APPENDIX B BEST PROSPECTS (USD millions, except where noted) A) Rank of sector: 1 B) Name of sector: TELECOMMUNICATIONS EQUIPMENT C) ITA or PS&D Code: TEL 1993 1994 1995 D) Total Market Size 592 640 690 E) Total Local Production 830 912 1005 F) Total Exports 770 847 930 G) Total Imports 532 575 615 H) Imports from the U.S. 165 180 198 I) Exchange Rate 2.80 3.03 3.30 Comments: Israel's telecommunication market offers good opportunities with the ongoing expansion of the National Cable T.V. network, the introduction of a second cellular phone operator, and privatization of a number of services currently provided by the Israel's Telecommunication Company, Bezeq. U.S. companies have traditionally been the market leaders in this sector. Elimination of the remaining 10-15% duty equivalent tax under the FTAA will make U.S. products even more competitive. A) Rank of sector: 2 B) Name of sector: ELECTRICAL POWER SYSTEMS C) ITA or PS&D Code: EPS 1993 1994 1995 D) Total Market Size 234 300 340 E) Total Local Production 82 89 95 F) Total Exports 8 9 10 G) Total Imports 160 220 255 H) Imports from the U.S. 95 110 140 I) Exchange Rate 2.80 3.03 3.30 Comments: The Israeli Electric Corporation will make large investments over the next ten years to meet the growing demand by the private and industrial sectors for available energy. U.S. companies have traditionally held a leading position in the Israeli energy market, although recently competition from European suppliers has increased. Privatization of the power sector will strongly increase the demand for power station equipment. A) Rank of sector: 3 B) Name of sector: POLLUTION CONTROL EQUIPMENT C) ITA or PS&D Code: POL 1993 1994 1995 D) Total Market Size 46 52 58 E) Total Local Production 10 13 17 F) Total Exports 5 6 8 G) Total Imports 41 45 49 H) Imports from the U.S. 12 15 19 I) Exchange Rate 2.80 3.03 3.30 Comments: The Ministry of Environment is formulating strict enforcement legislation for air and water pollution control, and is cooperating with the U.S. EPA to establish standards. International tenders for pollution control equipment are due to be issued in 1994 and 1995. U.S. technologies and services are very highly regarded in Israel. A) Rank of sector: 4 B) Name of sector: INFORMATION SERVICES C) ITA or PS&D Code: INF 1993 1994 1995 D) Total Market Size 21 23 27 E) Total Local Production - - 1 F) Total Exports - - - G) Total Imports 17 23 26 H) Imports from the U.S. 17 20 25 I) Exchange Rate 2.80 3.03 3.30 Comments: The market for information services is expanding rapidly in the intense commercial and academic R&D environments. Approximately 98% of available information services in Israel are U.S.-made. CD-based specialized databases and on-line databases have the best market prospects in high-tech oriented industries. The market is open to a wide variety of more user-friendly services. A) Rank of sector: 5 B) Name of sector: COMPUTER SOFTWARE C) ITA or PS&D Code: CSF 1993 1994 1995 D) Total Market Size 350 383 415 E) Total Local Production 325 353 388 F) Total Exports 165 180 195 G) Total Imports 190 210 222 H) Imports from the U.S. 128 145 159 I) Exchange Rate 2.80 3.03 3.30 Comments: U.S. products dominate the Israeli software products and services import market. In contract to European competitors, the U.S. software industry produces more targeted, specialized software programs which are in high demand by Israeli industry, especially in the R&D sector. Competition against the well- developed local software industry is fierce. A) Rank of sector: 6 B) Name of sector: MEDICAL EQUIPMENT C) ITA or PS&D Code: MED 1993 1994 1995 D) Total Market Size 356 385 410 E) Total Local Production 400 430 460 F) Total Exports 214 235 270 G) Total Imports 170 190 220 H) Imports from the U.S. 64 70 90 I) Exchange Rate 2.80 3.03 3.30 Comments: About 96% of Israel's population