investment climate in israel 2000 investment promotion center state of israel. ministry of industry...
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Investment Climate in Israel 2000
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
0
15
30
45
% Change
Traditional Mixed Hi-Tech
Branches of Industry
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Jaffa Oranges vs Software
0
400
800
1200
1600
2000
1992 1993 1994 1995 1996 1997 1998 1999
exports ($millions)
CitrusSoftware
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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
0
500
1000
1500
2000
2500
$ millions
1994 1995 1996 1997 1998 1999
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Venture Capital Raised
0
200
400
600
800
1000
1200
1400
1600
$ millions
1995 1996 1997 1998 1999 2000*
* projected
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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)
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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.
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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• L’Oreal• 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
0200400600800
1000120014001600
California Israel New York
Number of VC Deals- 1999
If Israel were a US State, it would rank 3/50.
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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 that’s 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 Lucent’s Optical Networking Group
(in “Globes”, 22.6.00).
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Where does Israel excel?
• Internet
• Software
• E-commerce
• Biotechnology
• Encryption and data security
• Agrotechnology
• Telecommunications
• Medical equipment
• Multimedia
• Electronics
• Computer aided education
• Datacommunications
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1999 VC Investments by Sector
Internet33%
Software14%
Life Sciences13%
Other Technology11%
Communications29%
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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 1. Outstanding Human ResourcesResources
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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
0
20
40
60
80
100
120
140
Isra
el US
Japa
n
Ger
man
y
Can
ada
Swit
zerl
and
Tai
wan UK
Irel
and
Ital
y
Sing
apor
e
Spai
n
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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.
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Investment in Education
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%
10.0%
Ire
lan
d
Me
xic
o
Au
str
alia
OE
CD
Av
.
Sp
ain
Fra
nc
e
US
A
Fin
lan
d
Sw
ed
en
Isra
el
Investment in Education as a % of GDP (1995)
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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
0
1
2
3
4
5
6
7
8
Percentage of the adult
population involved in the
establishment of new businesses.
US
Isra
el
Can
ada
Ital
y
UK
Ger
man
y
Den
mar
k
Fin
land
Japa
n
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2. Modern Infrastructure for 2. Modern Infrastructure for Technological DevelopmentTechnological 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 R&D
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
% of GDP (1997)
Gre
ec
e
Sp
ain
Ita
ly
Ire
lan
d
Ice
lan
d
Ca
na
da
UK
De
nm
ark
Fra
nc
e
US
A
Ge
rma
ny
Isra
el
Ja
pa
n
Investment in Civilian R&D
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3. Supportive Environment3. Supportive Environment
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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.
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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
444546474849505152
% of GDP
1992 1995 1998
Government spending as a % of GDP, by year.
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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.
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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 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.
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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 bExport of Goods $ 23.55 bGDP $ 98.9 bBusiness Sector Production $ 66.17 bGDP/cap $ 16,170
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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.
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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 Bank’s 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
Don’t 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