Investment Climate in Israel 2000

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Investment Climate in Israel 2000
Investment Promotion Center
State of Israel. Ministry of Industry and Trade.
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An Economy Transformed

• Until the 1980s, the Israeli economy was mainly
  focused on traditional industry such as
  agriculture and textiles.
• In the last 15 years, the economy has been
  radically transformed by a high-tech explosion.

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Change in Export Growth Rate Jan- Jul 2000
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Jaffa Oranges vs Software
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Yesterday and Today

• In 1991 there was one VC fund in Israel. Today
  there are over 100.
• In 1992, total foreign investment in Israel
  stood at 537 million. For 1999, the figure was
  approximately 3.7 billion.

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Today

• Today there are over 120 Israeli companies traded
  on US stock exchanges. More than any other
  country outside North America.
• During 1999, 12 Israeli companies made IPOs on
  Wall St, raising over 1.9 billion.
• There are over 20 Israeli companies traded on
  various European exchanges.

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Direct Foreign Investment in Israel
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Venture Capital Raised
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Case Study The Software Industry

• During the 1990s, sales of Israeli software have
  increased 700.
• Professional manpower has increased 250.
• Software exports
• 1997 1 billion
• 1998 1.5 billion
• 1999 2 billion
• 2000 2.5 billion (projected)

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Multinationals

• Microsoft built their first, and Cisco has built
  their only RD facilities outside the US in
  Israel.
• Motorolas Israel facility is the companys
  largest development center worldwide.
• In January 2000, IBM chose Israel for its first
  VC investment outside of the US.

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American Companies Invested in Israel- Some
Examples

• Microsoft
• Pratt Whitney
• AOL
• Intel
• IBM
• Boeing Enterprises
• Cisco Systems
• Kimberly Clark

• 3M
• US Robotics
• Lucent
• 3Com
• Hewlett Packard
• Merrill Lynch
• Motorola
• Sun Microsystems

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European Companies Invested in Israel - Some
Examples

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

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

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Asian Companies Invested in Israel - Some Examples

• Samsung Electronics
• Daewoo
• Nomura
• Goldtron
• Hutchison Telecomm.
• Nissho Iwai
• LG Group

• Sony
• Toyo Ink
• Hyundai
• Acer Computers
• Sumitomo Trading
• Fuji
• Honda

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Recent Investments

• Lucent bought Chromatis for 4.8 billion.
• Intel bought DSP Communications for 1.6 billion
  cash.
• BMC Software bought New Dimension Software for
  675 million.
• VerticalNet bought Tradeum for 474m.
• AOL bought ICQ for 407 million.

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Technology

• Israeli startups, as well as more established
  companies, are leading the world in cutting edge
  technologies.
• Today, Israel has about 2,000 high-tech companies
  and more than 3,000 high-tech startups. These
  numbers represent the second highest
  concentration in the world, in absolute terms,
  after California.

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VC Deals- 1999
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The New Silicon Valley

• Silicon Valley really has only one rival outside
  the US Israel. Wall St. knows it
• Newsweek, 8.4.96
• The hottest market abroad these days is Israel,
  which offers a great tax climate, sophisticated
  high-tech and a culture thats entrepreneurial
  down to its roots.
• Forbes Global Business, 15.4.99
• .

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Technology Leader

• Thanks to quality education, Israel is one of
  the most advanced countries in the world ..
  Israel is advancing in high-tech even more than
  other developed countries.
• Bill Gates, CEO Microsoft, World Economic Forum,
  Davos, January 2000
• Israel has the best engineers in the world... I
  view Israel as a tremendous source of
  technologies
• Harry Bosco, President of Lucents Optical
  Networking Group
• (in Globes, 22.6.00).

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Where does Israel excel?

• Telecommunications
• Medical equipment
• Multimedia
• Electronics
• Computer aided education
• Datacommunications

• Internet
• Software
• E-commerce
• Biotechnology
• Encryption and data security
• Agrotechnology

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1999 VC Investments by Sector
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How did this remarkable transformation occur?
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The transformation is a result of three major
factors

• Outstanding human resources
• Modern infrastructure for technological
  development
• A supportive environment for business development

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Our Best Resources

• Apart from some minerals in the Dead Sea area,
  Israel has virtually no natural resources.
• Israel was forced to turn to the only resource
  that it has Its human capital

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1. Outstanding Human Resources
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A Product of Adversity

• Highly trained graduates of the Israel Defense
  Forces have spearheaded the high-tech boom
  turning cutting edge defense technology into
  civilian applications.
• Close to 1 million highly educated immigrants
  from the former Soviet Union.

