonders of Nature international online competition. Several more historic cities (Acre, Nazareth, Safed, Jaffa) and seaside cities (Haifa, Netanya, Herzliya, etc.) join this list as well. Israel is the Holy Land, regarded as holy by all the monotheistic religions. The country abounds in archeological and historical sites, and offers a wealth and diversity of culture, including ethnic culture. Though very small in area, Israel has a broad range of landscapes and climates. Its small size facilitates the combination of cultural tourism with recreational tourism. In addition, Israel is a Western country with a developed technology and with vibrant modern cities. 18

19 Tourism Tourism Facts and Numbers 1 The majority of visitors arrive in Israel by air and use tourist accommodation facilities. Israel had about 3.4 million inbound tourists in About 31% of incoming tourists in 2011 came on organized tours. In 2011, about 21.9 million overnight stays were recorded in hotels. Room occupancy in hotels in 2011 stood at an average of 65.9% revenue per person-night averaged $ Hotel workers wages average ~$1,800 per month. Visitor Arrivals (Thousands) Source: Israel Central Bureau of Statistics; Ministry of Tourism Research and Statistics Department 19

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22 Tourism Inbound Tourism by Country of Origin 2011 Other 29% USA 19% Netherlands 2% Russia 15% Canada 2% Poland 3% Ukraine 4% Italy 4% Germany 6% UK 7% France 9% Tourists come to Israel for four main purposes: holiday and touring, pilgrimage, family visits, business/duty visits. Inbound Tourism by Purpose of Visit 2011 Business 10% Other 7% Holiday & Leisure 11% Visit Friends and Relatives (V.F.R.) 20% Touring & Sightseeing 30% Pilgrimage 22% 22

23 Tourism Gateways to Israel The bulk of inbound tourism arrives through the new, modern Ben Gurion Airport, which is located in the center of the country, between Jerusalem and Tel Aviv. Eilat airport also handles international flights, especially winter charters from Europe. Other gateways for inbound tourism are the seaports of Haifa and Ashdod, as well as the land crossings: the Jordan River and Taba (near Eilat). Domestic Tourism Domestic tourism shows every sign of thriving. Most Israeli families regularly go on excursions throughout the country, using all accommodation types. There are thousands of small businesses that produce and market home-made food, such as olives, cheeses, oil, wine, breads and more, located mostly in the rural regions in the north and south of the country and constituting tourist attractions, especially for domestic tourism. The stable domestic tourism market has provided a security net for the tourism industry in years of crisis, compensating to a great extent for the decrease in revenues from inbound tourism. Night Stays in Hotels (millions) Israelis Tourists Source: Israel Central Bureau of Statistics 23

24 Disk-In-Pro, smart visual communication

25 Government Policy on Tourism Investment

26 Government Policy on Tourism Investment Hotel Rooms Target Numbers Among the targets set by the Ministry of Tourism for the coming years is the arrival of 5 million tourists per year beginning in This target, juxtaposed against the existing supply of hotel rooms, translates into a need for 12,000 additional hotel rooms (to reach a total of 65,000 rooms). The main areas in which hotel rooms are expected to be built are: Jerusalem and its environs Around the Sea of Galilee (Lake Kinneret) and in the Galilee region Tel Aviv and the surroundings Eilat The Dead Sea new tourism complex Mediterranean Sea coast towns In order to reach its target number, the Ministry of Tourism is actively encouraging the establishment of additional accommodation facilities. 26

27 Government Policy on Tourism Investment Main Government Support Channels The Israeli Ministry of Tourism is working to develop a unique and variegated tourism product, by providing assistance to entrepreneurs for the construction of hotels and attractions, and through investment in the development of major visitor attractions (archeological, religious, historical and scenic) and development of tourism centers. The ministry is looking to consolidate Israel s image as a tourist destination by conducting marketing campaigns and operations. The ministry is working to facilitate access to Israel through the liberalization of air transport policy, agreements with wholesalers and airlines, and removal of administrative impediments such as the need for visas. The ministry holds local, regional and national marketing campaigns for domestic tourism and promotes the staging of tourist-drawing events. The ministry holds courses on product and service quality for workers in the various tourism sectors, in order to promote high standards. The ministry has prepared a strategic plan for sustainable development, which is being implemented in stages. 27

