Israel

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Israels Economy Main Characteristics

• Export Oriented Growth
• Rapid Development of Technology
• High-Tech Industries
• Entrepreneurial Culture
• Supportive Environment for Business
• Investment RD Incentives

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Contents

• Facts Figures
• Foreign Trade
• Industry
• Doing Business in Israel
• Benefits Investments

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Facts Figures
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Main Economic Indicators
Facts Figures
2004 2003 2002 2001 Criteria
117.6 110.4 104.2 113.6 GDP (current prices in B)
4.3 1.3 -0.7 -0.9 GDP Real Growth rate ()
17.3 16.5 15.9 17.6 GDP per Capita (current prices, 000)
2.5 -0.5 -2.7 -3.2 GDP per Capita Growth rate ()
50.5 38.4 37.0 35.0 Exports of Goods Services (B)
57.7 44.3 45.6 42.7 Imports of Goods Services (B)
10.4 10.7 10.3 9.3 Unemployment Rate ()
1.2 -1.9 6.5 1.4 Inflation Rate ( CPI, end of year)
0.4 0.5 -1.5 -1.7 Current Account ( of GDP)
Source Central Bureau of Statistics, Bank of
Israel
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Main Economic Indicators and Forecast
Facts Figures
2005F 2004 2003 2002 Criteria
123.2 117.6 110.4 104.2 GDP (current prices in B)
5.1 4.3 1.3 -0.7 GDP Real Growth Rate ()
17.9 17.3 16.5 15.9 GDP per Capita (current prices, 000)
3.2 2.5 -0.5 -2.7 GDP per Capita Growth Rate ()
53.8 50.5 38.4 37.0 Exports of Goods Services (B)
60.2 57.7 44.3 45.6 Imports of Goods Services (B)
9.1 10.4 10.7 10.3 Unemployment Rate ()
2.8 1.2 -1.9 6.5 Inflation Rate ( CPI, end of year)
Source Central Bureau of Statistics, Bank of
Israel, Forecast Ministry of Finance June 2005
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GDP and GDP per Capita (Annual Change, in
Constant Prices)
Facts Figures
Source Central Bureau of Statistics Estimation
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Business Sector GDP Growth (Annual Change)
Facts Figures
Source Central Bureau of Statistics, Bank of
Israel Estimation
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Major GDP Components(Annual Change, in
Constant Prices)
Facts Figures
Source Central Bureau of Statistics, Bank of
Israe l Estimation
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Exports of Goods and Services (B)
Facts Figures
Source Central Bureau of Statistics, Bank of
Israel
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GDP Growth and Exports Growth(Cumulative Rate of
Growth by Period)
Facts Figures
Source Central Bureau of Statistics, Bank of
Israel
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General Government Expenditure ( of GDP)
Facts Figures
Source Ministry of Finance, 2005
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Gross Tax Burden ( of GDP)
Facts Figures
Source Ministry of Finance, 2005
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Budget Deficit ( of GDP)
Facts Figures
Source Ministry of Finance, 2005
Forecast, Including the Disengagement Program
Expenses
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Current Account ( of GDP)
Facts Figures
Source Bank of Israel
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Net Foreign Debt ( of GDP)
Facts Figures
Source Bank of Israel
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Foreign Direct Investment (B)
Facts Figures
Forecast
Source Bank of Israel
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Inflation Rate ( Change in CPI, end of year)
Facts Figures
Source Economist Intelligence Unit , Bank of
Israel
Forecast
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Unemployment Rate by Quarters( of Total Labor
Force)
Facts Figures
Seasonally Adjusted Data
Source Central Bureau of Statistics, Bank of
Israel
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New Employed Persons in 2004 (Change in Israeli
Employed Persons, in Thousands)
Facts Figures
Source Central Bureau of Statistics,
Manufacturers Association of Israel
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Estimated Growth of Main GDP Components 2005
Facts Figures
Central Bureau of Statistics Criteria
5.1 Real GDP Growth
6.4 Business GDP Growth
6.5 Exports Growth
3.5 Private Consumption Growth
4.3 Government Consumption Growth
0.3 Investment in Fixed Assets Growth
Published September 2005
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Central Bank Interest Rates-Israel vs. USA ()
Facts Figures
Bank of Israel Rate
Federal Reserve Rate
Source Bank of Israel, Federal Reserve
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Israels Credit Rating 1992-2005
Facts Figures
Source Credit Rating Agencies
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Growth Competitiveness Index, 2004Israel Ranks
19 Out of 104 Countries (2003 Rank was 20)
Facts Figures
Source World Economic Forum, GCI 2004
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Business Competitiveness Index, 2004 Israel
Ranks 21 Out of 103 Countries (2003 Rank was 20)
Facts Figures
Source World Economic Forum, GCI 2004
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Core Technology-Innovating Economies, 2003
Israel Ranks 4 Out of 103 Countries
Facts Figures
Source The Global Competitiveness Report
2004-2005
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Foreign Trade
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EXPORTS The Engine of Israeli Growth
Foreign trade

