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Investment Climate in Israel

Investment Climate in Israel. Ministry of Industry, Trade & Labor Foreign Trade Administration Investment Promotion Center. August, 2004. Contents. 1. From Citrus to Software- An Economy Transformed 2. Foreign Investment & Venture Capital

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Investment Climate in Israel

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  1. Investment Climate in Israel Ministry of Industry, Trade & Labor Foreign Trade Administration Investment Promotion Center August, 2004

  2. Contents 1. From Citrus to Software- An Economy Transformed 2. Foreign Investment & Venture Capital 3. Israel - a High-Tech Powerhouse Foreign Trade Administration - Investment Promotion Center

  3. Inflation (%) Unemployment (%) Imports ($ billions) Exports ($ billions) GDP ($ billions) GDP/Cap ($) 2000 2001 2002 2003 0.0 1.4 6.5 -1.9 8.8 9.3 10.3 10.7 35.2 30.9 32.6 33.7 28.3 27.4 25.8 27.9 110.1 109.5 102.7 109.1 17,581 17,180 15,468 16,312 Main Indicators 1999-2003 Foreign Trade Administration - Investment Promotion Center

  4. From Citrus to Software- An Economy Transformed Foreign Trade Administration - Investment Promotion Center

  5. From Citrus to Software- An Economy Transformed • Until the 1980s, the Israeli economy was mainly focused on traditional industries • Since the 1980’s, the economy has been transformed by a high-tech explosion • In the 1960s, agriculture represented 70% of Israeli exports • Today, agriculture comprises only 3% Foreign Trade Administration - Investment Promotion Center

  6. Jaffa Oranges vs Software Source:Dept. Economic & Planning Admin., Ministry Industry, Trade and Labor Foreign Trade Administration - Investment Promotion Center

  7. High-tech Exports • During 2003, hi-tech exports comprised 36% of Israel’s industrial exports • 2003: Hi-tech exports - $9 billion • Over the last ten years, hi-tech exports have tripled Source: Association of Electronics & Information Industries (Israel) - 2003 Foreign Trade Administration - Investment Promotion Center

  8. High-Tech Exports * Source: Economic & Planning Admin., Min. of Industry, Trade & Labor 2003 Foreign Trade Administration - Investment Promotion Center

  9. Case Study: The Software Industry • Sales of Israeli software have increased by over 700%, over the last 10 years • Professional manpower has increased 250% • Local sales amount to over $500 m per year Foreign Trade Administration - Investment Promotion Center

  10. Biotechnology Encryption and data security Software Electronics Agrotechnology Telecommunications Medical equipment Optics Internet Computer aided education Where doesIsrael excel? Foreign Trade Administration - Investment Promotion Center

  11. Excellence “There are few places like Israel where one can find leading technologies in almost every field.” Y. Hasson – Senior Vice President Nokia Venture Partners (London) September 2003 Foreign Trade Administration - Investment Promotion Center

  12. Foreign Investment & Venture Capital Foreign Trade Administration - Investment Promotion Center

  13. Foreign Investmentin Israel Source:Bank of Israel Foreign Trade Administration - Investment Promotion Center

  14. Sources of Foreign Investment -2002 Source: Israel Venture Association , March 2003 Foreign Trade Administration - Investment Promotion Center

  15. Happy Investors “Outside the US, we invest in only one other country. That’s Israel.” Julien Nguyen, Managing Partner, Applied Materials Ventures September 2003 Foreign Trade Administration - Investment Promotion Center

  16. Major Acquisitions of Israeli companies • Intel bought DSP Communications for $1.6 billion • Lucent bought Chromatis for $4.5 billion • Marvellbought Galileo for $2.7 billion • Marvell bought Radlan for $195 million • Broadcombought VisionTech for $1 billion • HPbought Indigo for $629 million • Veritasbought Precise software for $609 million • Guidant bought X-Technologies for $160miliion Foreign Trade Administration - Investment Promotion Center