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Outstanding Human Resources I

• One of the most highly educated workforces in the
  world.
• A multilingual population with cultural, historic
  and business ties to almost every other nation.
• Israel ranks third in the industrialized world in
  the number of patents per head of population
  (after the US and Japan).

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Scientists technicians per 10,000 workers
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An Educated Workforce

• 24 of Israels workforce hold university degrees
  (ranking 3rd in the industrialized world, after
  the US and Holland).
• 12 hold advanced degrees.
• 35 of Israelis between the ages of 25-64 hold a
  university degree.
• 40 of new immigrants hold academic degrees.

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Investment in Education
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Outstanding Human Resources II

• Well established and strong academic
  infrastructure.
• An entrepreneurial environment. Large numbers of
  Israelis are eager to establish their own
  businesses and make their mark.
• Success stories breed success. Everyone wants to
  be an ICQ.

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Establishing New Businesses
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2. Modern Infrastructure for Technological
Development
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Modern Infrastructure I

• State of the art telecommunications and
  data-communications.
• World renowned medical, scientific, advanced
  research and educational institutions.
• A highly advanced banking and financial sector.
• Government supported technological incubators.

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Technological Incubator Projects

• 24 incubators have accepted a total of 800
  projects.
• 592 have left the incubators. Of these, 308 (52)
  have continued to operate (either through private
  investment or on their own steam).
• 208 projects continue in the incubators today.

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Modern Infrastructure II

• A large volume of high-tech and science based
  industry in centralized locations- including 19
  hi-tech industrial parks.
• Israel has one of the highest rates of PCs per
  household (54) in the world
• US (42) and the UK (37).

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Investment in RD
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3. Supportive Environment
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Government Support

• Competitive government grants.
• Tax holidays for up to 10 years.
• Significant government funding for RD projects.
• Labor training grants.
• Marketing Encouragement Fund.

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Restructuring the Economy

• The Israeli economy has been transformed into a
  modern, liberalized and open system.
• An open and liberal foreign currency system.
• A major reduction in government involvement in
  the economy.
• Inflation in 1999 was just 1.3 -The lowest
  figure in 33 years.

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Government Spending
41
Privatization

• From 1986-1996, 3.5 billion was raised from the
  governments privatization program.
• A further 4 billion was raised in 1997-99 alone.
• During this time a total of 75 companies have
  ceased to be state owned.

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Supportive Business Environment

• Worldwide taxation and customs treaties.
• Protection of trademarks, patents and
  intellectual property of all kinds.
• Comprehensive legal protection of foreign
  companies.

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Trade and Research

• Bi-national funds for RD projects with many
  countries (including the US, Europe, Singapore
  and the UK).
• Large number of free trade agreements in place
  with other nations.
• Israel is the only country to have a FTA with the
  US, the EU and EFTA.

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Committed

• There is a unilateral commitment, across the
  political spectrum, to the restructuring and
  liberalization of the Israeli economy- including
  privatization.
• Similarly, there is an across-the-board consensus
  regarding the importance of government incentives
  for continued technological development.

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Main Indicators 1999
Inflation 1.3 Unemployment 8.9 Imports
of Goods 30.63 b Export of Goods
23.55 b GDP 98.9 b Business Sector
Production 66.17 b GDP/cap 16,170
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The New Economy

• Remarkably, just as Israels high-tech sector has
  boomed, it is this sector that is generating
  economic excitement across the globe.
• The ease of transfer of information today
  minimizes Israels traditional disadvantage of
  being physically distant from major markets.

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Tomorrow

• More and more foreign companies are coming to
  Israel in search of startups.
• In the first half of 2000, the annualized growth
  rate reached 5.4.
• Electronics exports were up 138 during the first
  seven months of 2000.
• Israel was placed in the World Banks list of the
  35 developed countries of the world.

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Tomorrow

• Industrial exports were up 28 during Jan- July
  2000.
• According to the Israel Export Institute, 2-3 new
  startups are established in Israel every day.
• Hundreds of startups and incubators are just
  embarking on their road to success.

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So, Why Do Business in Israel?

• Outstanding human resources
• Modern infrastructure
• Supportive environment
• Dont miss out on the high-tech boom that
  is transforming Israel.

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Ministry of Industry and Trade

• INVESTMENT PROMOTION CENTER
• 30 Agron St, Jerusalem
• Israel, 94190
• www.tamas.gov.il
• Presented by Dani Wassner
• dani_at_moit.gov.il