The Industrial Cooperation Authority (ICA) at the Israel Ministry of Economy and Industry has, following discussions with the Israel Hotels Association and the Israel Ministry of Tourism, decided on a pilot that would facilitate reciprocal procurement in the field of incoming business tourism, for international companies that have won government tenders.
According to its promoters, this means that international companies committed to reciprocal procurement in Israel will be able to purchase hotel accommodation services within the framework of business tourism: conferences, seminars, corporate vacations, exhibitions, etc. The new outline should give a significant boost to business tourism (MICE) in Israel, which is considered a central engine for growth in the tourism industry.
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Israel is nowadays known as Startup Nation for its high-tech startups. And the country is a leading innovator in new technologies and sciences as well as medical treatments of all sorts. For example, Israeli doctors have recently come up with a number of new treatments for cancer.
But still, to this day, Israel’s most important source of income comes from the country’s tourism industry. As the Holy land, millions of people of many religions come to visit the country every year.
Just before the corona pandemic struck, tourist entries into Israel reached a record level of nearly 4.6 million tourists. During the pandemic, Israel’s skies were closed and hardly any tourists visited Israel for two years. The incoming tourism industry, including incoming tourism hotels, tour operators, tour guides and tourist transportation companies almost collapsed. Since then, the skies have re-opened and incoming tourism has begun to recover, but, according to forecasts, it will return to its pre-pandemic levels only in another two years.
Against this background and following an appeal on behalf of the Israel Hotels Association and the Israel Ministry of Tourism, the ICA has decided, within the framework of the realization of commitments of foreign companies (in government tenders) for business collaborations and reciprocal procurement, to temporarily allow recognition of services and/or products that include accommodation services for MICE tourism, corporate vacations, conferences, seminars for no less than $75,000 per event. Such business tourism activities will be recognized as collaboration within the framework of the company’s commitments to indirect collaboration, and not instead of direct collaboration (direct collaboration in the project in which the company won the tender). In addition, in the outline, regular tourism expenses that are not part of the business tourism events will not be recognized.
While the average tourist expenditure in Israel is about $1400, it is estimated that the average expenditure of a MICE tourist is significantly higher. In addition, this tourism represents an opening for additional investments in the future. As a result, tourism authorities around the world focus on and work to expand this tourism sector.
The agreement is valid for two years. In the first stage, the Tourism Ministry and the Economy Ministry will approach international companies currently committed to reciprocal procurement and market this new outline.
The ICA, which operates in the Israel Ministry of Economy and Industry, is entrusted with the management of the State of Israel’s reciprocal procurement, to monitor the realization of the commitments of the foreign companies and the connection between Israeli factories and industry and the relevant foreign companies, with emphasis on industrial activity in the periphery and promoting small and medium-sized businesses.
A foreign company, from which government entities purchase, are obliged by law to make procurements and industrial collaborations in Israel from Israeli companies for a certain amount of the transaction: 50% on security transactions, 20% on civilian transactions with countries who are signatories of the GPA agreement and 35% on all other transactions. The ICA monitors this compulsory obligation, from the tender phase, through the preparation of a business plan together with the foreign companies where investment options are offered in Israeli companies, to the monitoring of debt.
Procurement is a significant growth engine that produces business opportunities worth billions of dollars annually for Israeli industry, which contributes to the development of the industry and breaking into new markets for these industries. Procurement is much more than a legal commitment – it represents leverage for investment in Israeli industry and economic growth, creates business relationships between Israeli and foreign companies, and a quality, long-term investment for foreign companies which today understand more and more that reciprocal procurement in Israel is a most lucrative investment.