A LITERATURE REVIEW ON THE MACRO-ENVIRONMENTAL FACTORS IN

ISRAEL

Submitted to
Mr. Raymond D. Paderna
Of the Decision Sciences and Innovation Department
RVR-College of Business
In partial fulfillment of the course requirements in Global Management (GLOBMGT)
Term 1 AY 2015-2016

By:
Esperidion, Richmond
Francisco, Karen
Garcia, Rafa
Palileo, Laurence
Barroga, Vamico

September 2015

I. Introduction
 The State of Israel, or Israel is a country located in West Asia situated at the southeastern

shore of the Mediterranean Sea and the northern shore of the Gulf of Aqaba in the Red Sea. It

shares its borders with Lebanon, Syria, Jordan and the Palestinian territories which compromises

the West Bank and Gaza Strip. Its capital is Jerusalem however it’s not recognized by the United

Nations since it is still being disputed. Throught the years, Israel has fought with a lot of other

neighboring countries and until now it continues to resist struggles that their country faces. Israel

is actually considered a democratic state and they are actually a very developed country ranking

37th-largest economy in the world by nominal gross domestic product as of 2014. The country

has the highest standard of living in the Middle East and the fifth highest in Asia,and has the one

of the highest life expectancies in the world.

It is very much relevant that we share the state of their country right now to further

deepen our knowledge and broaden our insights on the country that is Israel.

II. Economic environment in the country

The economy of Israel is actually very advanced since they are a progressive country and

they are continually developing. As of 2013, Israel ranks 19th among 187 nations on the UN's

Human Development Index, which places it in the category of "Very Highly Developed" making

Israel ahead of countries like France, Austria and Belgium.

The top industries that are present in Israel include high-technology products, metal

products, electronic and biomedical equipment, agricultural products, processed foods,

chemicals, pharmaceuticals, and transport equipment. Their diamond industry is one of the
world’s center for diamond cutting and polishing. However, Israel’s natural resources are scarce,

they rely on imported gas, wheat, raw materials, etc.

Israel’s currency is the Israeli new shekel and their inflation rate is 1.5% with a

population of 7.9 million with only 6.7% of them are unemployed. Israel’s a country with only

22.5% are in the population below poverty line and their labor force is actually 3.595 million.

They export around $62.5 billion (FOB) while their imports are around $70.62 billion

(FOB). Interest Rate in Israel averaged 6.23 percent from 1996 until 2015, reaching an all time

high of 17 percent in June of 1996 and a record low of 0.10 percent in February of 2015. These

are all provided by the Bank of Israel. Israel’s main export partners are The United States, Hong

Kong, The UK, Belgium and China while their main import partners are The United States,

China, Germany, Switzerland and Belgium.

Taxation in Israel include income tax, capital gains tax, value-added tax and land

appreciation tax.VAT in Israel, is applied to most goods and services, including imported goods

and services. As of June 2013, the standard rate of Israel is 18%, and as of September 2014, the

corporate tax rate in Israel is 26.5%

To make it easier for us, the exchange rate of 1 Israeli New Sheqel equals 11.98

Philippine Peso.

Annual income level (NIS) 2014 tax rate

0 – 63,360 10%

63,361 – 108,120 14%

108,121 – 168,000 21%

168,001 – 240,000 31%

 240,001 – 501,960 34%

501,960 - 811,560 48%

over 811,560

50%

Consumer Confidence in Israel as of June 2015 is -20. Consumer Confidence in Israel

averaged -23.83 from 2011 until 2015, with an all time high of -12.65 in June of 2011 and a

record low of -38.47 in September of 2012.

III. Socio-cultural environment in the country

Israel’s socio cultural state is one that has grown throughout the years and was

influenced by so many events that has changes its views and beliefs and an example of such is

the event wherein Jesus Christ came thousands of years ago. Israel is a state which is populated

by Jewish people and their main language is Hebrew.

