Israel’s Economy – Main Characteristics Export Oriented Growth Rapid Development of Technology & High-Tech Industries Entrepreneurial Culture Supportive.
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Israel’s Economy – Main Characteristics
• Export Oriented Growth• Rapid Development of Technology &
High-Tech Industries• Entrepreneurial Culture • Supportive Environment for Business• Investment & R&D Incentives
Facts & Figures Foreign Trade Industry Doing Business in Israel Benefits & Investments
Contents:
Facts & Figures
Facts & Figures
Criteria2001200220032004
GDP (current prices in B$)113.6104.2110.4117.6
GDP Real Growth rate (%)-0.9%-0.7%1.3%4.3%
GDP per Capita (current prices, 000’$)17.615.916.517.3
GDP per Capita Growth rate (%)-3.2%-2.7%-0.5%2.5%
Exports of Goods & Services (B$)35.037.038.450.5
Imports of Goods & Services (B$)42.745.644.357.7
Unemployment Rate (%)9.3%10.3%10.7%10.4%
Inflation Rate ( CPI, end of year)1.4%6.5%-1.9%1.2%
Current Account (% of GDP)-1.7%-1.5%0.5%0.4%
Source: Central Bureau of Statistics, Bank of Israel
Main Economic Indicators
Criteria2002200320042005F
GDP (current prices in B$)104.2110.4117.6123.2
GDP Real Growth Rate (%)-0.7%1.3%4.3%5.1%
GDP per Capita (current prices, 000’$)15.916.517.317.9
GDP per Capita Growth Rate (%)-2.7%-0.5%2.5%3.2%
Exports of Goods & Services (B$)37.038.450.553.8
Imports of Goods & Services (B$)45.644.357.760.2
Unemployment Rate (%)10.3%10.7%10.4%9.1%
Inflation Rate ( CPI, end of year)6.5%-1.9%1.2%2.8%
Source: Central Bureau of Statistics, Bank of Israel, Forecast: Ministry of Finance June 2005
Main Economic Indicators and Forecast
Facts & Figures
Source: Central Bureau of Statistics *Estimation
3.0
0.5
2.6
0.0
8.0
4.6
-0.9
-3.2
-0.7
-2.8
1.3
-0.7
4.3
2.5
5.1
3.2
-5.0
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
1998 1999 2000 2001 2002 2003 2004 2005*
GDP GDP per Capita
GDP and GDP per Capita (Annual % Change, in Constant Prices)
Facts & Figures
Source: Central Bureau of Statistics, Bank of Israel *Estimation
Business Sector GDP Growth (Annual % Change)
10.2
-2.4 -2.6
1.7
6.1 6.4
-4
-2
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005*
Facts & Figures
Source: Central Bureau of Statistics, Bank of Israe l *Estimation
Major GDP Components(Annual % Change, in Constant Prices)
7.7
2.21.7
23.1
2.73.4
-4.8
-11.2
1.1
5.7
-7.0
-2.4
1.3
-2.0-4.9
6.2 5.7
-1.9-1.7
14.9
3.5 4.3
0.3
6.5
-15
-10
-5
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005*
Private Consumption Government ConsumptionInvestment in Fixed Assets Exports of Goods and Services
Facts & Figures
Source: Central Bureau of Statistics, Bank of Israel
Exports of Goods and Services (B$)
31.1
14.5
28.1
11.8
27.4
10.9
30.1
12.3
36.3
14.2
2000 2001 2002 2003 2004
Goods Services
45.6
39.9 38.342.4
50.5
Facts & Figures
GDP Growth and Exports Growth(Cumulative Rate of Growth by Period)
115%
188%
62%
120%
34%
54% 54%
100%
30%
63%
0%
50%
100%
150%
200%
1960-1969 1970-1979 1980-1989 1990-1999 1994-2003
GDP Growth Exports Growth
Source: Central Bureau of Statistics, Bank of Israel
Facts & Figures
Source: Ministry of Finance, 2005
General Government Expenditure (% of GDP)
Facts & Figures
55% 55%
54%
53%
52%
51%
53%
55%
53%
51%
48%
49%
50%
51%
52%
53%
54%
55%