is currently covered by health insurance plans. With the implementation of the proposed National Health Insurance Law, the remaining 4% will also have to be provided with medical care. There is a growing demand for high quality medical equipment as a result of a large number of private medical centers, established to meet the demand for better health services. U.S. suppliers will have to compete against a strong local industry and the growing presence in the market of European and Far Eastern manufacturers. A) Rank of sector: 7 B) Name of sector: LABORATORY & SCIENTIFIC INSTRUMENTS C) ITA or PS&D Code: LAB 1993 1994 1995 D) Total Market Size 140 154 166 E) Total Local Production 187 200 217 F) Total Exports 160 170 187 G) Total Imports 113 124 136 H) Imports from the U.S. 74 81 88 I) Exchange Rate 2.80 3.03 3.30 Comments: Strong economic growth, major investments in large industrial projects, and the growing need for R&D will generate increased demand in this sector. Due to the excellent reputation of U.S.-made laboratory and scientific instruments, U.S. companies should be able to maintain their leading position in the Israeli market. A) Rank of sector: 8 B) Name of sector: AUTOMOTIVE PARTS AND SERVICE EQ. C) ITA or PS&D Code: APS 1993 1994 1995 D) Total Market Size 450 486 525 E) Total Local Production 349 378 409 F) Total Exports 24 27 30 G) Total Imports 125 135 146 H) Import from the U.S. 18 20 22 I) Exchange Rate 2.80 3.03 3.30 Comments: There is a growing demand for U.S.-made cars and accessories, due to their high safety standards and the reduction of the purchase tax levied on automobiles with large engines. The increase in sales of U.S. cars has resulted in a growing market potential for U.S.-made accessories and spare parts. U.S. manufacturers face stiff competition from Europe and the Far East. A) Rank of sector: 9 B) Name of sector: BUILDING PRODUCTS C) ITA or PS&D Code: BLD 1993 1994 1995 D) Total Market Size 700 875 1,100 E) Total Local Production 652 805 1,000 F) Total Exports 72 80 88 G) Total Imports 120 150 188 H) Imports from the U.S. 31 35 40 I) Exchange Rate 2.80 3.03 3.30 Comments: After a slow-down in 1993, the Israeli construction market is again showing signs of significant growth as a result of government intervention. Accelerated land allocations, growing demand for single family housing, establishment of industrial parks and major infrastructure projects all contribute to the high growth rate in this sector. Although this sector is dominated by local producers, U.S.-made products will become more competitive with the elimination of remaining duties under the FTAA. A) Rank of sector: 10 B) Name of sector: CONSTRUCTION EQUIPMENT C) ITA or PS&D Code: CON 1993 1994 1995 D) Total Market Size 125 135 165 E) Total Local Production 15 17 23 F) Total Exports 2 2 3 G) Total Imports 112 121 145 H) Imports from the U.S. 20 23 25 I) Exchange Rate 2.80 3.03 3.30 Comments: The GOI places a high priority on the development of the country's infrastructure. In the transportation sector the construction of a number of major highways, tunnels, new intersections and bridge projects is currently underway. Other major projects fueling the growing demand for constuction equipment and services include: the new international airport terminal project, an underground/light rail system for the Tel Aviv metropolitan area, and several port expansion products. U.S. firms face fierce competition from European, Far Eastern, and local companies. A) Rank of sector: 11 B) Name of sector: AIRCRAFT & PARTS C) ITA or PS&D Code: AIR 1993 1994 1995 D) Total Market Size 390 430 475 E) Total Local Production 434 479 531 F) Total Exports 341 375 413 G) Total Imports 297 326 357 H) Imports from the U.S. 231 254 278 I) Exchange Rate 2.80 3.03 3.30 Comments: This is a traditional "best prospect" for U.S. firms. U.S. products account for over 75% of the import market and close to 60% of the overall Israeli market for aircraft and parts. Israel's national airline, El-Al, traditionally purchases U.S.