Investment Climate in Israel 2002 Amir Hayek Director General State of Israel. Ministry of Industry and Trade Presentation for OECD Paris, April 10, 2002
Facts & Figures
Reasons for Success
Israeli Hi-tech – A Case Study
Prospects for the Future
Net Foreign Inward Investment ($ Billion)
Net Foreign Outward Investment ($ Billion)
Going Global International Investors – Some examples:
American Companies Invested in Israel- Some Examples
Pratt & Whitney
AOL Time Warner
European Companies Invested in Israel - Some Examples
Cable & Wireless
Asian Companies Invested in Israel - Some Examples
Venture Capital in Israel
VC’s invested $3 Billion in 2000
VC invested alone = all of Europe
#4 worldwide for High Tech Deals
Startups raised over $1 Billion in first 6 months of 2000
Investments by Venture Capital Funds ($M)
Venture Capital by Industry ($M)
High-tech Capital Raised 1995-2001
II. Reasons for success:
High Annual Growth Rate (GDP)
2. Highly Skilled Workforce Engineers per 10,000 Employees
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.
4. Monetary Stability Annual percentage change in CPI
5. Government support
Regional Development – Investment Center
Industrial R&D – Office of Chief Scientist
Investment Promotion Center – first stop for Foreign Investors
Investment Center Approvals as % of GDP (1996-2000)
International Investors’ interest in Emerging Markets and Hi-Tech Sector
Liberal Foreign Trade Regime
Foreign Currency Liberalization
Favorable Geo-political Climate
Jaffa Oranges vs Software
III. Hi-tech sector- a case study
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
Hi-Tech as a Percentage of GDP
Change in composition of Non-Diamond Industrial Exports 1980 vs 2000
Formula For Success:
#2 – Investment in Civilian R&D as % of GDP
High Tech Education Investment in Education as a % of GDP (1995)
IV. Prospects for the Future
2001 economic indicators were affected by:
Slowdown in US Economy starting with High Tech crisis
Deterioration of the security situation
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.
2001: Some Growth Areas Continued
Despite the global tech downturn, during 2001, exports grew by:
Security Products +19%
2000 – A Record Year
Industrial exports were up 24.4%.
Foreign currency reserves reached an all time high of $22.93 billion.
TASE: 6 th 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.
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.
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.”