56%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Ministry of Finance, 2005
Gross Tax Burden (% of GDP)
Facts & Figures
40%
39%
40%
39% 39%
40% 40% 40%
39%
38%
37%
38%
39%
40%
41%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Ministry of Finance, 2005
Budget Deficit (% of GDP)
Facts & Figures
2.6%2.2%
2.4%
0.7%
4.4%
3.8%
5.6%
3.0%*
3.8%
0%
1%
2%
3%
4%
5%
6%
7%
1997 1998 1999 2000 2001 2002 2003 2004 2005*
*Forecast, Including the Disengagement Program Expenses
Current Account (% of GDP)
Source: Bank of Israel
-1.7 -1.3 -1.7 -1.5
0.5 0.4
-2
-1.5
-1
-0.5
0
0.5
1
1999 2000 2001 2002 2003 2004
Facts & Figures
11.8%9.9%
3.2%
0.5% -1.8% -5.1% -9.8%
-10%
-5%
0%
5%
10%
15%
1998 1999 2000 2001 2002 2003 2004
Net Foreign Debt (% of GDP)
Source: Bank of Israel
Facts & Figures
Foreign Direct Investment (B$)
Source: Bank of Israel
1.6 1.7
3.1
5.1
3.6
1.8
3.9
1.6
4.5*
0
1
2
3
4
5
6
1997 1998 1999 2000 2001 2002 2003 2004 2005
High-Tech Boom
High-Tech
Bubble Burst
Facts & Figures
*Forecast
Inflation Rate (% Change in CPI, end of year)
Source: Economist Intelligence Unit , Bank of Israel
7.0%
8.6%
1.3%
0.0%
1.4%
6.5%
-1.9%
1.2%2.8%
1997 1998 1999 2000 2001 2002 2003 2004 2005F*
Facts & Figures
*Forecast
Unemployment Rate by Quarters*(% of Total Labor Force)
*Seasonally Adjusted Data
9.1
9.8
10.5
10.1
10.910.8
10.9
9
9.2
9.4
9.6
9.8
10
10.2
10.4
10.6
10.8
11
2003-Q3 Q4 2004-Q1 Q2 Q3 Q4 2005-Q2
Facts & Figures
Source: Central Bureau of Statistics, Bank of Israel
15.1
28.5
-2.4
21.8
33.8
12
73.8
-3.2
2001 2002 2003 2004
Business Sector Public Sector
New Employed Persons in 2004 (Change in Israeli Employed Persons, in Thousands)
Source: Central Bureau of Statistics, Manufacturers’ Association of Israel
Facts & Figures
CriteriaCentral Bureau of Statistics*
Real GDP Growth5.1%
Business GDP Growth6.4%
Exports Growth6.5%
Private Consumption Growth3.5%
Government Consumption Growth4.3%
Investment in Fixed Assets Growth0.3%
*Published: September 2005
Estimated Growth of Main GDP Components 2005
Facts & Figures
Central Bank Interest Rates-Israel vs. USA (%)
Source: Bank of Israel, Federal Reserve
Facts & Figures
Bank of Israel Rate
Federal Reserve Rate
0
1
2
3
4
5
6
7
8
9
10
20
02
2 3 4 5 6 7 8 9 10
11
12
20
03
2 3 4 5 6 7 8 9 10
11
12
20
04
2 3 4 5 6 7 8 9 10
11
12
20
05
2 4 6 8 10
Source: Credit Rating Agencies
Israel’s Credit Rating 1992-2005
0
1
2
3
4
5
6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Moody's A2 Stable S&P A- Stable Fitch A- Stable
A1/A+
A2/A
A3/A-
Baa1/BBB+
Baa2/BBB
Baa3 /BBB-
Facts & Figures
Source: World Economic Forum, GCI 2004
Growth Competitiveness Index, 2004Israel Ranks 19 Out of 104 Countries (2003 Rank was 20)
6660
4847
4137
2723
2119
1513
117
1
46
Facts & Figures
Source: World Economic Forum, GCI 2004
Business Competitiveness Index, 2004 Israel Ranks 21 Out of 103 Countries (2003 Rank was 20)
5552
4741
3026
2422
21
1312
86
31
34
Facts & Figures
Source: The Global Competitiveness Report 2004-2005
Core Technology-Innovating Economies, 2003 Israel Ranks 4 Out of 103 Countries
Singapore
Canada
Germany
Finland
Sweden
Switzerland
Israel
Taiwan
Japan
USA
Facts & Figures
1
2
3
4
5
6
7
8
9
10
Foreign Trade
In 2004,
the Export Sector’s share in the total GDP growth was about 60%, making it the main contributor of GDP growth.
