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Israel’s Economic Highlights Newsletter, Q1 2012

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Israel’s Economic Highlights Newsletter, Q1 2012

Israel’s Economic Highlights Newsletter, Q1 2012

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  • 1. STATE OF ISRAELMINISTRY OF FINANCEInternational Affairs Department Economic Highlights Newsletter 1st Quarter 2012 Website: www.finance.gov.il Follow us on Twitter Email: financeisrael@mof.gov.il Follow us on Linkedin Table of ContentsMajor Features of Government Economic News................................................................... 2Monetary and Capital Market News .................................................................................... 4News from the Press ......................................................................................................... 5Environmental Economy News ........................................................................................... 6Main Economic Indicators .................................................................................................. 7Contact ............................................................................................................................ 8 Headlines Israel Deepens Economic and Academic Ties with China and India Ministry of Finance Investment Promotion Campaign Summary of the First EU – Israel Economic Dialogue IVC Research Centers Findings for Israeli VC in 2011 Israel Named Safest Place to Invest in the Past Decade Israel Ranked 2nd in the World for Clean-TechIn any case of information derived from sources external to the Ministry of Finance, suchsources are mentioned at the bottom of each item
  • 2. Major Features of Government Economic News New in our Website: Final Recommendations of the Committee on Increasing Competitiveness in the Economy Final recommendations were submitted by the Committee on February 22, 2012. Committee on Increasing Competitiveness in the Economy New in our Website: Concluding Statement of the 2012 Article IV Consultation Mission to Israel IMFs main concern is over low participation rate among Haredi (Jewish-Orthodox) men. Israel and the IMF Israel Deepens Economic and Academic Ties with China and India Israel and China executed an agreement exceeding more than NIS 1 billion for the export of Israeli water technologies to China. Israel also launched programs to boost research cooperation with India and China. New financial protocol with China Israel and China signed a financial protocol exceeding more than NIS 1 billion (US $ 300 million) for the export to China of Israeli water technologies for agricultural use. The current protocol joins 3 previous protocols that have been signed with the government of China since 1995. Altogether, these existing protocols amount to one billion dollars.Israeli trade with China in 2011 totaled $ 10.15 billion (excluding diamonds), an increase of 25% compared to theprevious year. The trade deficit in 2011 was $ 4.78 billion. Israeli exports to China in 2011 totaled $ 2.7 billion, anincrease of 31% compared to the previous year.Academic cooperation program between Israel, India and ChinaIsrael launched two programs designed to boost research cooperation with India and China. The programs aim toattract researchers and students from those two countries to Israel’s research institutions, and will provide fertile soilfor future cooperative ventures in research and economics. Read more in our websiteMore development in economic relations with India:Israel and India sign cooperation agreement on urban waterIndia’s Minister of Urban Planning, Kamal Nath, just completed a visit to Israel (February 12-14) during which anagreement was signed between the two nations aimed at fostering cooperation, with a focus on urban water.Minister Nath talked about the successful water projects Israeli companies have already undertaken in India, bycompanies including IDE (desalination), Amiad and Aqwise. However this is just the tip of the iceberg, as many moreprojects, and more extensive ones, are needed in order to meet India’s pressing needs.Talks over exporting natural gas to IndiaTwo months after the visit by the Minister of Finance, Dr. Yuval Steinitz, to India, the Minister of NationalInfrastructures, Dr. Uzi Landau, visited India and again discussed the possibility of exporting some of Israelslarecently discovered natural gas to India.Promotion of a Free Trade Agreement with IndiaSo far, two rounds of negotiations between Israel and India on the matter of an FTA agreement have occurred.Another round of negotiations is planned in order to promote the future signing of an agreement.(Additional sources: Israel NewTech, The Hindu) -2-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il
