Foreign investment in Israel plunged in 2009

Haaretz today:

    Foreign direct investment in Israel fell by 64% in 2009 to only $3.9 billion, down from $10.9 billion in 2008. Israel fell from 54th place in 2008 to 80th in 2009 in terms of FDI.

I found this great tool on Google that lets you compare FDI data for various countries.
Of course, since Israel plummeted from 54th place globally in ’08 to 80th in ’09, 26 other countries did relatively better than it did last year. One was China, which I put onto the Google chart there.
Equally obviously, it was not only the global economic turndown that brought down Israel’s total FDI. If it had been that, all other countries would have been roughly equally affected, and Israel might have retained its ranking. There must have been some other factor.
I’m pretty certain that worldwide horror over the Israeli assault on Gaza must have played a role– buttressed by the emergence of the worldwide BDS movement. Obviously, we should all keep the pressure up until Israelis are prepared to sign onto a fair, compassionate, and sustainable peace with its Palestinian neighbors and indeed, all ts neighbors.

7 thoughts on “Foreign investment in Israel plunged in 2009”

  1. “foreign direct investment” is hardly the same thing as “foreign investment” — its an incredibly volatile measure and takes in only a tiny fraction of a nation’s trade activity. just look at Germany’s FDI over the last 10 years.
    israeli share prices are a far better measure of foreign investor appetite, and those are doing just fine:
    http://www.businessweek.com/news/2010-06-13/israel-shares-lead-middle-east-gains-as-europe-debt-risk-eases.html

  2. Helena,
    Once again you refer without specifics to a “fair, compassionate, and sustainable peace with its Palestinian neighbors and indeed, all ts neighbors.” I would be curious what you think the outlines of that peace would be?

  4. From: “Economic Survey of Israel 2009: Executive summary” by the OECD:
    “Effective macroeconomic stabilisation policies along with market-oriented structural reforms have helped support a high average rate of growth. Also, the economy has weathered the recent global downturn well, and the policy responses have been generally appropriate.”
    Rest of report here

  5. Helena,
    Although “may be” Gaza part of that but not major one. In fact the trampled economy around the world specially US, this is the main cause of declined foreign direct investment not only in Israel but you can get same data or worse with US and other western countries. China the only country with resultant economy still and going with more foreign direct investment.
    Anyway war is a factor of worry for investors especially in ME hot zones.

  6. J.Wengli has a good point. This is a volatile measure. However, it could be interesting to look at how other countries in the region perform.
    And it seems, like Israel bottomed out in 2007, and is now about to recover, although slowly. I would say, this was the effect of the Lebanon war, or, perhaps, random chance volatility. Numbers are old, however, I would wait until we get numbers from 2009 and 2010 to say something specific about this.
    Look at the neighbours, and you get a different pictures. While Israel is slowly recovering from the low in 2007, Turkey, Jordan, and Egypt are still falling, and Turkey and Egypt quite significantly. Hence, Israel is certainly performing better on this measure so far during the crisis.
    Syria and Lebanon, however, seems to be doing quite fine, however, so I am not sure what is the causation here.
    Then, take a look at Israel together with some countries at a similar GDP/cap level, Italy, Cyprus, South Korea, Slovenia, Greece, New Zealand, Taiwan, Czech and the Bahamas.
    What do we get?
    Firstly, Italy is a huge economy, so it does attract a lot more foreign investment. further, it goes into a nosedive in 2008. Quite the opposite of Israel. However, lets take it out in order to see the other better.
    Czech: Plunges in 2006, bounces in 2007, and increase slightly in 2008. volatile, and quite different from Israel.
    New Zealand: Reaches bottom in 2007 – just like Israel – and reaches new top in 2008, significantly better than Israel. But, note again, the volatility.
    Greece: Bottoms in 2007 – like Israel – and recovers in 2008. Performs relatively solid on this measure, however, performs catastrophic in the real economy. No signs of recovery there, to say the least!
    Cyprus: Performs strong, seems to experience little trouble from the crisis, or anything else, for that matter. Tax-haven, you know…
    Oman: Oil economy, dips a bit from 2007 to 2008.
    South Korea: Very volatile. Note that FDI fell during the boom. this indicates that South Korean firms and individuals where investing abroad, hence South Korea was the source of much FDI abroad, rather then the target of FDI from abroad.
    Slovenia: Little sign of crisis here? The upward trend initiated by the introduction of the Euro continues.
    Bahamas: Another small tax-haven, with a steady increase in FDI.
    I can not see that Israel is doing particularily worse than other countries with similar GDP pr capita. However, it is striking that, with a relatively small economy – about a tenth of Italy, the general level of FDI is very high. Hence, if FDI would dry up, the real economy would certainly plunge.
    When it comes to the stock market, it is true that it does signal relatively good demand from foreign investors. However, considering the ‘special relationship’ it is no surprise that lax monetary policies in the US will influence the Israeli stock market relatively more than other countries.
    And, thanks a lot for the link! Here is plenty of good data for a curios economist.

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