Apart from reparations, capital imports mainly consist of long-term loans and grants designed for investment by the government or the Jewish Agency.
A 1951 law was designed to encourage foreign investment in those industries and services most urgently required to reduce Israel's dependence on imports and to increase its export potential. Applying mainly to investments in industry and agriculture, the law offers such inducements as relief from property taxes during the first five years, special allowances for depreciation, exemption from customs and purchase tax on essential materials, and reductions in income tax rates. In a further effort to attract foreign investment, the government approved the "Nissim Plan" in 1990. This plan gives the investor the option of state loan guarantees for up to two-thirds of a project or the bundle of benefits offered under the "Encouragement of Capital Investments Law." A 1985 US–Israeli Free Trade Area (FTA) agreement reduces tariffs and most nontariffs barriers for US firms. Israel also has an FTA agreement with the EU under which tariffs on industrial products and certain agricultural products fell to zero on 1 January 1989. In 1995, the most current year for which statistics are available, Israel attracted $2.5 billion in foreign investment. This figure came on the heels of several years of economic growth and fiscal austerity.