  • 3. Ministry of Finance Investment Promotion Campaign The Minister of Finance Dr. Yuval Steinitz, and Acting Director General of the Ministry of Finance, Mr. Doron Cohen, joined by leading members of the Israeli business community, headed on March 21 for Europe to attend the Bloomberg Sovereign Debt Conference, with the aim of promoting Israel as an economic haven and attractive investment center.The delegation accompanying the minister included the Capital Market, Insurance and Savings Commissioner in theMinistry of Finance, Prof. Oded Sarig; the Chairman of the ISCAR company, Mr. Eitan Wertheimer; the GeneralManager of Intel Israel and Vice President of Intel International, Ms. Maxine Fassberg; the Chief Scientist in theMinistry of Industry, Trade and Labor, Mr. Avi Hasson; the CEO of the Tel Aviv Stock Exchange, Ms. Esther Levanon,and the former Director General of the Ministry of Finance, Mr. Chaim Shani.The activities of the minister and the delegation at the conference are one facet of an international publicinformation campaign that is being launched by the Ministry of Finance to attract investments to Israel and exploitthe opportunities presented by the complex global financial situation. The campaign is based on an understanding ofthe importance of foreign investments at the present juncture for sustaining economic growth.The Israeli delegation to the conference was acting in collaboration with the Foreign Trade Administration in theMinistry of Industry, Trade and Labor and the Ministry of Foreign Affairs.The Bloomberg Sovereign Debt ConferenceThe Bloomberg Sovereign Debt Conference was held to discuss developments in the European debt crisis and assessopportunities for attractive and sustainable investments. At the conference, the Israeli delegation met with seniorEuropean policymakers and high-level executives of European financial institutions and spelled out to them theadvantages of the Israeli economy against the background of todays global economic challenges.Remarks by Members of the DelegationOne of the principal panel discussions at the conference dealt with the Israeli economy as a current investmentopportunity. When he spoke, Iscar Chairman Eitan Wertheimer concentrated on the advantages of Israel’s highquality manpower. “Competitiveness is determined by who is the first to reach the market with the most innovativeproduct. To do so you have to wake up early, work fast or do both. And that is precisely the kind of people we havein Israel, very hungry people with the ability to connect with whoever offers an advantage.” He added that “thepeople in Israel are exposed to the latest technologies early and adapt to them very quickly…”Maxine Fassberg, CEO of Intel Israel and VP of Intel International, said that “Intel initially came to Israel in 1974 andestablished its planning center in Haifa. The main reason for its arrival was the quality of the manpower, theengineers, their ability to solve problems in creative and original ways and, ultimately, to provide Intel with solutionsthat would be used by the company and are still being used to this day.” Fassberg said, “To date, Intel has investedUSD 9.4 billion in Israel, while the Israeli government has invested USD 1.3 billion. This partnership has led to thesituation today, with Intel’s most advanced technologies being produced in Kiryat Gat. A combination of awesomeengineering capabilities, Israel’s high quality educational infrastructure, the number of Nobel Prize winners in relationto the population, the blend of educational capabilities and government investments – have made Israel highlyattractive to international companies. These two things are intertwined – education and government support forinvestment.” Read more in our website -3-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il
  • 4. New in our Website: Macro-Economic Overview by the Minister of Finance The macro-economic overview was presented by Minister Steinitz to the Knesset Finance Committee in January 2012. The presentation contains estimations from growth, investments, labor market, taxes, deficit, debt, developments in the capital market and forecasts for 2012. Read the full press release Open presentation Summary of the First EU – Israel Economic Dialogue The first meeting of the EU - Israel Sub-Committee on Economic and Financial matters took place in January. A delegation from the European Commission, the European External Action Service and the European Central Bank met with representatives of the Israeli Ministry of Finance, National Economic Council, Bank of Israel and the Israel Central Bureau of Statistics.Forecasts for the Israeli economyIsraeli representatives presented a detailed picture regarding the composition of growth, labor market, capitalmarkets and external trade. Special focus was attributed to the issue of the fiscal challenges for the year 2012, whichare mainly due to the shortfall in the tax revenue. The 2011 Israeli social protests led to a thorough reevaluation ofthe cost of living and purchasing power of the citizens and the results are summarized by the Trajtenberg Committeefor Social and Economic Change. The recommendations of the Committee on Enhancing Competitiveness were alsohighlighted.Monetary PolicyRepresentatives from the European Central Bank discussed the latest trends in inflation in the euro area and the EUand explained the European Central Banks strategy and recent measures. There was also a discussion of inflationdevelopments in Israel and the Bank of Israels recent policy of intervention in foreign exchange markets.Statistical CooperationBoth sides outlined their views on the recent developments and challenges for the Israeli statistical system, as