why israel?
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Confidential
1
- Jan 2013 -
Israel Economy
Confidential
2
Israel – General Overview
Sources: Israel Central Bureau of Statistics; Bank Israel
Population: 7.7M
Jews: 75% Arabs: 21% Others: 4%
Annual Growth % (2009-2010) 1.8
Annual Growth % (1948-2010) 3.7
GDP per capita, ppp: $31,005
Confidential
3
Israel Economy Growth Rate Exceed the Average Rate of Advanced Economies
Israel Compared to Advanced Economies, Annual Rate of Change, Constant Prices
4.8% 4.9% 5.6% 5.5%
4.0%
0.8%
4.8% 4.7%
3.1% 2.7%
3.1% 2.8%
0.1%
-3.7%
3.1%
1.6%
2004 2005 2006 2007 2008 2009 2010 2011
Israel Advanced Economies
Confidential
4
Growth is Based on Investments in Fixed Assets and Export
Annual Rate of Change, Constant Prices, 2005
6.3%
2.8% 1.4% 1.4% 1.4%
3.3% 2.1% 2.2% 2.2% 2.2%
14.5%
4.4%
-5.8%
13.7%
16.3%
9.2%
6.6%
-12.5%
3.6% 4.8%
2007 2008 2009 2010 2011
Private Consumption Public Consumption Investment in Fixed Assests Exports of Goods and Services
Global Economic Crisis
Confidential
5
Gross Public Debt is Deceasing
As % of GDP
97.4% 93.8%
84.3% 77.8% 77.1% 79.3% 76.3% 74.7%
2004 2005 2006 2007 2008 2009 2010 2011
Global Economic Crisis
Confidential
6
Low Budget Deficit
As % of GDP
3.5%
1.8%
0.9%
0%
2.2%
5.2%
3.7%
0%
2004 2005 2006 2007 2008 2009 2010 2011
Confidential
7
Average Inflation Rate of 2-3%
Rate of Change in Consumer Price Index, Yearly Average
1.3%
2.1%
0.5%
5%
3.3%
2.7%
3.5%
2005 2006 2007 2008 2009 2010 2011
Confidential
8
Unemployment Decrease while Participation Rate Grows
As % of Total Labor Force
57.1%
56.8% 56.8% 56.8% 56.7%
57.2%
57.7% 57.7% 57.5% 57.5%
57.4% 57.4% 7.5%
7.9%
7.6%
7.2% 6.9%
6.6% 6.6% 6.4%
6.0%
5.6% 5.6% 5.4%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
54.0%
54.5%
55.0%
55.5%
56.0%
56.5%
57.0%
57.5%
58.0%
58.5%
59.0% Participation in Labor Force Unemployment Rate
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2009 2010 2011
Confidential
9
USA is the Major Trading Partner Followed by China
US $B, Constant Prices, 2005
*Since July 1997 the data on trade with Hong-Kong is added to the data on China Sources: Central Bureau of Statistics
Exports Imports
18.5
6
3.1 2.9 2.3 1.8 1.7 1.3 1.3 1.3
USA
Ch
ina*
Bel
giu
m &
Lu
xem
bu
rg
Ind
ia
UK
Net
her
lan
ds
Ger
man
y
Turk
ey
Fran
ce
Ital
y
6.7 6.1
3.7 3.2 2.4 2.2 2.1 1.8 1.8 1.8
USA
Ch
ina*
Ger
man
y
Swit
zerl
and
Ital
y
UK
Net
her
lan
ds
Ind
ia
Turk
ey
Jap
an
Confidential
10
Pharmaceutical Products $6,612
33%
Equipment for Control & Supervision
$4,237 21%
Electronic Communication
Equipment $3,338
17%
Electronical Components
$3,295 16%
Aircraft $1,733
9%
Office & Computing Equipment
$918 5%
20,128
11,188
11,710
4,833
6,739
3,171
2,101
1,812
2010 2000
Low-Technology Industries
Medium-Low Technology Undustries
Medium-High Technology Industries
High - Technoloy Industries
Israel Growth Is Based on High-Technology Industries
Total Industrial Exports Excluding Diamonds: In 2000 - $21,005M In 2010 - $40,678M
Sources: Israel C.B.S
Hi-Tech. Exports By Branches, 2010
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11
Innovation and Entrepreneurship Oriented Economy
IMD World Competitiveness Yearbook 2011
Sources: IMD World Competiveness Yearbook 2011
4.27 3.96
3.62 3.45 3.36 3.02 3 2.94 2.82 2.77
Isra
el
Fin
lan
d
Swed
en
Jap
an
Kore
a
Den
mar
k
Swit
zerl
and
Taiw
an
Ge
rman
y
USA
Total Expenditure on R&D (as % of GDP)
8.63 8.61 8.19 8.11 7.89 7.81 7.79
7.46 7.39 7.35
Isra
el
Swit
zerl
and
USA
Ger
man
y
Swed
en
Den
mar
k
Jap
an
Sin
gap
ore
Fin
lan
d
Taiw
an
Scientific Research
8.24 8 7.88 7.6 7.52 7.3 7.24 7.21 7.04 7
USA
Isra
el
Swit
zerl
and
Ge
rman
y
Swed
en
Taiw
an
Au
stri
a
Den
mar
k
Kore
a
Jap
an
Innovation Capacity
Confidential
12
Innovation and Entrepreneurship Oriented Economy
IMD World Competitiveness Yearbook 2011
Sources: IMD World Competiveness Yearbook 2011
7.01 6.77 6.55 6.55 6.44 6.26 6.24 6.22 6.12 6.03
USA
Isra
el
Ho
ng
Kon
g
Taiw
an
Swed
en
Fin
lan
d
No
rway
Net
her
lan
ds
Can
ada
Sin
gap
ore
