investment climate in israel ministry of industry, trade & labor foreign trade administration...

Investment Climate in Israel

Investment Climate in Israel

Ministry of Industry, Trade & LaborForeign Trade Administration

Investment Promotion Center

August, 2004

Foreign Trade Administration - Investment Promotion Center 2

Contents

1. From Citrus to Software-

An Economy Transformed

2. Foreign Investment & Venture Capital

3. Israel - a High-Tech Powerhouse


Main Indicators 1999-2003

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


From Citrus to Software- An Economy Transformed


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%


Jaffa Oranges vs Software

0

500

1000

1500

2000

2500

3000

3500

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

exports ($millions)

CitrusSoftware

Source:Dept. Economic & Planning Admin., Ministry Industry, Trade and Labor


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


High-Tech Exports

0

2

4

6

8

10

12

14

16

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

$US Billions

Source: Economic & Planning Admin., Min. of Industry, Trade & Labor 2003

*


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


Where doesIsrael excel?

Biotechnology

Encryption and data security

Software

Electronics

Agrotechnology

Telecommunications

Medical equipment

Optics

Internet

Computer aided education


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 Investment & Venture Capital


Foreign Investmentin Israel

0

2

4

6

8

10

12

14

16

$ Billion

91-93 94-96 97-99 00-02

Direct

TradedSecuritiesTotal

Source:Bank of Israel


Sources of Foreign Investment -2002

North America

49%

Asia6%

Other18%

Europe27%

North AmericaEuropeAsiaOther

Source: Israel Venture Association ,

March 2003


Happy Investors

“Outside the US, we invest in only one other country. That’s Israel.”

Julien Nguyen, Managing Partner,

Applied Materials Ventures September 2003


Major Acquisitions of Israeli companies

Intel Intel bought DSP Communications for $1.6 billionbought DSP Communications for $1.6 billion

Lucent Lucent bought Chromatis for $4.5 billionbought Chromatis for $4.5 billion

MarvellMarvell bought Galileo for $2.7 billion bought Galileo for $2.7 billion

Marvell bought Radlan for $195 millionMarvell bought Radlan for $195 million

BroadcomBroadcom bought VisionTech for $1 billionbought VisionTech for $1 billion

HPHP bought Indigo for $629 millionbought Indigo for $629 million

VeritasVeritas bought Precise software for $609 millionbought Precise software for $609 million

GuidantGuidant bought X-Technologies for $160miliion bought X-Technologies for $160miliion


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


Israeli Venture Capital

1991 - one venture capital fund in Israel

Today - over 60 with $1.5 billion available for new investments


High-tech Capital Raised 1995-2002

0

500

1000

1500

2000

2500

3000

3500

$ millions

1995 1996 1997 1998 1999 2000 2001 2002Source: Israel Venture Association,

March 2003


VC Investments (by quarter)

0

100

200

300

400

500

600

700

$ USD millions

Q12001

Q2 Q3 Q4 Q12002

Q2 Q3 Q4 Q12003

Q2 Q3

Source: IVC Online


VC Investments in Israel & Europe

0

200

400

600

800

1000

1200

1400

1600Sp

ain

Hol

land

Swed

en

Ital

y

Fra

nce

Ger

man

y

Bri

tain

Isra

el

20012002

Source: Price Waterhouse Cooper,

May 2003


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


VC Investments by Sector - 2003

Internet4%

Communications35%

Semiconductors8%Other

Technology11%

Life Sciences15%

Software 18%

Source:Israel Venture Assoc.

January, 2004


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


American Companies Invested in Israel- Some

Examples

Microsoft

Pratt & Whitney

AOL Time Warner

Intel

IBM

Boeing Enterprises

Cisco Systems

GE

3Com

Hewlett Packard

Merrill Lynch

Motorola

Sun Microsystems


European Companies Invested in Israel Some Examples

Siemens

DaimlerChrysler

Volvo

Cable & Wireless

Baan

Volkswagen

Deutsche Telekom

L’Oreal

British Telecom

Danone

Ares Sereno

Unilever


Asian Companies Invested in Israel - Some Examples

Samsung Electronics

Daewoo

Nomura

Hutchison Telecomm.

Nissho Iwai

LG Group

Sony

Toyo Ink

Hyundai

Acer Computers

Sumitomo Trading

Fuji

Honda


Israel - a High-Tech Powerhouse

Excellent Human Resources

Dynamic Infrastructure


Natural Resources

Israel has always been able to turn to it’s only significant natural resource:

Human Capital


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


Scientists & Technicians per 10,000 Workers

0

20

40

60

80

100

120

140Is

rael

US

Japa

n

Ger

man

y

Can

ada

Sw

itze

rlan

d

Tai

wan UK

Irel

and

Ital

y

Sin

gapo

re

Spa

in


Excellent Human Resources II

Well established and strong academic infrastructure

An outstanding entrepreneurial spirit

Success stories breed success. Everyone wants to be an ICQ


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


Entrepreneurship

0123456789

10

Japa

n

Mex

ico

Fra

nce

Ger

man

y

Sing

apor

e

UK

Kor

ea

Irel

and

Aus

tral

ia

Tai

wan

Can

ada

Isra

el

HK

USA

Common

Not Common

Source: IMD World Competitiveness Yearbook, 2002


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


IMD World Report 2002Country Rank 1st2nd3rd

Quality of basic researchUnited States

FinlandIsrael

Legal environment for technology development and application

FinlandIsraelSingapore

Quality of university educationIsraelFinlandIreland

Number of outstanding engineersIndiaSlovakiaIsrael

University-industry collaborationFinlandIsraelUnited States

Technological tie-ups between companiesFinlandSwedenIsrael

Source: IMD World Competitiveness Yearbook- 2002 Edition,


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


Growth Competitiveness Ranking – World Economic Forum 2002-3

2001 2002USA 2 1Singapore 4 4UK 12 11Germany 17 14Israel 24 19Korea 23 21France 20 30China 39 33


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


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


Government Support

Competitive government assistance for R&D projects

Tax holidays for up to 10 years for foreign investors


Supportive Business Environment

Worldwide taxation and customs treaties

Protection of trademarks, patents and intellectual property of all kinds

Comprehensive legal protection of foreign companies


Government Reforms

Liberalization of foreign currency

Deregulation of foreign trade

Privatization of government companies


PrivatizationThe 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


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


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


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


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


So, Why Do Business in Israel? Outstanding human resources

Modern infrastructure

Supportive business environment

Cutting edge technology

and scientific breakthroughs


“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

51

State of Israel Ministry of Industry, Trade & Labor

Foreign Trade AdministrationInvestment Promotion Center

5 Bank Israel St., Kiryat Ben-GurionJerusalem, Israelwww.moital.gov.il

[email protected]

investment climate in israel ministry of industry, trade & labor foreign trade administration...

Documents

sources of foreign investment

investment climate

labor slide

year slide

israel source

hightech powerhouse

israel s industrial

hightech exports source