wellas the consequences stemming from Israels membership in the OECD. There was also discussion of theMemorandum of Understanding between Eurostat and Israel Central Bureau of Statistics on the exchange of data.Both parties also welcomed the fruitful and successful cooperation between the Eurostat and the Israel CentralBureau of Statistics, and agreed to favorably consider the extension of the Memorandum of Understanding on theexchange of data beyond 2013. Read more in our website Orders Signed Giving Effect to Conventions for the Avoidance of Double Taxation with Georgia and Denmark The conventions entered into force in December 2011 and have gone into effect on January 1, 2012. The conventions will apply to income derived in the 2012 tax year and onward, and to taxes withheld at source from amounts paid in 2012 and onward. Read the full press release Read more on avoidance of double taxation agreements in our website Israel, Azerbaijan Sign Customs Cooperation Agreement Azerbaijan and Israel have signed an agreement on mutual support in the customs area. Azerbaijan has become an important trading partner with Israel on security and foreign affairs. Economic cooperation between Israel and Azerbaijan has grown significantly. Israeli-Azerbaijani trade now outweighs the trade relations Israel has developed with the countries of Central Asia by a minimum of a factor of five.(Additional sources: Port2Port) -4-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il
  • 5. Monetary and Capital Market News The Ministry of Finance Completes a 10.5-Year Overseas Bond Issue for a Total of $1.5 Billion at a Yield of 4.115% The issue is a success for the Ministry of Finance and an unqualified vote of confidence in Israels economy. Lowest-ever pricing was achieved by the State of Israel in issues of dollar bonds. Read the full press release IVC Research Centers Findings for Israeli VC in 2011  $796 million raised by Israeli VC funds in 2011  Less than $300 million remains for first investments  IPOs on the decline again  $2.88 billion in private equity deals in 2011, up 18% from 2010  $2.14 billion raised by Israeli start-ups in 2011, up 70% from 2010  Israeli VC fund share at Israeli start-ups at 25%(Additional sources: IVC Research Center) Moodys Reiterates “A1 – Stable” Rating for IsraelThe rating is "underpinned by the countrys high levels of economic, institutional and financial strength andmoderate event risk. The Israeli economy is resilient and dynamic, and the macroeconomic policy framework iscoherent. The high-tech exports-based economic model underpins favorable medium- to long-term growthprospects, though it is subject to cyclical fluctuations in world trade."(Additional sources: Moodys, Invest in Israel – Ministry of Industry, Trade and Labor) OECD praises Israels corporate governance According to a comparative OECD report on related party transactions and minority shareholder rights, Israel has taken numerous additional steps to strengthen an already robust framework to prevent the abuse of minority shareholder rights, and has one of the most elaborate systems of disclosure and review among OECD countries reviewed. Related Party Transactions and Minority Shareholder Rights(Additional sources: OECD, Globes) -5-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il
  • 6. News from the Press Israel Named Safest Place to Invest in the Past Decade According to Bloomberg, Israel produced better risk- adjusted returns than all other developed stock markets in the past decade as the technology-driven economy attracted global investors.(Additional sources: Bloomberg) Tel Aviv Takes the Tech-Hub Crown, Named among Worlds Most Creative Cities According to the Wall Street Journal, figures indicate that no European city can challenge Tel Aviv. Also, the Canadian Globe and Mail mentioned Tel Aviv as one of the worlds 5 most creative cities.(Additional sources: Wall Street Journal, Globe and Mail) New Organization for Israeli High Tech and Life Sciences High Tech Industry Association (HTIA) and Israel Life Sciences Industries Organization (ILSI) have merged into Israel Advanced Technology Industries (IATI). The next HTIA yearly conference is to be held in September, in Jerusalem. Next HTIA yearly conference in September, in Jerusalem(Additional sources: IATI) Cisco Systems Buys Israeli NDS for $5B Computer communications giant Cisco Systems announced its intention to acquire the Israeli advanced inter-active systems provider NDS for $5 billion.(Additional sources: Cisco Systems, NDS, Globes) Microsoft Israel Launching Startup Incubator Microsoft Israels R&D center to set up a startup incubator. After years of passive support for startups, during which Microsoft provided access to development tools and services, the company is joining the growing trend in the high tech industry.(Additional sources: Microsoft, Globes) More Natural Gas Discovered Offshores Israel Oil and gas were discovered off the Tel Aviv coastline. Modiin Energy, Adira Energy announce oil discovery of up to 232.2 million barrels, drilling to begin at end of year. In its notice to the TASE, Modiin said that the best estimate for Gabriella is 128.4 million barrels of oil. The natural gas discovery is a fifth the size of the 9 trillion cubic foot deep water Tamar discovery.(Additional sources: Jerusalem Post, Globes) Blackstone to Invest in Israel Blackstone will set up a joint venture with Markstone to invest hundreds of millions of dollars in Israel. Blackstone, with $166.2 billion in assets under management, is the worlds largest private equity fund. Markstone will apparently become Blackstones exclusive representative in Israel.(Additional sources: Blackstone, Markstone Capital Partners, Globes) -6-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il