The “Jewish State” is a state that remembers the victims of the Jewish people in

the holocaust which changed their lives forever which was supposed to be the solution to their

problem which was lack of homeland and independence. it is a state that values freedom, justice,

equity, and peace of Israel's heritage.

It is a state whose values and tradition are drawn from religious descent in which also

the Bible is the most basic book. As for its ethics, it stands on the foundation of prophets of

Israel. “Halacha” (Religious Law) are among its most basic values. This interpretation of “the

values of the State of Israel as a Jewish state,” leads to the conclusion that the values of the State
of Israel have two primary aspects. The zionist aspect and Heritage or Tradition Aspect.

“Halacha” (Religious Law) are among its most basic values. This interpretation of “the values of

the State of Israel as a Jewish state,” leads to the conclusion that the values of the State of Israel

have two primary aspects.The next aspect which is the Heritage or tradition aspect is based on

the “World of Halacha” talking about religious law, expressed, for example, in the law which

states that a gap in legislation, which cannot be filled by analogy, must be completed according

to the “principles of freedom, justice, equity, and peace of Israel's heritage.” The World of

Halacha contains particular and universal values. It contains values developed over generations

as the story of the history of Israel unfolded for its Jewish people. There are values which

compliment each other and values which contradict each other.

Equality is promoted in all aspects of life across the state including the members of

different nations, communities, ages, gender and the like. The citizens may not discriminate no

matter what religious background, ethnic background or race the belong to. Their Supreme court

also stated that the allocation of arabs and jews should be equal across the state.

IV. Political-legal environment in the country

Israel does not have a constitution; rather it has “Basic Laws” which forms a

Parliamentary system that declares a democratic republic.

The political history of Israel was struck with war like many other states. Israel

declared Independence on May 14, 1948 when the armies of Egypt, Jordan, Syria,

Lebanon, and Iraq invaded their motherland. It was know as the War of Independence,
their defense was called the Israel Defense forces which was not prepared and not

equipped with the arms that were as advanced as the invaders. UN intervened with the

situation to stop the fighting. After the national elections in January 25, 1949, the 120-

seat Parliament went back to office. David Ben-Gurion was the first Prime Minister of

Israel and Chaim Weizmann was elected as President. They joined the UN on May 11,

1949. Doing business in Israel is quite simple, like any other country, you just have to

form your corporation and apply for all the usual forms and permits to obtain a business

permit in Israel. Israel like other countries, impose taxes as well to said businesses.

Israel has established quite a number of political relationships with over 25 countries.

Some notable countries are Canada, United States, United Kingdom, Australia, Italy,

Switzerland and many more. However, embassies of these countries are not located in

Jerusalem, the capital of Israel, they are found in Tel Aviv, the capital of Israel in the
 past. The reason for this is the political circumstances in Tel Aviv to make it more

convenient to maintain

V. Technological environment in the country

Science and technology in Israel is one of the sectors that Israel could be so proud

of, because of its development and achievements. According to an article made by the Ministry

of Industry, Trade, and Labor of the state of Israel, the amount spent on R&D (Research and

Development) of the country in relation to GDP (Gross Domestic Product) is the second highest

in the world. Due to the number of scientists and engineers in Israel, the high technology

industry has flourished immensely. Israel has an enormous number of scientists, engineers, and

technicians per capita in the world compared to U.S.A. and Japan. Israel has surely become a

powerhouse in terms of its economical and technological aspect; the lack of Israel’s natural

resources could be one of the reasons why they have put a special emphasis on technology and

education. According to the Bloomberg Index, a list published every year during the month of

January, Israel has been ranked one of the top 50 most innovative and impressive countries in the

Global technology market, ranking 4 th in the world. According to the Bloomberg index, Israel

ranked 2nd worldwide in research and development, 4 th in research personnel, 4th in education 11th

in high-tech companies, and 21st when it comes to manufacturing. Israel is also part of EUREKA,

is an intergovernmental organization for pan-European research and development funding and

coordination, which aims to coordinate efforts of governments, research institutes and

commercial companies concerning innovation. It does not partake in military research and
follows a "bottom-up" approach to R&D funding, industry itself deciding which projects should

be developed.