• In 2004,
• the Export Sectors share
• in the total GDP growth
• was about 60,
• making it the main contributor
• of GDP growth.

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Trade of Goods and Services (B)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel Estimation
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Trade Deficit (B and of Exports)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel Estimation
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Annual Trade Growth
Foreign trade
Note Trade of Goods (exc. Diamonds )
Source Central Bureau of Statistics, Bank of
Israel
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Exports as a of GDP
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel, Israel Export International Cooperation
Institute, Ministry of Finance Forecast
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Exports of Goods by Commodity Group, 2004 ( of
Total Exports of Goods)
Foreign trade
The High-Tech Sector Accounts for 33 of Total
Exports of Goods
Source Central Bureau of Statistics, Bank of
Israel
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The Growth of Industrial Exports (B)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Exports of Goods by Region 2004 (exc. Diamonds)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Imports of Goods by Region 2004 (exc. Diamonds)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Israels Main Trading Partners, 2004(inc.
Diamonds)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Israels Main Trading Partners, 2004(exc.
Diamonds)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Growth Rate of Commodity Exports by Selected
Countries, 2003-2004 ( of Change)
Foreign trade
Source Global Trade Information Service (GTIS)
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Real Growth in Exports of Goods and Services -
International Comparison(Annual Average for
1999-2003)
Foreign trade
Source OECD - Organisation for Economic
Co-operation and Development
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Medium High-Tech Export Development (B)
Foreign trade
6.2
5.1
Source Central Bureau of Statistics, Bank of
Israel
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Medium Low-Tech Export Development (B)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Low-Tech Export Development (B)
Foreign trade
Source Central Bureau of Statistics, Bank of
Israel
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Industry
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Selected Indicators in Industry, 2001-2004(Real
Annual Change, Yearly Average)
Industry
Source Central Bureau of Statistics,
Manufacturers Association of Israel
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Industrial Production and Exports(Real
Cumulative Rates of Change)
Industry
Source Central Bureau of Statistics, Bank of
Israel
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Labor Productivity in Industry, 2000-2004 (Real
Annual Change)
Industry
Source Central Bureau of Statistics,
Manufacturers Association of Israel
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A High-Tech Oriented Industry -
Industry
The Israeli Industry is Undergoing Long Term
Structural Changes (Industrial Output
Distribution 1994, 2004)
Source Central Bureau of Statistics,
Manufacturers Association of Israel
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The High-Tech Sectors led Industrial Growth in
2004 (Real Annual Change)
Industry
Source Central Bureau of Statistics,
Manufacturers Association of Israel
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The High-Tech Sectors Recruited the Largest
Number of Persons in Industry in 2004(Real
Annual Change)
Industry
Source Central Bureau of Statistics,
Manufacturers Association of Israel
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Israels Major High-Tech Exports 2004
Industry
Total High-Tech Export (Including Software) 14 B
Source Israel Export International Cooperation
Institute, Israel Association of Software Houses
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Israeli High-Tech Exports by Geographic Breakdown
2004
Industry
Source Israel Export International Cooperation
Institute, Central Bureau of Statistics
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Expenditure on Civilian RD in Israel in
Selected OECD Countries ( of GDP, 2002)
Industry
Source Central Bureau of Statistics, Bank of
Israel
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Qualified Engineers Index
Industry
Source Institute for Management Development
World Competitiveness Yearbook- 2004/5
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Technology Index, 2004
Industry
Israel Ranks 8 Out of 104 Countries
Source World Economic Forum, GCI 2004
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Israels ICT and Business Sectors Product 2004
(Annual Growth Rate )
Industry
ICT Information Communication Technologies
Source Central Bureau of Statistics, Bank of
Israel
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Software and Electronic Industries(Israel the
World Growth Rates 1994-2004)
Industry
Source Israel Association of Electronics and
Information Industries
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Israels Software Exports (B)
Industry
Source Israel Association of Electronics and
Information Industries
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Israel A Major Player in the Global
Biotechnology Industry
Industry

• Sales from the Biotech sector generated
• 1.8 -2.3 US B in 2004.
• Israel's share in global Biotechnology
• sales is about 2.5.
• There are 23 Technological
• Incubators in Israel,
• more than 20 of them
• are Involved in Biotechnology projects.