EXPORTS: The Engine of Israeli Growth
Foreign trade
Trade of Goods and Services (B$)
46 47
4044
38
43 42 44
51 52
2000 2001 2002 2003 2004
Exports Imports
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel *Estimation
Trade Deficit (B$ and % of Exports)
1.0
2.2%
3.6
9.0%
4.2
13.0%
2.0
4.5%
1.52.0%
0.61.1%
2000 2001 2002 2003 2004 2005*
Trade Deficit Trade Deficit as a % of Exports
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel *Estimation
*Note: Trade of Goods (exc. Diamonds )
Annual Trade* Growth
-7.1% -6.1%
-0.9%
-6.4% -6.5%
-0.7%
6.7%
2.2%1.3%
21.6%20.5%
4.3%
2001 2002 2003 2004
Exports Imports GDP
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel
Exports as a % of GDP
31%
35%36%
38%
43%
45%
25%
30%
35%
40%
45%
1995 2001 2002 2003 2004 2005F*
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel, Israel Export & International Cooperation Institute, Ministry of Finance *Forecast
Exports of Goods by Commodity Group, 2004 (% of Total Exports of Goods)
Polished Diamonds
19%Rough Diamonds9%
Agricultural3%
Industrial69%
The High-Tech Sector Accounts for 33% of Total Exports of Goods
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel
The Growth of Industrial Exports (B$)
2.4
32.11.1
6.8
4
2.91.8
9
5.1
3.61.8
11
6.2
4.5
2
0
5
10
15
20
25
30
35
40
1993 1998 2003 2004
High-Tech Medium High-Tech Medium Low-Tech Low-Tech
`
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel
23.7
19.5
15.5
8.6
Exports of Goods by Region 2004 (exc. Diamonds)
Asia16%
Rest of the World13%
USA28%
Central & South America
4%
EU33%
Rest of Europe6%
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel
Imports of Goods by Region 2004 (exc. Diamonds)
Asia17%
Rest of the World14%
USA17%
South & Central America
2%
European Union39.5%
Rest of Europe10.5%
Source: Central Bureau of Statistics, Bank of Israel
Foreign trade
Israel’s Main Trading Partners, 2004(inc. Diamonds)
0
5
10
15
20
B$
USABelgium
Germany
UKSwitzerland
Hong Kong
Netherlands
ItalyChina
IndiaFrance
Imports of Goods Exports of Goods
2.1
4.04.5
7.0
20.2
2.4 2.22.73.12.1
3.5
Source: Central Bureau of Statistics, Bank of Israel
Foreign trade
Israel’s Main Trading Partners, 2004(exc. Diamonds)
0
2
4
6
8
10
12
B$
USAGerm
any
UK Netherlands
ItalyChina
France
Turkey
Japan
Switzerland
Belgium
Spain
S.Korea
Taiwan
Imports of Goods Exports of Goods
1.22.42.72.8
4.4
1.7 1.71.82.0
12.3
1.32.1
1.12.0
Source: Central Bureau of Statistics, Bank of Israel
Foreign trade
Source: Global Trade Information Service (GTIS)
Growth Rate of Commodity Exports by Selected Countries, 2003-2004 (% of Change)
43
37
33
30
25 25
22 21 21 21 20 20 2019 19 18 18 17 17 16 16
Foreign trade
Source: OECD - Organisation for Economic Co-operation and Development
Real Growth in Exports of Goods and Services - International Comparison(Annual Average for 1999-2003)
8.3 8
7.1
5.8
4.84.5 4.5
3.6 3.62.9
1.91.4
0
1
2
3
4
5
6
7
8
9
Ireland
Turkey
Denmark
Germ
any
Israel
Greece
Japan
France
Portugal
Belgium
Norway
USA
Foreign trade
Medium High-Tech Export Development (B$)
3.5
1.1
0.5
4.3
1.4
0.5
2003 2004
Chemicals (exc. Pharmaceutical) Machinery & Equip. Transport & Electrical Equip.