28 Government Policy on Tourism Investment Government Assistance for New Tourism Projects Projects which conform to government policy for the development of tourist accommodation facilities, and prove to be economically viable, are eligible for government assistance according to the Encouragement of Capital Investment Law. Categories of Assistance Government assistance for the construction of tourist projects includes: 1. Granting approved enterprise status, making the project eligible for grants during construction and for tax benefits in the course of operation. 2. Allocating or leasing state-owned land which is administered by the Israel Lands Administration. Foreign investors may be eligible for land allocation without a tender, under special conditions. Corporations Eligible for Assistance Any entity whose legal corporate form meets the requirements of the law is eligible for government assistance under the Encouragement of Capital Investment Law. This includes: 1. A company, as defined in the Companies Ordinance, possessing equity capital. 2. A cooperative society, as defined in the Cooperative Societies Ordinance. 3. A partnership registered under the Partnerships Ordinance as a foreign limited partnership, in which all Israeli partners are corporations. 4. A partnership, registered under the Partnerships Ordinance, in which the partners belong to any of those specified in the foregoing paragraphs 1, 2 and A partnership registered under the Partnerships Ordinance, including a foreign partnership, in which the partners are individuals, subject to recognition as an approved enterprise. 28

29 Government Policy on Tourism Investment Authorities Involved in the Approval Procedure The Ministry of Tourism The ministry sets the policy for the encouragement of investments in the tourism industry, and recommends specific projects to the Israel Lands Administration, when allocation of land is needed. As of January 2010, the ministry is legally empowered to grant approved enterprise status, and it is now responsible for handling applications through the whole procedure of grant disbursement. Israel Lands Administration The authority responsible for the management, allocation and leasing of state-owned land. In rare instances the land may be allocated to a foreign investor without a public tender. In tourism matters, decisions are based in part on the Ministry of Tourism s recommendation. Grants The grant disbursed to projects which are granted approved enterprise status is determined as a fixed rate of the recognized investment as approved by the Ministry of Tourism in accordance with its cost guidelines. The recognized investment for the construction of a new hotel is derived from the product of the approved number of rooms multiplied by the maximum fixed recognized investment per room as set by the ministry, or the actual cost, whichever is less. For the adjustment or upgrading of an existing building, and for the construction of a tourist attraction, the financial and physical extent of the approved project plan is determined by the investment board at the ministry, according to its engineer s estimates. The approved cost of the project constitutes the recognized investment limit for the purpose of grant disbursement. At present, grants are provided for: Construction/expansion of hotels Restoration/conversion of buildings for hotel use Upgrading of hotels Construction/expansion and variation of tourist attractions The grants are provided in priority areas designated in the Law, among them Jerusalem and the Galilee region, and according to criteria fixed by the Ministry of Tourism. For hotel projects, in most areas the grant amounts to 20% of the recognized investment, while in Jerusalem and Tiberias it amounts to 28%. For tourist attractions, the grant amounts to 10% of the recognized investment. One of the preconditions for obtaining approved enterprise status is ownership of, or possession of a lease on, the land on which the project is to be carried out, for a period of 15 years at least. Other preconditions include the presentation of an effective zoning plan permitting hotel use, and presentation of a bank s confirmation of financial capacity to provide equity capital at 30% at least of the total required investment in the project. 29

30 Government Policy on Tourism Investment Tax Benefits 1 An Automatic Tax Benefits program is administered by the Israel Tax Authority. To qualify, investment projects must meet certain criteria, including registration of the company in Israel. Once the criteria are met, the enterprise is recognized as a preferred enterprise by the tax authority. It is then eligible for reduced tax rates, tax exemptions and other tax-related benefits. Tax benefits are determined by the percentage of foreign control: the more foreign control in the enterprise, the higher the benefits. An approved/preferred investment is entitled to accelerated depreciation on its property and equipment for tax purposes. Investors choosing one of the automatic tax programs may apply to the Israel Tax Authority for a pre-ruling to ascertain the scope of the benefits they will be entitled to if they meet the investment conditions as stated in the Law. For further details regarding tax benefits, see: 1 Source: Invest in Israel Investment Promotion Center, Ministry of Industry, Trade and Labor WELCOME TO ISRAEL BOTH AS A GUEST AND AS AN INVESTOR! For further information please contact: Business Projects Promotion Center Ministry of Tourism 5 Bank of Israel St., Jerusalem 91009, Israel 30 Tel: Fax: meravp@tourism.gov.il /

31 TOURISM INVESTMENT IN ISRAEL = YESTERDAY S UNIQE HERITAGE ASSETS + TODAY S SOLID BUSINESS ENVIRONMENT

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33 This guide represents general information only and is in no way binding on the Ministry of Tourism or any other body mentioned herein. It does not add to, detract from, or alter any current law or regulation. The terms of assistance presented here are updated to December 31, Subsequent developments may necessitate future changes to these terms.

34 Tourism Investment in Israel Where Unique Heritage Assets Meet a Solid Business Environment All rights reserved Israel Ministry of Tourism Published by the Israel Ministry of Tourism / Infrastructure Development & Investments Administration / Business Projects Promotion Center Editor: Merav Peleg, Ministry of Tourism Copy Editing and Graphic Design: Quality Translations (QT)