VI. Environment and natural resources in the country

The country of Israel is a small, narrow, and semi-arid country lying in the junction of

Europe, Asia, and Africa on the southeastern coastline of the Mediterranean sea. Bordered by

Lebanon in the north, around the vicinity of Israel also include Syria in the northeast, Jordan in

the east, and Egypt in the southwest. Being long and narrow, Israel has a wide variety of

topographical features ranging from forested highlands and green valleys to desserts and even

semitropical places such as Jordan and the Dead Sea.

Like many other countries in the world, Israel faces numerous pollution problems. In the

past 15-20 years, developing trends have brought increasing pressure to the country’s pollution

problems. According to numbeo.com, the world’s largest database of user contributed data about

cities and countries worldwide, Israel has a pollution index of 64.81. In fact, the World Health

Organization reported last year that Israel is 12th in air pollution in the entire world based on the

levels of PM10, or tiny particles of liquid or solid that affect the public’s health. The prevailing

coal and oil-fired electric power plants have been the main cause of the pollution in the air, and

to add to this, the rise of the use of automobiles in the country has only degraded the quality of

the air. Aside from pollution in the air, another major pollution problem in the country has been

in the water sources of the country, namely the streams, rivers, and underground aquifers due to
the industrial sewage that has taken over these bodies of water. These water problems have been

caused by the inability to install sewage treatment equipment with the needs of the fast-growing

cities and towns.

Israel is a country with approximately 8.27 million inhabitants. Though the country may be

a country known for being high in diversity, majority of the inhabitants are of Jewish descent,

taking up around 80% of the population and Arabs taking up around 20%. The increasing birth

rate in the country has become a major concern in the country as it is projected that in the year

2035, the population would grow from 8 million to around 10-12.5 million which is a major

increase. One of the main issues with this is that most of the the population that is growing are

from the Arabs. According to an article on ibitimes.com, this poses a threat to the Jewish identity

of the country.

Israel has its own fair share of electric and water consumption problems. In a study that was

conducted by the World Bank back in 2011, Israel’s electric consumption was at 6925.93 kWh.

In the past, Israel has faced electric problems due to it not being connected to any major electric

power grids, but in recent years, the problem has been slowly being solved by discoveries in new

alternatives of finding and harnessing power. One of which would be renewable energy found in

solar technology. The Israeli government has started doing extensive research on finding ways to

make the most out solar power, such as the use of solar ponds, saltwater pools that collect and

store solar thermal energy — and parabolic-trough technology, which uses mirrors to concentrate

sunlight on heat-transfer fluid, which subsequently is used to heat steam to turn an electricity-

generating turbine. Israel has suffered from a chronic water shortage for years. In recent years
however, the situation has developed into a crisis so severe that it is feared that by the next

summer it may be difficult to adequately supply municipal and household water requirements.

The current cumulative deficit in Israel's renewable water resources amounts to approximately 2

billion cubic meters, an amount equal to the annual consumption of the State. The deficit has also

lead to the qualitative deterioration of potable aquifer water resources that have, in part, become

either of brackish quality or otherwise become polluted. Most of these water consumption

problems are both natural and man-made as Israel has suffered from a 4 year drought, and with

the increasing demand due to the increasing population in the country, there does not seem to be

any slowing down to this problem.

Climate change has been a worldwide phenomenon that has gone on for ages now, and

each this epidemic has impacted every nation in the world. Focusing on Israel, it has affected in

numerous ways. These would include severe water shortages, more severe weather events such

as droughts and floods, desertification and loss arable land, shifting of ecosystems, losses in

species, and many more.

