investment climate
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Investment Climate in Israel 2002
Investment Climate in Israel 2002
Amir HayekDirector General
State of Israel. Ministry of Industry and Trade
Presentation for OECD
Paris, April 10, 2002
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Presentation
I. Facts & Figures
II. Reasons for Success
III. Israeli Hi-tech – A Case Study
IV. Prospects for the Future
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Net Foreign Inward Investment ($ Billion)
01
2
34
5
6
78
9
10
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Portfolio
FDI
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Net Foreign Outward Investment ($ Billion)
-1
0
1
2
3
4
5
6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
PortfolioFDI
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Going Global
International Investors – Some examples:
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American Companies Invested in Israel- Some
Examples
Microsoft
Pratt & Whitney
AOL Time Warner
Intel
IBM
Boeing Enterprises
Cisco Systems
GE
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
Hutchison Telecomm.
Nissho Iwai
LG Group
Sony
Toyo Ink
Hyundai
Acer Computers
Sumitomo Trading
Fuji
Honda
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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 $1 Billion in first 6
months of 2000
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Investments by Venture Capital Funds ($M)
0
500
1000
1500
2000
2500
3000
3500
1997 1998 1999 2000 2001
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Venture Capital by Industry ($M)
0
50
100
150
200
250
300
350
400
450
500
Software Communic. Computers Medical equip. Biotech
1997 1998 1999
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High-tech Capital Raised 1995-2001
0
500
1000
1500
2000
2500
3000
3500
$ Million
1995 1996 1997 1998 1999 2000 2001
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II. Reasons for success:
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1. High Annual Growth Rate (GDP)
6.4%
2.0%
-0.5%
6.2%5.9%
6.7%
3.3%
7.0% 6.8%
4.5%
3.3%
2.7% 2.6%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Forecast
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15
19
22
25
28
34
35
38
53
65
70
135
0 20 40 60 80 100 120 140 160
Singapore
Iceland
South Korea
U.K.
Taiwan
Switzerland
Canada
Netherlands
Japan
U.S.
Israel
2. Highly Skilled WorkforceEngineers per 10,000 Employees
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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 $8.6 billion was raised through privatization.During this time around 80 companies have ceased to be state owned.
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4. Monetary StabilityAnnual percentage change in CPI
0
2
46
8
10
12
14
1618
20
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
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5. Government support
Regional Development – Investment Center
Industrial R&D – Office of Chief Scientist - Grants- Technological Incubators - Magnet
Investment Promotion Center – first stop for
Foreign Investors
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Investment Center Approvals as % of GDP (1996-2000)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
20001999199819971996
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Other:
6. International Investors’ interest in Emerging Markets and Hi-Tech Sector
7. Liberal Foreign Trade Regime 8. Foreign Currency Liberalization9. Favorable Geo-political Climate
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Jaffa Oranges vs Software
0
500
1000
1500
2000
2500
3000
3500
exports ($millions)
CitrusSoftware
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III. Hi-tech sector- a case study
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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
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Hi-Tech as a Percentage of GDP
0
2
4
6
8
10
12
14
16
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Total high-tech revenues as a % of GDP
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Change in composition of Non-Diamond Industrial Exports
1980 vs 2000
0%10%20%30%40%50%60%70%80%90%100%
20001980
Mining and Quarrying
Food and Beverages
Others
Textiles, Clothing andLeatherMetal and Machinery
Chemicals,rubber andplasticElectronics group
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Formula For Success:
Investment
Ideas
Innovation
Ingenuity
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#2 – Investment in Civilian R&D as % of GDP
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
H. Kong
Italy
Ireland
Norway
UK
Denmark
France
Germany
USA
Israel
Finland
% of GDP (2000)
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0% 2% 4% 6% 8% 10%
Ireland
Mexico
Australia
OECD Av.
Spain
France
USA
Finland
Sweden
Israel
High Tech Education
Investment in Education as a % of GDP (1995)
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IV. Prospects for the Future
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2001
2001 economic indicators were affected by:
Slowdown in US Economy starting with High Tech crisis
Worldwide downturn
Deterioration of the security situation
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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.
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2001: Some Growth Areas Continued
Despite the global tech downturn, during 2001, exports grew by:
Software +16%Pharmaceuticals +37%Security Products +19%
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2000 – A Record Year
Industrial exports were up 24.4%.
Foreign currency reserves reached an all time high of $22.93 billion.
TASE: 6th 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.
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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.
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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.”
IMF: Israel Interim Staff Visit, Concluding Statement (Preliminary)—February 26, 2002, Section 12.
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Recovery
“When the US economy stages a recovery, the flexibility and structural characteristics of the Israeli economy means that it will be well-placed to stage a quick recovery of its own.”
International ratings agency, Fitch- report on Israel, Feb 10, 2002.
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Improved Outlook
The State of the Economy Index rose 0.4% in February 2002.Industrial exports increased by 4%, and high tech exports by 13.5% in January-February 2002.The number of job seekers dropped in February 2002, after rising steadily from January 2001 through January 2002.
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OECD NATIONAL CONTACT POINT
Established at Ministry of Industry and Trade (web site: www.moit.gov.il/ncp)
Intra-ministerial Advisory Committee to NCP
Guidelines translated to Hebrew and Arabic
Ongoing dialogue with civil society