- made aircrafts, and the local airforce is based solely on U.S.- made fighters, helicopters and carriers. The Israeli aircraft industry is also heavily oriented toward U.S. technology. A) Rank of sector: 12 B) Name of sector: COMPUTERS & PERIPHERALS C) ITA or PS&D Code: CPT 1993 1994 1995 D) Total Market Size 570 616 665 E) Total Local Production 311 332 361 F) Total Exports 131 146 160 G) Total Imports 390 430 464 H) Imports from the U.S. 137 143 150 I) Exchange Rate 2.80 3.03 3.30 Comments: Due to a reputation for excellence, U.S.-made computers and peripherals account for over 30% of the import market in this sector. Although there is strong competition from European and Far Eastern suppliers, Israeli businesses and consumers tend to prefer U.S. brand names, and the defense establishment prefers U.S. computers, as they can be purchased with FMS funds. Japanese and Korean manufacturers are, however, making inroads, taking advantage of their countries' less stringent export control regulations. A) Rank of sector: 13 B) Name of sector: REFRIGERATION AND AIRCONDITIONING EQUIPMENT C) ITA or PS&D Code: ACC 1993 1994 1995 D) Total Market Size 215 232 248 E) Total Local Production 199 216 232 F) Total Exports 61 67 73 G) Total Imports 77 83 89 H) Imports from the U.S. 27 29 31 I) Exchange Rate 2.80 3.03 3.30 Comments: The import market is expected to grow at an average rate of 8-10% over the next three years, primarily due to higher disposable household incomes, especially among new immigrants, and a reduction in the purchase tax expected in 1995/1996. U.S. products will be in a better position to compete against local and European competitors once the remaining 21-22% duties are eliminated under the FTAA. U.S. brands have an excellent reputation and are very popular with Israeli consumers. A) Rank of sector: 14 B) Name of sector: COSMETICS & TOILETERIES C) ITA or PS&D Code: COS 1993 1994 1995 D) Total Market Size 106 125 152 E) Total Local Production 64 72 92 F) Total Exports 28 31 35 G) Total Imports 70 84 95 H) Imports from the U.S. 7 8 10 I) Exchange Rate 2.80 3.03 3.30 Comments: There is a high demand for good-quality, foreign-made cosmetics and toileteries in Israel, and a growing inclination to buy imported brands available in the local market rather than to purchase them during trips abroad. This is a major factor contributing to an expected average growth rate of 12% over the next three year. Elimination of the remaining 24% duty-equivalent tax under the FTAA will significantly improve U.S. product competitiveness vis-a-vis local and European suppliers. A) Rank of sector: 15 B) Name of sector: SPORTING GOODS AND RECREATIONAL EQ. C) ITA or PS&D Code: APS 1993 1994 1995 D) Total Market Size 82 90 98 E) Total Local Production 15 16 17 F) Total Exports 1 1 1 G) Total Imports 68 75 82 H) Imports from the U.S. 18 20 22 I) Exchange Rate 2.80 3.03 3.30 Comments: An increasingly improved standard of living and consequent changes in lifestyle and consumption habits have resulted in a growing demand for sports and recreation equipment. Israel is an "out-of-doors" country which has a proliferation of country clubs, private gyms and outdoor recreation areas. Although U.S. products are well accepted and often preferred, there is strong competition from Europe and the Far East. A) Rank of sector: N/A B) Name of sector: WHEAT C) ITA or PS&D Code: N/A (Thousands of metric tons) 1993 1994 1995 D) Total Market Size 840 880 910 E) Total Local Production 220 60 180 F) Total Exports 0 0 0 G) Total Imports 545 700 550 H) Imports from the U.S. 545 600 500 I) Exchange Rate 2.80 3.03 3.30 Comments: Israel has a growing demand for wheat and flour. In 