Investment Climate in Israel 2002

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Investment Climate in Israel 2002
Presentation for OECD Paris, April 10, 2002
Amir Hayek Director General
State of Israel. Ministry of Industry and Trade
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Presentation

• Facts Figures
• Reasons for Success
• Israeli Hi-tech A Case Study
• Prospects for the Future

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Net Foreign Inward Investment ( Billion)
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Net Foreign Outward Investment ( Billion)
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Going Global
International Investors Some examples
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American Companies Invested in Israel- Some
Examples

• Microsoft
• Pratt Whitney
• AOL Time Warner
• Intel
• IBM
• Boeing Enterprises
• Cisco Systems

• GE
• Lucent
• 3Com
• Hewlett Packard
• Merrill Lynch
• Motorola
• Sun Microsystems

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European Companies Invested in Israel - Some
Examples

• Deutsche Telekom
• LOreal
• British Telecom
• Danone
• Ares Sereno
• Unilever

• Siemens
• DaimlerChrysler
• Volvo
• Cable Wireless
• Baan
• Volkswagen

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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

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Venture Capital in Israel

• VCs invested 3 Billion in 2000
• VC invested alone all of Europe
• 4 worldwide for High Tech Deals
• Startups raised over 1 Billion in first 6
  months of 2000

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Investments by Venture Capital Funds (M)
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Venture Capital by Industry (M)
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High-tech Capital Raised 1995-2001
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II. Reasons for success
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High Annual Growth Rate (GDP)
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2. Highly Skilled Workforce Engineers per 10,000
Employees
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3. Deregulation and Privatization

• The privatization process began in 1986 and was
  accelerated in 1997.
• 2002 There are currently 7 companies in the
  process of privatization, including Bezeq and El
  Al.
• From 1986- 2000 8.6 billion was raised through
  privatization.
• During this time around 80 companies have ceased
  to be state owned.

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4. Monetary StabilityAnnual percentage change in
CPI
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5. Government support

• Regional Development Investment Center
• Industrial RD Office of Chief Scientist
• Grants
• Technological Incubators
• Magnet
• Investment Promotion Center first stop for
  Foreign Investors

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Investment Center Approvals as of GDP
(1996-2000)
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Other

• International Investors interest in Emerging
  Markets and Hi-Tech Sector
• Liberal Foreign Trade Regime
• Foreign Currency Liberalization
• Favorable Geo-political Climate

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Jaffa Oranges vs Software
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III. Hi-tech sector- a case study
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From every point of view, Israel is technology

• 36 of Israelis surf regularly on the
  Internet vs global average of 7
• Over 70 are cell-phone users 2nd highest
  usage in world
• 54 of all households have PCs outranking US
  and UK

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Hi-Tech as a Percentage of GDP
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Change in composition of Non-Diamond Industrial
Exports 1980 vs 2000
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Formula For Success

• Investment
• Ideas
• Innovation
• Ingenuity

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2 Investment in Civilian RD as of GDP
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High Tech Education Investment in Education as a
of GDP (1995)
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IV. Prospects for the Future
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2001

• 2001 economic indicators were affected by
• Slowdown in US Economy starting with High Tech
  crisis
• Worldwide downturn
• Deterioration of the security situation

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World Economic Downturn

• The Israeli economy was in a mature, strong and
  stable position when the global recession hit.
• As a result, the economy was able to absorb the
  shocks occurring abroad with minimal effect on
  the local economy.
• After a record breaking year in 2000, during 2001
  economic indicators dipped, but remained well
  above 1999 levels.

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2001 Some Growth Areas Continued

• Despite the global tech downturn, during 2001,
  exports grew by
• Software 16
• Pharmaceuticals 37
• Security Products 19

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2000 A Record Year

• Industrial exports were up 24.4.
• Foreign currency reserves reached an all time
  high of 22.93 billion.
• TASE 6th best performing market in the world
  (Merrill Lynch Report, 28.12.00)
• Electronics exports were up 150 over 1999.
• The Israeli Shekel was one of the strongest
  currencies in the world during 2000.

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2000 vs 2001

• So, 2001 economic indicators appear low when
  compared to the unusual example of 2000.
• When viewed in relation to previous years, 2001
  figures point to modest gains.

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IMF Report, 2002

• The Israeli economy has withstood major
  exogenous shocks remarkably well so far. Once
  global demand begins to recover, there is a good
  chance that the economy will return to its high
  potential growth path relatively quickly.
• IMF Israel Interim Staff Visit, Concluding
  Statement (Preliminary)February 26, 2002,
  Section 12.

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Recovery

• When the US economy stages a recovery, the
  flexibility and structural characteristics of the
  Israeli economy means that it will be well-placed
  to stage a quick recovery of its own.
• International ratings agency, Fitch- report on
  Israel, Feb 10, 2002.

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Improved Outlook

• The State of the Economy Index rose 0.4 in
  February 2002.
• Industrial exports increased by 4, and high tech
  exports by 13.5 in January-February 2002.
• The number of job seekers dropped in February
  2002, after rising steadily from January 2001
  through January 2002.

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OECD NATIONAL CONTACT POINT

• Established at Ministry of Industry and Trade
  (web site www.moit.gov.il/ncp)
• Intra-ministerial Advisory Committee to NCP
• Guidelines translated to Hebrew and Arabic
• Ongoing dialogue with civil society