  17. Israel in the global investment market • Over 100 Israeli companies are traded on the Nasdaq • Over 30 Israeli companies traded on European exchanges • 21 Israeli companies dual-listed on the Tel Aviv Stock Exchange and Nasdaq Foreign Trade Administration - Investment Promotion Center

  18. Israeli Venture Capital • 1991 - one venture capital fund in Israel • Today - over 60 with $1.5 billion available for new investments Foreign Trade Administration - Investment Promotion Center

  19. High-tech Capital Raised 1995-2002 Source: Israel Venture Association, March 2003 Foreign Trade Administration - Investment Promotion Center

  20. VC Investments(by quarter) Source: IVC Online Foreign Trade Administration - Investment Promotion Center

  21. VC Investments in Israel & Europe Source: Price Waterhouse Cooper, May 2003 Foreign Trade Administration - Investment Promotion Center

  22. Good Things –Small Packages “Israel is a small country with a tiny population, and yet it has many significant high-tech success stories.” Sven Lingjaerarde – Co-Founder & General Partner Vision Capital – September 2003 Foreign Trade Administration - Investment Promotion Center

  23. VC Investments by Sector - 2003 Source:Israel Venture Assoc. January, 2004 Foreign Trade Administration - Investment Promotion Center

  24. Multinationals • Microsoft built their first R&D facility outside the US in Israel • Cisco built their only R&D facility outside the US in Israel • Motorola’s Israel facility is the company’s largest development center worldwide. • IBM chose Israel for its first VC investment outside of the US • Sequoia Capital (Israel) is the company’s first VC fund to be set up outside of Silicon Valley Foreign Trade Administration - Investment Promotion Center

  25. Microsoft Pratt & Whitney AOL Time Warner Intel IBM Boeing Enterprises Cisco Systems GE 3Com Hewlett Packard Merrill Lynch Motorola Sun Microsystems American Companies Invested in Israel- Some Examples Foreign Trade Administration - Investment Promotion Center

  26. Siemens DaimlerChrysler Volvo Cable & Wireless Baan Volkswagen Deutsche Telekom L’Oreal British Telecom Danone Ares Sereno Unilever European Companies Invested in Israel Some Examples Foreign Trade Administration - Investment Promotion Center

  27. Samsung Electronics Daewoo Nomura Hutchison Telecomm. Nissho Iwai LG Group Sony Toyo Ink Hyundai Acer Computers Sumitomo Trading Fuji Honda Asian Companies Invested in Israel - Some Examples Foreign Trade Administration - Investment Promotion Center

  28. Israel - a High-Tech PowerhouseExcellent Human Resources Dynamic Infrastructure Foreign Trade Administration - Investment Promotion Center

  29. Natural Resources Israel has always been able to turn to it’s only significant natural resource: Human Capital Foreign Trade Administration - Investment Promotion Center

  30. Excellent Human Resources • Highly educated workforce • A multilingual population with cultural, historic and business ties to almost every other nation • Over 1 million highly educated immigrants from the former Soviet Union since 1989 • 135 engineers per 10,000 employees Foreign Trade Administration - Investment Promotion Center

  31. Scientists & Technicians per 10,000 Workers Foreign Trade Administration - Investment Promotion Center

  32. Excellent Human Resources II • Well established and strong academic infrastructure • An outstanding entrepreneurial spirit • Success stories breed success. Everyone wants to be an ICQ Foreign Trade Administration - Investment Promotion Center

  33. Excellent Human Resources III • Highly trained graduates of the Israel Defense Forces have turned cutting edge defense technology into civilian applications. “Israel leads in encryption software, a by-product of it’s military industry, as are so many technologies in which it excels.” “Forbes” June 2002 Foreign Trade Administration - Investment Promotion Center

  34. Entrepreneurship Common Not Common Source: IMD World Competitiveness Yearbook, 2002 Foreign Trade Administration - Investment Promotion Center

