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Investment Climate in Israel

State of Israel Ministry of Industry, Trade & Labor - Foreign Trade Administration Investment Promotion Center. Investment Climate in Israel. June, 2005. Contents. From Citrus to Software - An Economy Transformed Foreign Investment & Venture Capital Israel - a High-Tech Powerhouse .

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Investment Climate in Israel

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  1. State of Israel Ministry of Industry, Trade & Labor - Foreign Trade Administration Investment Promotion Center Investment Climate in Israel June, 2005

  2. Contents • From Citrus to Software - An Economy Transformed • Foreign Investment & Venture Capital • Israel - a High-Tech Powerhouse

  3. Main Indicators 2005F 2001 2002 2003 2004 1 - 3 Inflation(%) 1.4 6.5 -1.9 1.2 9.1* Unemployment(%) 9.3 10.5 10.9 10.0 45.8 Imports ($ billion) 33.3 33.1 34.2 41.1 43.1 Exports ($ billion) 29.0 29.3 31.8 38.5 121 GDP ($ billions) 109.5 102.7 109.1 117.2 17.7 GDP/Cap ($) 17,180 15,468 16,312 17,200 * May 2005

  4. From Citrus to Software – An Economy Transformed

  5. From Citrus to Software - An Economy Transformed • Until the 1980s, the Israeli economy was mainly focused on traditional industries • Since the 1980’s, the economy has been transformed by a high-tech explosion • In the 1960s, agriculture represented 70% of Israeli exports • Today, agriculture comprises only 3%

  6. Jaffa Oranges vs. Software Exports ($ millions) Source: Dept. Economic & Planning Admin., Ministry Industry, Trade and Labor

  7. High-tech Exports • During 2003, hi-tech exports comprised 36% of Israel’s industrial exports • 2003: Hi-tech exports - $9 billion • Over the last ten years, hi-tech exports have tripled Source: Association of Electronics & Information Industries (Israel) - 2003

  8. High-Tech Exports * Source: Economic & Planning Admin., Min. of Industry, Trade & Labor 2003

  9. Case Study: The Software Industry • Sales of Israeli software have increased by over 700%, over the last 10 years • Professional manpower has increased 250% • Local sales amount to over $900 m per year

  10. Where does Israel excel? • Biotechnology • Data security • Software • Semiconductors • Agrotechnology • Safety & Security • Telecommunications • Medical equipment • Optics • Internet technologies • Computer aided education

  11. Excellence “ There are few places like Israel where one can find leading technologies in almost every field. ” Y. Hasson – Senior Vice President Nokia Venture Partners (London) September 2003

  12. Foreign Investment & Venture Capital

  13. Investment climate in Israel Foreign Direct Investment in Israel Millions USD Source: Bank of Israel Not including traded securities

  14. Sources of Foreign Investment - 2003 Source: Israel Venture Association , March 2003

  15. Happy Investors “ Outside the US, we invest in only one other country. That’s Israel. ” Julien Nguyen, Managing Partner, Applied Materials Ventures September 2003

  16. Major Acquisitions of Israeli companies • Perrigo bought Agis for $900 million • Intel bought DSP Communications for $1.6 billion • Lucent bought Chromatis for $4.5 billion • Marvell bought Galileo for $2.7 billion • Marvell bought Radlan for $195 million • Broadcom bought VisionTech for $1 billion • HP bought Indigo for $629 million • Veritas bought Precise software for $609 million • Guidant bought X-Technologies for $160miliion

  17. Recent trends and developmentsRecent M&A IsraeliCompany Technology Acquirer Sum Time Impulse Dynamics healthcare Johnson & Johnson $80M 05/2005 Siliquent semiconductors fabless Broadcom ~$85M 05/2005 Tecnomatix software UGS Corp $228M 04/2005 Kagoor Voiceover Internet Juniper Networks $68M 03/2005 Savient biopharmaceutical Ferring Holding SA $80M 03/2005 OREX Radiography Medical equipment Kodak $51M 03/2005 Native Networks Communication Alcatel ~$50M 03/2005 Oplus Technologies processors for digital display devices Intel $100M 03/2005 Modem-Art semiconductors fabless Agere Systems $150M 02/2005

  18. Recent trends and developmentsRecent M&A IsraeliCompany Technology Acquirer Sum Time Agis Pharmaceutical Perrigo $900M 11/2004 ART Technologies & Phonetic Systems Speech Applications Scansoft $100M 11/2004 P-CUBE Traffic Management CISCO $200M 8/2004 ENVARA Wireless infrastructure INTEL $40M 3/2004 EMBLAZE Chips for Mobile-device applications ZORAN $54M 6/2004 ACTONA TECHNOLOGIES Enterprise software CISCO $100M 6/2004 A2I Content management software SAP $10M 7/2004 SANCTUME Web security WATCHFIRE $45M 7/2004

  19. Israel in the global investment market • Over 70 Israeli companies are traded on the Nasdaq (the biggest outside N. America) • Over 30 Israeli companies traded on European exchanges • 21 Israeli companies dual-listed on the Tel Aviv Stock Exchange and Nasdaq

  20. Venture Capital • Investments by venture capital funds constitute an added value above financial contributions - in management, world market familiarity, strategic guidance and economic credibility. • Capital raised by Israeli VCs Surges to $724m in 2004 • Capital available for investment now at $1 billion • $1.5 billion projected to be raised by VCs in 2005 Source: IVC Research Center (2004)

  21. High-tech Capital Raised 1995-2003 Source: Israel Venture Association, March 2003

  22. VC Investments (by quarter) Source: IVC Online

  23. VC Investments in Israel & Europe Source: Price Waterhouse Cooper, May 2003

  24. Good Things – Small Packages “ Israel is a small country with a tiny population, and yet it has many significant high-tech success stories. ” Sven Lingjaerarde – Co-Founder & General Partner Vision Capital – September 2003