Source: Central Bureau of Statistics, Bank of Israel
Foreign trade
6.2
5.1
Medium Low-Tech Export Development (B$)
1.3
0.8
0.5
0.5
0.5
1.5
1
0.7
0.5
0.8
2003 2004
Rubber & Plastics Metal Products Mining & Quarrying Jewellery Goldsmith Other
Foreign trade
Source: Central Bureau of Statistics, Bank of Israel
4.5
3.6
Low-Tech Export Development (B$)
0.3
1.0
0.5
0.3
1.1
0.6
2003 2004
Food products Textiles products Paper products
1.82.0
Source: Central Bureau of Statistics, Bank of Israel
Foreign trade
Industry
Industry
Selected Indicators in Industry, 2001-2004(Real Annual Change, Yearly Average)
-2.4%
7.0%
-3.1%
1.1%
-2.4%
17.6%
-9.8%
8.0%
Industrial Output Employees Industrial Export Investments
2001- 2003 2004
Source: Central Bureau of Statistics, Manufacturers’ Association of Israel
Industrial Production and Exports(Real Cumulative Rates of Change)
109.6%
92.5%
83.3%
73.2%78.8%
46.4%
36.7%
22.4%
7.5%5.4%
7.2% 10.3% 11.9%
23.0%17.0% 14.8% 14.4%
22.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
1996 1997 1998 1999 2000 2001 2002 2003 2004
Industrial Exports Industrial Production
Source: Central Bureau of Statistics, Bank of Israel
Industry
Labor Productivity in Industry, 2000-2004 (Real Annual Change)
7.7%
0.0%
1.3%
2.5%
6.0%
2000 2001 2002 2003 2004
Source: Central Bureau of Statistics, Manufacturers’ Association of Israel
Industry
A High-Tech Oriented Industry -
26%
43%
31%
34%
43%
23%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1994 2004
High-Tech Mixed-Tech Low-Tech
Source: Central Bureau of Statistics, Manufacturers’ Association of Israel
Industry
The Israeli Industry is Undergoing Long Term Structural Changes
)Industrial Output Distribution 1994, 2004(
The High-Tech Sectors led Industrial Growth in 2004 (Real Annual Change)
Source: Central Bureau of Statistics, Manufacturers’ Association of Israel
15.1%
0.2%
3.4%2.2%
High-Tech Mixed High-Tech Mixed Low-Tech Low-Tech
Average 7%
Industry
The High-Tech Sectors Recruited the Largest Number of Persons in Industry in 2004(Real Annual Change)
4.5%
-2.1%
0.0%
0.7%
High-Tech Mixed High-Tech Mixed Low-Tech Low-Tech
Source: Central Bureau of Statistics, Manufacturers’ Association of Israel
Average 1.1%
Industry
Israel’s Major High-Tech Exports 2004
Software21%
Pharmaceutical Products
11%
Equipment for Control and Supervision
20%
Aircraft9%
Electronic Communication
Equipment 20%
Office and Computing Equipment
7%
Electronical Components
12%
Source: Israel Export & International Cooperation Institute, Israel Association of Software Houses
Total High-Tech Export (Including Software): 14 B$
Industry
Israeli High-Tech Exports by Geographic Breakdown 2004
Other7%
Oceania1%South and
Centeral America6%
Asia26%
North America35%
EU24%
Other European Countries
1%
Source: Israel Export & International Cooperation Institute, Central Bureau of Statistics
Industry
Expenditure on Civilian R&D in Israel & in Selected OECD Countries (% of GDP, 2002)
4.54.1
3.4
2.8 2.82.6 2.5
2.32
1.8 1.7
1.2 1.1
0
1
2
3
4
5
Israel
Sweden
Finland
Japan
Korea
Switzerland
Germany
USAFrance
Netherlands
UK Ireland
Italy
