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Israel country brief

Feasibility study on strengthening trade and investment with Israel

The Department of Foreign Affairs and Trade (DFAT) is undertaking a feasibility study on how best to strengthen trade and investment with Israel, including possibly through a Free Trade Agreement. The feasibility study will be completed by 30 June 2021.

DFAT invites submissions from interested businesses, groups and individuals. Submissions close on Friday 30 April 2021.

Make a submission

Overview

Australia and Israel share a close relationship with significant people-to-people links and broad commercial engagement. Australia established diplomatic relations with Israel in 1949. The Australian Embassy in Tel Aviv, and the Israeli Embassy in Canberra, were both opened in that year.

Political overview

The State of Israel is a robust parliamentary democracy. The Knesset (parliament) is made up of 120 members elected on the basis of proportional representation. The Prime Minister is a member of the Knesset, although Ministers need not be. The President is the Head of State and is elected, by a secret Knesset vote, to this largely ceremonial role for a single seven-year term.

Economic overview

Israel has a technologically advanced market economy with substantial, though diminishing, government participation. Israel's economy had been growing continuously for over 15 years until 2020, averaging around 3.5 per cent GDP growth annually.

Israel's innovation eco-system is one of the most developed in the world, shaped by a sophisticated system of major global investors, start-ups, the Israeli military and universities. There are more than 350 multinational research and development (R&D) centres in Israel, established by global companies such as Apple, Facebook, GE, Google, IBM, Intel, Microsoft, and Samsung. Apple opened its first R&D office outside the US in Israel.

On the back of the rapid expansion of the hi-tech sector, services exports now account for over 46 per cent of Israel's total exports.

The discovery of two major gas fields off the Israeli coast in 2009 has the potential to transform Israel into a net exporter of energy. In early 2017, Israel signed a gas export deal with Jordan and in 2019, Israel will begin exporting gas to Egypt.

For information on doing business and opportunities in Israel please see the Austrade website.

Bilateral relations

Australia has a warm and close relationship with Israel, which is supported strongly by Australia's active Jewish community. The relationship has a strong historical dimension, dating back to the First World War when Australian forces fought in the Sinai-Palestine campaign alongside their Allied counterparts against the Ottomans, including the iconic charge of the Australian Light Horse's during the Battle of Beersheba. Australia was the first country to vote in favour of the 1947 UN partition resolution, which ultimately led to the creation of Israel as a nation state. Australia established diplomatic relations with Israel in 1949 and in the same year presided over the vote admitting Israel to the United Nations.

Australia is committed to a two-state solution in which Israel and a future Palestinian state co‑exist, in peace and security, within internationally recognised borders. Consistent with this longstanding policy, in December 2018, Australia recognised West Jerusalem as the capital of Israel, being the seat of the Knesset and many of the institutions of the Israeli government. Australia looks forward to moving its Embassy to West Jerusalem when practical, in support of, and after the final status determination of, a two-state solution.

Australia is a strongly opposed to unfair targeting of Israel in the United Nations and other multilateral institutions. However, we make clear our concerns about Israeli actions that undermine the prospects of a two-state solution and continue to urge Israel and other actors to respect international law.

Australia continues to broaden bilateral cooperation with Israel. In recent years, there has been significantly increased engagement across a range of sectors, including innovation, security and defence.

Austrade established one of its five innovation Landing Pads in Tel Aviv in 2016 as part of the National Innovation and Science Agenda. As a bridge between the Australian and Israeli innovation ecosystems, the Landing Pad offers early-stage Australian start-ups a platform to build links with local and multinational business partners in Israel. In February 2017, Australia and Israel signed a Technological Innovation Cooperation Agreement. The Agreement includes a bilateral funding program to enable cooperation between Australian and Israeli companies.

Since 2017, Australia and Israel have expanded cooperation on national security, defence and cyber security. Defence officials began annual strategic talks in 2018 and in early 2019, Australia appointed a resident Defence Attaché to the Embassy in Tel Aviv. Leveraging Australia and Israel's respective areas of expertise, cooperation on national security continues to develop, including on aviation security with Home Affairs as the lead Australian agency. In January 2019, following a series of reciprocal visits and dialogue, the two countries signed a Memorandum of Understanding (MOU) on cyber security cooperation.

Expanded economic engagement has been underpinned by the conclusion of several bilateral agreements including a Double Taxation Agreement in March 2019, an Air Services Agreement in February 2017, and a Working Holiday Agreement in June 2016, and the signing of a Memorandum of Understanding (MOU) on defence industry cooperation in October 2017. The Australian Trade and Defence Office in West Jerusalem, which opened in 2019, is facilitating trade, investment and defence industry partnerships.

Australia’s bilateral economic relationship with Israel continues to grow. In 2019-20, Israel was Australia's 45th largest two-way trading partner and 50th largest export market. In 2019-20, two-way goods and services trade amounted to approximately $1.3 billion, of which Australian exports were worth $345 million and imports from Israel $1.02 billion. In 2019, Australian investment in Israel totalled $1.2 billion and Israeli investment in Australia was $342 million, mostly centred in the innovation sector. Major merchandise exports to Israel are live animals followed by plastic products, pearls and gems, beef, and aluminium. As at February 2021, 20 Israeli companies were listed on the Australian Stock Exchange (ASX), making Israel the third largest source of foreign company listings.

People to people links

A vibrant Australian-Jewish community, which numbers about 91,000 (2016 census), is an important element of Australia's relationship with Israel. There are 9,817 Israeli-born people living in Australia, mostly in Victoria and NSW, and about 10-12,000 Australians living in Israel.

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