  25. VC Investments by Sector - 2003 Source:Israel Venture Assoc. January, 2004

  26. Multinationals • Microsoft built their first R&D facility outside the US in Israel • Cisco built their only R&D facility outside the US in Israel • Motorola’s Israel facility is the company’s largest development center worldwide. • IBM chose Israel for its first VC investment outside of the US • Sequoia Capital (Israel) is the company’s first VC fund to be set up outside of Silicon Valley

  27. Foreign Companies Invested in Israel- Some Examples US Europe Asia • Microsoft • Pratt & Whitney • AOL Time Warner • Intel • IBM • Boeing Enterprises • Cisco Systems • GE • Lucent • 3Com • Hewlett Packard • Merrill Lynch • Motorola • Sun Microsystems • Philips • Alcatel • Siemens • DaimlerChrysler • Volvo • Cable & Wireless • Baan • Volkswagen • Deutsche Telecom • L’Oreal • British Telecom • Danone • Ares Sereno • Unilever • Samsung Electronics • Daewoo • Nomura • Hutchison Telecomm. • LG Group • Sony • Toyo Ink • Hyundai • Acer Computers • Sumitomo Trading • Fuji • Honda

  28. Israel a High-Tech Powerhouse Excellent Human Resources Dynamic Infrastructure

  29. Excellent Human Resources • Highly educated workforce • A multilingual population with cultural, historic and business ties to almost every other nation • Over 1 million highly educated immigrants from the former Soviet Union since 1989 • 275 engineers per 10,000 employees

  30. Scientists & Technicians per 10,000 Workers

  31. Excellent Human Resources II • Well established and strong academic infrastructure • An outstanding entrepreneurial spirit • Success stories breed success. Everyone wants to be an ICQ

  32. Excellent Human Resources III Highly trained graduates of the Israel Defense Forces have turned cutting edge defense technology into civilian applications. “ Israel leads in encryption software, a by-product of it’s military industry, as are so many technologies in which it excels. ” “Forbes” June 2002

  33. Entrepreneurship Source: IMD World Competitiveness Yearbook, 2002

  34. World Economic Forum 2002-3 • Technology Index Rank 7/ 82 • Innovation Sub Index 6/82 • Networked Readiness Index: 12/80 • Environment Component Index: 5/80 • Readiness Component Index 8/80 • Microeconomic Competitiveness: 18/80 Source: World Economic Forum, Global Competitiveness Report; 2002-03

  35. The OECD International Investment Declaration • In 2002 Israel adhered to the OECD Declaration on International Investment and Multinational Enterprises, and to the OECD Guidelines for Multinational Enterprises. • The declaration and guidelines create a framework of good practices principles for the operation of enterprises and Member States with regard to international investment.

  36. דוגמאות למסרים לקידום ישראל IMD World Report 2004 Country Rank  1st 2nd 3rd 4th Source: IMD World Competitiveness Yearbook- 2004

  37. דוגמאות למסרים לקידום ישראל WEF –Competitiveness Report 2004 – 2005 Country Rank  1st 2nd 3rd 4th WEF – The Global Competitiveness Report 2004 – 2005

  38. Innovation “ Israel is important to our goal because it has historically been a hotbed of new raw technology and scientific developments ” Matthew I. Growney, Managing Director Motorola Ventures September 2003

  39. Growth Competitiveness Ranking – World Economic Forum 2002-3 2001 2002 USA 2 1 Singapore 4 4 UK 12 11 Germany 17 14 Israel 24 19 Korea 23 21 France 20 30 China 39 33

  40. Patents Number of patents (per 10,000) registered in the U.S. during 2003 Israel - An annual increase of 20% Source: BDI - Business Data Israel

  41. Modern Infrastructure • State of the art telecommunications • World renowned research and educational institutions • A highly advanced banking and financial sector • A large volume of high-tech and science based industry

  42. Government Support • Competitive government assistance for R&D projects • Tax holidays for up to 10 years for foreign investors • The reform law for the Encouragement of Capital Investment will simplify bureaucratic processes related to the approval of investments through the establishment of a "green lane". In addition a "Strategic Track" will offer multinational companies significant benefits.

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

  44. Government Reforms • Liberalization of foreign currency • Deregulation of foreign trade • Privatization of government companies

  45. Privatization • The privatization process began in 1986 and was accelerated in 1997 • During this time 82 companies have ceased to be state owned • 2003:National airline El-Al begins privatization • From 1986- 2002 $8.6 billion was raised through privatization

  46. Trade Agreements • Membership in world organizations: GATT (since 1962), WTO (since 1995) and an active part in OECD • Israel has free trade agreements with: EU (25) EFTA (4) Romania US Mexico Bulgaria Canada Turkey

  47. Joint R&D Foundations • BIRDF – with the U.S. • USISTC – US-Israel Science and Technology Commission • BRITECH - with Britain • CIIRDF – with Canada • KORIL-RDF – with Korea • SIIRD – with Singapore • FRANCE • GERMANY • ITALY • SWEDEN

  48. European Union 6th Framework Agreement • An active participant in the European Union’s R&D Framework program since 1996 • Israel continues to be active in the 6th Framework Agreement that began in November 2002

  49. Technological Incubator Projects technological incubators operate projects operate currently projects have left the incubators in the last decade have received further private investment 23 200 735 54%

  50. So, Why Do Business in Israel? • Outstanding human resources • Modern infrastructure • Supportive business environment • Cutting edge technology and scientific breakthroughs

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