Source: Central Bureau of Statistics, Bank of Israel
Industry
Qualified Engineers Index
Source: Institute for Management Development World Competitiveness Yearbook- 2004/5
4.1
5.65.9 6.0
6.6 6.7 6.9 6.9 7.07.3 7.5 7.6 7.7 7.9 8.0 8.1
8.5 8.68.9
0
1
2
3
4
5
6
7
8
9
10
Industry
Technology Index, 2004
Source: World Economic Forum, GCI 2004
Israel Ranks 8 Out of 104 Countries
5.1
5.1
5.1
5.2
5.2
5.3
5.3
5.3
5.7
5.8
5.9
6.0
6.2
4.0 4.5 5.0 5.5 6.0 6.5
Canada
Germany
Singapore
Norway
Korea
Israel
Switzerland
Denmark
Japan
Sweden
Finland
Taiwan
USA
Industry
Israel’s ICT* and Business Sectors Product 2004 (Annual Growth Rate %)
4
21
2
10 10
37
-2
-13
-3-7
23
69
-20
-10
0
10
20
30
40
1998 1999 2000 2001 2002 2003 2004
Business ICT
*ICT: Information & Communication TechnologiesSource: Central Bureau of Statistics, Bank of Israel
Industry
Software and Electronic Industries(Israel & the World Growth Rates 1994-2004)
Source: Israel Association of Electronics and Information Industries
13 12 13 13
107
11
7
11
1
79
34
15
-5
-9-12
-6
1
-5
16
9
-15
-10
-5
0
5
10
15
20
25
30
35
19941995
19961997
19981999
20002001
20022003
2004
Israel World
Industry
Israel’s Software Exports (B$)
Source: Israel Association of Electronics and Information Industries
0.3
0.6
1.0
1.5
2.0
2.6 2.72.6
2.7
3.0
-0.3
0.2
0.7
1.2
1.7
2.2
2.7
3.2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Industry
Israel: A Major Player in the Global Biotechnology Industry
Sales from the Biotech sector generated
1.8 -2.3 US B$ in 2004.
Israel's share in global Biotechnology
sales is about 2.5%.
There are 23 Technological
Incubators in Israel,
more than 20% of them
are Involved in Biotechnology projects.
Source: Israel's Ministry of Science
Industry
Biotechnology
1800
600
336250209
5015
149
100
63
87
135
2530
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2003199919971995199319901988
-10
10
30
50
70
90
110
130
150
Anuall Sales (M$) No. of Companies
Industry
Start-Ups – The Emerging Economic Force
Industry
Israel Enjoys
the Highest Concentration
of High-Tech Companies
Outside of the Silicon Valley“
”Robert Greifeld President & CEO NASDAQ 2004
Investments in High-Tech Companies 2004
Communications29%
Internet4%
Life Sciences22%
Software22%
Semiconductors10%
Others13%
Source: IVC - Israel Venture Capital
YearTotal in
$ B
19991.1
20003.2
20012.0
20021.1
20031.0
20041.5
Industry
Capital Raised by Israeli VC Funds (M$)
92 154 123 135299
580 608
1548
3711
1323
-174
14
724
1500
-500
0
500
1000
1500
2000
2500
3000
3500
4000
19921993
19941995
19961997
19981999
20002001
20022003
20042005*
Source: IVC - Israel Venture Capital *Forecast
Industry
VC Investments in Israel & Europe (M$)
Source: PWC - Price Waterhouse Cooper, May 2003
13162
320315
457
255
811
135
761
599
950
644
1569
790
1600
851
0
200
400
600
800
1000
1200
1400
1600
2001 2002
Industry
High - Tech
Source: IVC - Israel Venture Capital
92
33
13
29
14
43
30
8
40
16
9
4
9
16
42
20
14
12
4
15
37
18
15
11
4
18
33
19
13
10
4
22
29
22
0
20
40
60
80
100
1999 2000 2001 2002 2003 2004
Other Semiconductors Internet Life Sciences Communications Software