Venture Capital
7.5 7.06 7 6.98 6.98 6.87 6.82 6.7 6.69 6.64
Isra
el
Mal
aysi
a
Co
lom
bia
Taiw
an
Ho
ng
Kon
g
Kore
a
Pola
nd
Bra
zil
Irel
and
USA
Entrepreneurship
8.25 8.24 8.14 8.08 7.96 7.92 7.88 7.88 7.64 7.63
Isra
el
Ho
ng
Kon
g
Au
stra
lia
Bra
zil
Taiw
an
Turk
ey
Irel
and
Ph
ilip
pin
es
Icel
and
New
Zea
lan
d
Flexible and Adaptability
Confidential
13
Israel has a Rich Legacy Leading World Innovations
63
48
6
5
5
4
3
3
2
2 Germany
France
Korea
India
Singapore
UK
Ireland
Japan
Canada
Israel
SOURCE: NASDAQ, May 2009; Israel’s investment promotion center; Factiva
Non-US companies in NASDAQ, 2009
Some of the world’s cutting edge technology has been developed in Israel
First instant messaging services
Internet security pioneer Pill-Camera Capsule Endoscopy
Instant messaging
Life science Firewall/VPN
By Given Imaging
By Check Point
By Mirabilis
First USB-Flash drives technology
USB flash drive
By M-Systems
Israel is a world leading high tech cluster
Confidential
14
Multinational Giants have Recognized Israel's Innovative Environment and Established their R&D Centers
1 In some cases by M&A of Israeli companies SOURCE: Press search; Israel Venture Association
1995-2000 2000-2010 1990-1995
Confidential
16
SOURCE: Company web site; IVC; Dow Jones; VentureSource; Thomson Reuters; U.S. Central Intelligence Agency; World fact book, 2007, 2008
Venture Capital Investments per Capita, 2008
90
60
55
40
20
20
12
10
10
8 China
India
Korea
Singapore
UAE
France
UK
Denmark
Ireland
USA
Israel 265
Very Intensive Venture Capital Industry with Strong International Presence …
Some of World Largest VC Companies Are Active in Israel Venture Capital Investment in Israel is Very High
Description Activity in Israel
First investor and business partner in companies that make up 10% of the Nasdaq's value
Present in Israel since 2001 Israel is the only place
outside the Silicon Valley in which Sequoia invests
Managed Capital: $380mn in three VC funds
Portfolio includes 27 companies
Nine exits
Early-stage venture firm investing in technology-driven companies (e.g., eBay)
Capital under management: $2.5bn in committed VC
Present in Israel since 2001 Managed capital: $490mn
in two VC funds Portfolio includes 28
companies Six exits
Global private equity group with $4bn in funds advised by the group worldwide
Present in Israel since 2000 Portfolio includes 5 Israeli
companies Two exits
Confidential
17
R&D incentive programs Tax incentive program
Strong Support from the Israeli Government
SOURCE: Team analysis
Program Description
Pre Seed
Designed to encourage and support individual entrepreneurs
Grants are up to 85% of the approved expenses for building prototypes, registering patents, designing business plans
Generic R&D
Supports the formation of consortia comprised of industrial firms and academic institutions, to jointly develop generic, pre-competitive technologies
Grants are up to 66% of the approved budget
No royalty payments Overall budget: ~ $60mn/yr
Competitive R&D
Grants are on a sliding scale from 20% to 50% of R&D budget
Royalty payment is 3% to 5% of future product sales
Supports more than 1,000 projects/yr from more than 500 companies
Overall budget: ~ $300mn/yr
Program Description
Grants Programs
Foreign investor investing more than 140mn
NIS will enjoy a grant of 20% of the
investment and a reduced tax rate for an
eight-year period
Priority Area Programs
For a foreign investor, the dividend tax rate
is 4% and a total corporate tax rate is 11.5%
Time: If at least 25% of the company is
foreign owned, then the benefit period is 10
years
Strategic Program
Intended for large multinational companies meeting the following criteria
– Annual turnover > $3bn
– Project investment >$130mn
Full corporate tax and dividend tax exemptions for 10 years
Confidential
18
Venture Capital Investment Split
Total Investment By Sector
Communications & Networking
21%
Software 13%
Life Sciences 18%
Internet 22%
Semmiconductors 13%
Other 13%
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