1994, for the first time the GOI licensed milling quality wheat imports from sources other than the U.S. but Hard Red Winter remains the preferred flour grain. Prospects exist for imports by Israeli (and Palestinian) merchants and brokers for sale to neighboring countries such as Jordan and Lebanon. A) Rank of sector: N/A B) Name of sector: FEED GRAINS C) ITA or PS&D Code: N/A 1993 1994 1995 D) Total Domestic Market 1850 1950 2050 E) Total Local Production 15 15 15 F) Total Exports 0 0 0 G) Total Imports 1835 1935 2035 H) Imports from the U.S. 1000 1200 1300 I) Exchange Rate 2.80 3.03 3.30 Comments: Israel produces virtually no feedgrains of its own. Under the Economic Support Agreement which grants the government $1.2 billion annually Israel undertakes to import at least 1.6 million metric tons of bulk agricultural commodities. In the past three years performance has exceeded the commitment, in spite of the feedmill industry's high sensitivity to the price of the feed it imports. A) Rank of sector: N/A B) Name of sector: DRIED FRUITS C) ITA or PS&D Code: N/A (Metric tons) 1993 1994 1995 D) Total Domestic Market 6000 6200 6400 E) Total Local Production 2100 2200 2300 F) Total Exports 0 0 0 G) Total Imports 3900 4000 4100 H) Imports from the U.S. 1100 1300 1500 I) Exchange Rate 2.80 3.03 3.30 Comments: Israel's annual raisin and prune imports are governed by quotas of 500 and 600 metric tons respectively. In 1994 the quantity was unofficially increased by 200 tons. Following implementation of the GATT agreements on agriculture in 1995 imports from the U.S. can be expected to grow further with the development of marketing efforts by the dried fruit sector. A) Rank of sector: N/A B) Name of sector: TREE NUTS C) ITA or PS&D Code: N/A (Metric tons, shelled basis) 1993 1994 1995 D) Total Domestic Market 12000 12250 12500 E) Total Local Production 1100 1100 1100 F) Total Exports 200 200 200 G) Total Imports 11000 11250 11500 H) Imports from the U.S. 4000 4300 4500 I) Exchange Rate 2.80 3.03 3.30 Comments: Nuts enter Israel without quota restrictions and with a significant customs advantage. As of January 1, 1995 all duties on imports from the U.S. will be zero while those from the European Union will be close to 15% and from third countries (eg. Turkey) as much as 22.5%. Market promotion by the California Walnut Commission demonstrated that a well-designed campaign can yield good dividends in market share and absolute quantities. A) Rank of sector: N/A B) Name of sector: HIGH QUALITY BEEF C) ITA or PS&D Code: N/A (Thousands of metric tons) 1993 1994 1995 D) Total Domestic Market 98000 101500 104500 E) Total Local Production 38100 40000 43000 F) Total Exports 0 0 0 G) Total Imports 44000 48000 50000 H) Imports from the U.S. 2000 2500 3500 I) Exchange Rate 2.80 3.03 3.30 Comments: Late in 1993 the Government of Israel relinquished its monopoly on the importation of almost all types of meat. At present, beef and lamb imports are in the hands of the private sector and several U.S. packing and cutting plants have been certified for exports to Israel. By law, all imported frozen beef must meet the kosher requirements of the Chief Rabbinate of Israel. Fresh and chilled meat does not have to meet this requirement. The U.S. Meat Export Federation and the USDA are actively developing the market for high quality U.S. beef. Estimates place the potential of this market at several thousand tons, once it is properly developed. However primary demand, possibly as much as 80% of the total, is for kosher beef. The market for non-kosher, high quality beef could develop into four or five thousand tons within a few years. Price will play an important role in determining the size of U.S. market share, although studies indicate that the Israeli consumer appreciates quality and is willing to pay up to 10% more for a high quality product.