Despite being in the otherwise oil-rich Middle East, Israel is famously low on natural

resources. The country's economic stability is largely due to its advanced high-tech sector and

agriculture, rather than its production of raw materials. Still, the Holy Land does produce some

minerals and other substances that are useful for agriculture and industry. Some of the natural

resources of Israel include minerals, wood, metal, soils, natural gas, and crude oil. However, as

stated earlier, there are numerous pollution problems in the country and these are the main causes

to the depletion of these natural resources.

 While Israel's landmass is compact, it boasts an unusually rich array of physical

conditions, as well as flor and fauna. In large part, Israel's location on the seam of Asia, Europe

and Africa, coupled with the historical climatic changes, are responsible for the country's high

diversity of species. In Israel, there are over 2,800 species of wild plants, more than 500 species

of birds, 100 species of mammals, and thousands of invertebrates, algae and fungi- many of

which have yet to be identified. As of today, this abundant biological diversity is endangered due

to an increasing population and its natural expansion. The greatest threat to biodiversity is habitat

fragmentation and poor ecosystem management.

The disposal system has been an issue for quite awhile now in Israel as the country uses

primitive ways of disposing their waste with filling up landfills. Not only does this contribute as

well to the first two pollution problems presented, but it also takes up space as landfills pile up

and form mountains to extents that the government has had problems finding places to transfer

these wastes.

VII. Synthesis

Based on the evidence given, we can clearly see how the economy of Israel has been

progressing economically. Being ranked 19th in the human developments and still having

numerous industries that are flourishing such has having high-technology products, metal

products, electronic and biomedical equipment, agricultural products, processed foods,

chemicals, pharmaceuticals, and transport equipment, it isn’t hard to see why they are revered as
a highly developed country. Israel’s market is a technologically advanced market which even

puts itself in front of countries such as France, Austria, and Belgium.

For the socio-cultural part of Israel, we can evidently see how history has played a

role in shaping the nation it has become today. This is so as though few things may be changing

with the times, the country still tries to tediously to keep it’s natural heritage by having laws such

as the “Law of Return” which helps Jews remain Jews by allowing them to come back to Israel.

This greatly helps preserve the traditions of the country and most especially their Hebrew

language. Aside from this, with the “World of Halacha”, we see how the nation wants to stick to

the laws and regulations it has lived by since the time of Jesus Christ. Israel is a very religious

country and believes in values that have gone on since the beginning of time such as peace,

justice, and equality.

The political-legal environment in Israel involves parliament and a democratic republic

with no constitution but with “Basic Laws.” They were a state once oppressed a century ago by

surrounding states, they were forced to create the IDF to protect their motherland. They were

finally able to overcome these obstacles when the UN intervened a few months after they

became a member of the UN. In terms of business, there are no unique laws regulating

businesses. The state only requires the owners to fulfill all the required documentation to register

the said business.

The technological environment in Israel is one of the environments in the country that the

country greatly puts emphasis and effort on as they are ranked on of the highest in developments

and technological advancements in the world. It is without a doubt that the country suffers from

scarcity of natural resources and thus, it tries its best to compensate for this with technological

advancements. Having more scientists, engineers, and technicians per capita as compared to
countries such as the USA and Japan, Israel extensively focuses its efforts on research and

development.

Lastly, the environment in Israel has caused problems from the country ranging from

lack of natural resources to the numerous problems it faces with pollution. These two problems

can be seen working hand in hand as while one gets worse, the counterpart gets affected as well.

Aside from the natural causes of the problems in the environment of the country, man made

problems have only made the problem even worse with the poor waste disposal system and

sewage water treatments. Israel has been experiencing terrible effects of climate change with the

4 years of drought and flash flood that cannot be expected. Being a country filled with a number

of topographies, it is quite difficult to solve each of the problems because of the numerous

landscapes. All of these factors that come in play a great role in the shaping of the country, and

most especially on the health of its citizens.

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2015.

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