Source Israel's Ministry of Science
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Biotechnology
Industry
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Start-Ups The Emerging Economic Force
Industry
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Investments in High-Tech Companies 2004
Industry
Year Total in B
1999 1.1
2000 3.2
2001 2.0
2002 1.1
2003 1.0
2004 1.5
Source IVC - Israel Venture Capital
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Capital Raised by Israeli VC Funds (M)
Industry
Source IVC - Israel Venture Capital Forecast

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VC Investments in Israel Europe (M)
Industry
Source PWC - Price Waterhouse Cooper, May 2003
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High - Tech
Industry
Capital Raised by Israeli High-Tech Companies by
Sectors ()
Source IVC - Israel Venture Capital
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Israels Life Sciences Industry Sectors 2004
Industry
Source Israel Life Sciences Industry 2004
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Israels Biotech Companies Subsectors 2004
Industry
Source Israel Life Sciences Industry 2004
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Doing Business In Israel
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Foreign Investment in Israel
Doing Business In Israel

• At the crossroads of three continents
• Europe, Africa and Asia
• Israel enjoys an excellent reputation
• as a technologically advanced economy,
• which has made it a prime destination
• for investment by multinational
• corporations

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Cooperation Between the Academy and Industry (1
minimal or nonexistent , 7 intensive and
ongoing)
Doing Business In Israel
Source World Economist Forum 2004/5
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Over 20 Israeli Companies are Traded
on the London Stock Exchange
Doing Business In Israel

• Israel is ranked 2nd after Canada
• in the number of foreign companies
• traded on the American
• Technology Stock Exchange.
• Israel is second in the world
• in the number of companies
• of a foreign nation traded on Wall Street.

Source http//www.maarivintl.com/
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Number of Companies Traded on NASDAQ Selected
Countries
Doing Business In Israel
Compiled from NASDAQ data
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Recent MA
Doing Business In Israel
Time Sum Acquirer Technology Israeli Company
09/2005 345M Aris Communications Terayon Communication Systems Inc.
08/2005 230M HP Printing Scitex Vision Ltd.
07/2005 122M Cisco Communications Sheer Networks Ltd
07/2005 84M Broadcom Communications Siliquent Technologies Inc.
07/2005 42M West Pharmaceutical Services Inc. Life Sciences Medimop Medical Projects Ltd.
06/2005 105M McKesson Corp. Life Sciences Life Sciences Medcon Telemedicine Technology Ltd.
06/2005 620M eBay Internet Shopping.com
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Recent MA (cont.)
Doing Business In Israel
Time Sum Acquirer Technology Israeli Company
05/2005 80M Johnson Johnson Healthcare Impulse Dynamics
05/2005 85M Broadcom Semiconductors Fabless Siliquent
04/2005 228M UGS Corp Software Tecnomatix
03/2005 68M Juniper Networks Voiceover Internet Kagoor
03/2005 80M Ferring Holding SA Biopharmaceutical Savient
03/2005 51M Kodak Medical Equipment OREX Radiography
03/2005 50M Alcatel Communication Native Networks
03/2005 100M Intel Processors for Digital Display Devices Oplus Technologies
02/2005 150M Agere Systems Semiconductors Fabless Modem-Art
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E-Readiness Score, 2004
Doing Business In Israel
Source World Economic Forum, GCI 2004
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Foreign Companies Invested in Israel (Examples)
Doing Business In Israel
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IMD World Report 2004 (Examples)
Doing Business In Israel
4th 3rd 2nd 1st Country Rank
ILE-DE FRANCE FINLAND SWEDEN ISRAEL Total Expenditure on RD as Percentage of GDP
ITALY HONG KONG LUXEMBURG ISRAEL Number of Mobile Telephone Subscribers per 1000 Inhabitants
MALAYSIA CANADA ISRAEL DENMARK Total Public Expenditure on Education as Percentage of GDP
SWITZERLAND SINGAPORE ISRAEL FINLAND University Education Meets the Needs Economy
JAPAN TAIWAN ISRAEL HONG KONG Consumer Price Inflation Average Annual Rate
SourceInstitute for management development World
Competitiveness Yearbook- 2004
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Entrepreneurship Index
Doing Business In Israel
Source IMD - Institute for Management
Development, World Competitiveness Yearbook-
2004/5
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Technology Leadership
Doing Business In Israel
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Technology Leadership (cont.)
Doing Business In Israel
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Benefits and Investments
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Main Economic Structural Reforms Launched and
Planned by the Government
Benefits and Investments

