Investment Climate in Israel
2000
Investment Promotion Center
State of Israel. Ministry of Industry and Trade.
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.
Change in Export Growth Rate
Jan- Jul 2000
% Change
Traditional
Mixed
Hi-Tech
Branches of Industry
Jaffa Oranges vs Software
exports
($millions)
Citrus
Software
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.
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.
Direct Foreign Investment in
Israel
$ millions
Venture Capital Raised
$ millions
*
* projected
Case Study: The Software Industry
• During the 1990’s, 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)
Multinationals
• Microsoft built their first, and Cisco has
built their only R&D facilities outside the
US in Israel.
• Motorola’s Israel facility is the company’s
largest development center worldwide.
• In January 2000, IBM chose Israel for its
first VC investment outside of the US.
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
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
Goldtron
Hutchison Telecomm.
Nissho Iwai
LG Group
•
•
•
•
•
•
•
Sony
Toyo Ink
Hyundai
Acer Computers
Sumitomo Trading
Fuji
Honda
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.
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.
VC Deals- 1999
If Israel were a US State, it would rank /
California
Number of VC Deals-
Israel
.
New York
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 that’s entrepreneurial down to its roots.”
Forbes Global Business, 15.4.99
.
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 Lucent’s Optical Networking Group
(in “Globes”, 22.6.00).
Where does Israel excel?
•
•
•
•
•
Internet
Software
E-commerce
Biotechnology
Encryption and
data security
• Agrotechnology
•
•
•
•
•
Telecommunications
Medical equipment
Multimedia
Electronics
Computer aided
education
• Datacommunications
1999 VC Investments by Sector
How did this
remarkable
transformation
occur?
The transformation is a result of
three major factors:
• Outstanding human resources
• Modern infrastructure for technological
development
• A supportive environment for business
development
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
1. Outstanding Human
Resources
A Product of Adversity
• Highly trained graduates of the Israel
Defense Forces have spearheaded the hightech boom; turning cutting edge defense
technology into civilian applications.
• Close to 1 million highly educated
immigrants from the former Soviet Union.
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).
Scientists & technicians per
10,000 workers
An Educated Workforce
• 24% of Israel’s 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.
Investment in Education
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.
Establishing New Businesses
2. Modern Infrastructure for
Technological Development
Modern Infrastructure I
• State of the art telecommunications and datacommunications.
• World renowned medical, scientific, advanced
research and educational institutions.
• A highly advanced banking and financial
sector.
• Government supported technological
incubators.
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.
Modern Infrastructure II
• A large volume of high-tech and science
based industry in centralized locationsincluding 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%).
Investment in R&D
Investment in Civilian R&D
. %
. %
. %
) . %
. %
Japan
Israel
Germany
USA
France
Denmark
UK
Canada
Iceland
Ireland
Italy
. %
Spain
. %
Greece
% of GDP (
3. Supportive Environment
Government Support
• Competitive government grants.
• Tax holidays for up to 10 years.
• Significant government funding for R&D
projects.
• Labor training grants.
• Marketing Encouragement Fund.
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.
Government Spending
Privatization
• From 1986-1996, $3.5 billion was raised
from the government’s 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.
Supportive Business
Environment
• Worldwide taxation and customs treaties.
• Protection of trademarks, patents and
intellectual property of all kinds.
• Comprehensive legal protection of foreign
companies.
Trade and Research
• Bi-national funds for R&D 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.
Committed
• There is a unilateral commitment, across the
political spectrum, to the restructuring and
liberalization of the Israeli economyincluding privatization.
• Similarly, there is an across-the-board
consensus regarding the importance of
government incentives for continued
technological development.
Main Indicators 1999
Inflation
Unemployment
Imports of Goods
Export of Goods
GDP
Business Sector Production
GDP/cap
1.3%
8.9%
$ 30.63 b
$ 23.55 b
$ 98.9 b
$ 66.17 b
$ 16,170
The New Economy
• Remarkably, just as Israel’s 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 Israel’s traditional disadvantage
of being physically distant from major
markets.
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 Bank’s list of
the 35 developed countries of the world.
Tomorrow
• Industrial exports were up 28% during JanJuly 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.
So, Why Do Business in
Israel?




Outstanding human resources
Modern infrastructure
Supportive environment
Don’t miss out on the high-tech boom
that is transforming Israel.
Ministry of Industry and Trade
INVESTMENT PROMOTION CENTER
30 Agron St, Jerusalem
Israel, 94190
www.tamas.gov.il
Presented by Dani Wassner
dani@moit.gov.il