  • 7. Environmental Economy News Israel Ranked 2nd in the World for Clean-Tech The Cleantech Group and the World Wildlife Fund (WWF) published The Global Cleantech Innovation Index 2012. According to the first-of-its-kind index, Israel is second only to Denmark in providing best conditions for clean technology start-ups. Israel was cited for its innovative capacity and received the highest score in “Evidence of Emerging Cleantech Innovation.” Israel was also cited to be “a clear winner in this factor, with by far the most Global Cleantech 100 companies per GDP and the second highest concentration of cleantech VC activity.” Global Cleantech Innovation Index report 2012(Additional sources: The Cleantech Group, WWF, Israel NewTech) Ashalim Sun PV Wins Tender for Planning, Financing and Building Photovoltaic Power Plant in Ashalim The power plant, which is expected to commence operation in the first half of 2015, is planned to be one of the biggest of its kind in the world. The power plant will join two thermo solar technology power plants that will be built nearby, each with installed capacity of 110 MW.Together, the power plants will supply approximately 2% of the economy’s electricity production. The three powerplants will constitute a significant milestone in terms of meeting the government’s goal, whereby by the year 2020,10% of the electricity production will be from renewable energy sources. Read the full press release(Additional sources: Tashtiot.co.il) Israels biggest solar farm to be set in Ramat Hovav The Ramat Hovav Tenders Committee accepted an NIS 80 million (approx. $21.5 million) bid by a subsidiary of Solar Israel Ltd. The company will lease 120 acres for the purpose of building a photovoltaic power generation farm. The project is expected to generate 35 megawatts of electricity and once it is operational it will be included in the national power grid. The new solar venture is to be Israels biggest within its limits.(Additional sources: Ynet) Israeli Company Opened another Solar Power Plant in Spain Israeli company AORA Solar will soon be opening its 2nd solar power station in southern Spain. The thermodynamic solar plant was constructed in the city of Almeria, on the Mediterranean coast. AORA Solar is using concentrated solar power (CSP) and opened its first plant in 2009 at Kibbutz Samar next to Eilat, in southern Israel. It is the exact same size as the new plant in Almeria.(Additional sources: Nocamels.com) Israels MATIMOP and UKs British Water signed a strategic water deal The Israeli Industry Center for R&D signed a strategic cooperation agreement with British Water. The agreement is meant to encourage the penetration of Israeli technologies into the British water market. The agreement also opens doors to British- Israeli cooperation on international water tenders.(Additional sources: MATIMOP, Israel NewTech, Ynet) -7-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il
  • 8. Main Economic Indicators See more extended economic data in our Economic Highlight PresentationRankings:  IMD Global Competitiveness Yearbook 2011: Israel maintained its rank as 17th  World Economic Forum Global Competitiveness Report 2011-2012: Israel improved from 24th to 22nd More on Israels rankings 2011 2011 Q1 2011 Q2 2011 Q3 2011 Q4GDPReal GDP growth 4.7% 4.7% 3.7% 3.4% 3.2%GDP per capita growth 2.8% 2.9% 2.0% 1.5% 1.2%ConsumptionPrivate consumption 1.4% 5.5% -0.2% 0.8% -0.8%Public consumption 2.2% 0.9% 3.9% 2.6% 8.5%TradeExports of goods and services 4.8% 3.7% 11.7% -9.8% -7.0%Imports of goods and services 10.6% 23.1% 14.1% -8.8% -5.2%InvestmentsGross domestic capital formation 1.9% 72.7% 0.5% 23.7% 3.2%Net foreign investments in Israel ($B) 7.8 5.3 5.6 -2.0 -1.1Net foreign direct investments ($B) 11.4 2.0 2.0 2.6 4.7Labor MarketUnemployment 5.7% 0.6% 5.6% 5.0% 5.4%Participation rate 57.3% 57.5% 57.5% 57.4% 57.4% 2007 2008 2009 2010 2011BalancesCurrent account surplus (% of GDP) 2.9% 0.9% 3.6% 2.9% 0.1%Gross public debt (% of GDP) 77.8% 77.1% 79.3% 76.3% 74.7%Budget deficit (% of GDP) 0.0% 2.2% 5.2% 3.7% 0.0% Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- 2011 2011 2011 2011 2011 2011 2011 2012 2012 2012MonetaryConsumer Price 104.0 104.1 104.0 104.2 103.7 104.0 104.0 104.0 104.0 --IndexBank of Israel 3.25% 3.25% 3.25% 3.25% 3.00% 3.00% 2.75% 2.75% 2.50% 2.50%interest rate Contact Mr. Roni Hershkovitz Follow us on Twitter Mr. Assaf Luxembourg Mr. Jonah Balakhaneh Follow us on Linkedin Overseas Economic Information Subscribe our RSS Feeds International Affairs Department Ministry of Finance Subscribe our Newsletters State of Israel Write us an Email Visit our Website -8-1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349English: www.finance.gov.il Hebrew: www.mof.gov.il