• Public sector reduction
• Deep reform of the tax system- in process
• Government expenditures reduction
• Privatization policy energy, transport
• and communication sector

Next Stage

• Further steps to reduce the public sector
• Structural reform of the capital market
• Structural reform of the education system
• Further steps in the privatization policy

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Government RD Incentives
Benefits and Investments

• The Law for the Encouragement of Industrial RD
  supports RD projects of Israeli Companies
• by offering conditional grants
• from 20-50 of the approved
• RD proposal
• Israel is a participant in the Sixth
• Framework Program for RD
• of the European Union, the only
• non-European Associated State, 
• fully participating in the program.

Source Ministry of Industry Trade and Labor
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Government RD Incentives (cont.)
Benefits and Investments

• The Global Enterprise RD Cooperation
• Framework encourages cooperation
• in industrial RD between Israel
• and multi-national companies (MNCs).

Source Ministry of Industry Trade and Labor
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Benefits for Foreign Investors
Benefits and Investments

• To qualify for these programs
• the company must be
• internationally competitive
• The Law for the Encouragement
• of Capital Investments offers
• investors both investment
• grants and tax benefits

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Benefits for Foreign Investors (cont.)
Benefits and Investments

• Grants program- Investment Grants of 24
• of the approved program in Priority Area A
• and 10 in Priority Area B corporate tax
• benefits for foreign investors
• at a rate of 10.
• Automatic Tax Benefits Programs
• offering foreign investors a complete
• tax exemption when investing
• in Priority area A for a 10 year period
• or alternatively a 10 corporate tax rate
• when not located in a Priority area.

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Benefits for Foreign Investors Investment
Grants ()
Benefits and Investments
(Grants as a percentage of investments in fixed
assets included in the Approved Enterprise Plan)
Source Investment Promotion Center
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Investment in Technologies (M)
Benefits and Investments
According to foreign investors, the Silicone
Valley, Boston, Texas and Israel are the main
centers to search for new high technology
investments Q1-Q3 2004
Source Earnest and Young, October 2004
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Israels Free Trade Agreements
Benefits and Investments
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Avoidance of Double Taxation Agreements
Benefits and Investments
Hungary
India
Jamaica
Japan
Luxembourg
Mexico
Norway
Philippines
Poland Romania Russia Singapore

Slovakia
South Africa
South Korea
Spain
Sweden
Thailand
The Netherlands
Turkey
USA
Belarus
Belgium
Brazil
Bulgaria
Canada
China
Czech republic
Denmark
Finland
France
Germany
Greece
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Cooperation in Industrial RD Agreements
Benefits and Investments
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Protection of Investment Agreements
Benefits and Investments
93
Benefits and Investments
Protection of Investment Agreements
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International Organization Membership
Benefits and Investments
BIS BSEC (observer) CE (observer) CERN
(observer) EBRD FAO IADB IAEA IBRD
ICAO ICC ICCt (signatory) ICFTU IDA IFAD
IFC IFRCS (observer) ILO IMF IMO
Interpol IOC IOM ISO ITU OAS (observer)
OPCW (signatory) OSCE (partner) PCA UN
UNCTAD UNECE UNEP UNESCO UNHCR UNIDO
UPU WB WCO WFP WHO WIPO WMO WToO
WTrO WTO
Economic Organizations
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Business Contacts Links
Business Contacts With Israeli Exporters List of
Israeli Trading Companies Israeli Government
Portal Technology Directory
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The Israel Export International Cooperation
Institute
For Further Information Please Contact
Editing Alona Ron-Snir, Director Economic
Department, IEICI Production Hani Erez,
Executive Media Productions Unit,
IEICI Published by The Israel Export
International Cooperation Institute, 2005