Since the establishment of the State of Israel in 1948, the Israeli economy has been progressively transformed from an agrarian economy to one which is technologically advanced and service-based. Trade liberalisation, along with the abolition of exchange controls, the adoption of modern corporate governance rules and intellectual property protection enhancement have led to the establishment of an enabling, transparent and non-discriminatory environment for domestic and foreign investment. The beneficial effects of Israel’s FDI policies are enhanced by a focus on high-tech industries and a wide network of international commitments.

However, particular attention needs to be given to reducing market access restrictions or distortions resulting from past heavy government involvement. Further progress may in fact largely depend on the acceleration of the privatisation process, the dismantling of monopolies and a less interventionist approach to business activity.

On 11 July 2002, Israel was invited to adhere to the OECD Declaration on International Investment and Multinational Enterprises, after a full examination of its foreign direct investment policies. This publication provides the results of the examination. It assesses the positive role that foreign direct investment has come to play in Israel's economy and the policies that could enhance this role in the future. Joining the Declaration will help consolidate Israel’s achievements and contribute to expanding economic relations with OECD members as well as other non-member adherents.

This review is part of the OECD's ongoing co-operation with non-member economies around the world.