  35. World Economic Forum 2002-3 • Technology Index Rank 7/ 82 • Innovation Sub Index 6/82 • Networked Readiness Index: 12/80 • Environment Component Index: 5/80 • Readiness Component Index 8/80 • Microeconomic Competitiveness: 18/80 Source: World Economic Forum, Global Competitiveness Report; 2002-03 Foreign Trade Administration - Investment Promotion Center

  36. IMD World Report 2002 Source: IMD World Competitiveness Yearbook- 2002 Edition, Foreign Trade Administration - Investment Promotion Center

  37. Innovation “Israel is important to our goal because it has historically been a hotbed of new raw technology and scientific developments.” Matthew I. Growney, Managing Director Motorola Ventures September 2003 Foreign Trade Administration - Investment Promotion Center

  38. Growth Competitiveness Ranking –World Economic Forum 2002-3 2001 2002 USA 2 1 Singapore 4 4 UK 12 11 Germany 17 14 Israel 24 19 Korea 23 21 France 20 30 China 39 33 Foreign Trade Administration - Investment Promotion Center

  39. International Patents • Israel ranked 13th in the world in registration of patents in 2002 • Israel ranked 4th in the world on a per capita basis • A 500% increase from 209 in 1985 to 1,046 in 2002 Source: CHI-USA June 2003 Foreign Trade Administration - Investment Promotion Center

  40. Modern Infrastructure • State of the art telecommunications • World renowned research and educational institutions • A highly advanced banking and financial sector • A large volume of high-tech and science based industry Foreign Trade Administration - Investment Promotion Center

  41. Government Support • Competitive government assistance for R&D projects • Tax holidays for up to 10 years for foreign investors Foreign Trade Administration - Investment Promotion Center

  42. Supportive Business Environment • Worldwide taxation and customs treaties • Protection of trademarks, patents and intellectual property of all kinds • Comprehensive legal protection of foreign companies Foreign Trade Administration - Investment Promotion Center

  43. Government Reforms • Liberalization of foreign currency • Deregulation of foreign trade • Privatization of government companies Foreign Trade Administration - Investment Promotion Center

  44. Privatization • The privatization process began in 1986 and was accelerated in 1997 • During this time 82 companies have ceased to be state owned • 2003:National airline El-Al begins privatization • From 1986- 2002 $8.6 billion was raised through privatization Foreign Trade Administration - Investment Promotion Center

  45. Trade Agreements • Membership in world organizations:GATT (since 1962), WTO (since 1995) and an active part in OECD • Israel has free trade agreements with: US EU EFTA Canada Turkey Hungary Poland Slovenia Mexico Bulgaria Romania Slovakia Czech Republic Foreign Trade Administration - Investment Promotion Center

  46. Bi-National Research Israel has bilateral R&D agreements with: Belgium Germany Italy Sweden India Finland France Holland Portugal China Taiwan Ireland Spain Hong Kong Foreign Trade Administration - Investment Promotion Center

  47. European Union 6th Framework Agreement • An active participant in the European Union’s R & D Framework program since 1996 • Israel continues to be active in the 6th Framework Agreement that began in November 2002 Foreign Trade Administration - Investment Promotion Center

  48. Technological Incubator Projects • 23 technological incubators operate • 200 projects operate currently • 735 projects have left the incubators in the last decade • 54% have received further private investment Foreign Trade Administration - Investment Promotion Center

  49. So, Why Do Business in Israel? • Outstanding human resources • Modern infrastructure • Supportive business environment • Cutting edge technology and scientific breakthroughs Foreign Trade Administration - Investment Promotion Center

  50. “If you liked investing in Israel in the late 1990’s, you’ve got to love it today –Same talent. Same opportunity. Better prices.” Stanley Gold, CEO Shamrock Holdings Director of Walt Disney Company, July 2002 Foreign Trade Administration - Investment Promotion Center

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