Capital Raised by Israeli High-Tech Companies by Sectors(%)
Industry
Israel’s Life Sciences Industry – Sectors 2004
Source: Israel Life Sciences Industry 2004
Medical IT3%
AGbiotech4%
Pharmaceuticals13%
Medical Devices54%
Biotechnology21%
Service1% Other
4%
Industry
Israel’s Biotech Companies – Subsectors 2004
Source: Israel Life Sciences Industry 2004
Biomaterials9%Immunology
9%
Research Tools3%
Research Equipment
6%Other
4%
Industrial8%
Drug Discovery21%
Genetics15%
Diagnostic Kits11%
Cell& Tissue Therapy
14%
Industry
Doing Business In Israel
Doing Business In Israel
Foreign Investment in Israel
At the crossroads of three continents –
Europe, Africa and Asia –
Israel enjoys an excellent reputation
as a technologically advanced economy,
which has made it a prime destination
for investment by multinational
corporations
Doing Business In Israel
Cooperation Between the Academy and Industry (1= minimal or nonexistent , 7= intensive and ongoing)
Source: World Economist Forum 2004/5
5.8
5.4 5.3 5.25.1 5.1 5.0 5.0 5.0 4.9 4.9 4.8 4.7 4.6 4.5
4.2 4.2 4.24.0
3.7 3.6
0
1
2
3
4
5
6
Doing Business In Israel
Over 20 Israeli Companies are Traded on the London Stock Exchange
Source: http://www.maarivintl.com/
Israel is ranked 2nd after Canada
in the number of foreign companies
traded on the American
Technology Stock Exchange.
Israel is second in the world
in the number of companies
of a foreign nation traded on Wall Street.
Doing Business In Israel
Number of Companies Traded on NASDAQ – Selected Countries
Compiled from NASDAQ data
7368
2319
1713 12 11 10 10
8 8 7 5 4 4
0
10
20
30
40
50
60
70
80
Doing Business In Israel
Recent M&AIsraeli
CompanyTechnologyAcquirerSumTime
Terayon Communication
Systems Inc. CommunicationsAris $345M 09/2005
Scitex Vision Ltd.
PrintingHP $230M 08/2005
Sheer Networks Ltd
CommunicationsCisco $122M 07/2005
Siliquent Technologies
Inc. CommunicationsBroadcom $84M 07/2005
Medimop Medical
Projects Ltd. Life Sciences
West Pharmaceutical Services Inc.
$42M 07/2005
Medcon Telemedicine
Technology Ltd. Life Sciences
McKesson Corp. Life Sciences
$105M 06/2005
Shopping.com InterneteBay$620M 06/2005
Doing Business In Israel
Recent M&A (cont.)
Israeli Company
TechnologyAcquirerSumTime
Impulse DynamicsHealthcare
Johnson & Johnson 80M$05/2005
SiliquentSemiconductors
FablessBroadcom~85M$05/2005
TecnomatixSoftwareUGS Corp228M$04/2005
KagoorVoiceover InternetJuniper
Networks68M$03/2005
SavientBiopharmaceuticalFerring
Holding SA80M$03/2005
OREX Radiography
Medical Equipment
Kodak51M$03/2005
Native NetworksCommunicationAlcatel~50M$03/2005
Oplus Technologies
Processors for Digital Display
DevicesIntel100M$03/2005
Modem-ArtSemiconductors
FablessAgere
Systems150M$02/2005
Doing Business In Israel
E-Readiness Score, 2004
Source: World Economic Forum, GCI 2004
7.0
7.1
7.1
7.4
7.5
8.0
8.0
8.2
8.3
8.3
8.6
8.6
8.7
Italy
Spain
Taiwan
Japan
Israel
Canada
Germany
Singapore
Finland
Hong Kong
Switzerland
Sweden
USA
Doing Business In Israel
Foreign Companies Invested in Israel (Examples)
US
• Microsoft• Pratt & Whitney• AOL Time Warner• Intel• IBM• Boeing Enterprises• Cisco Systems• GE• Lucent• 3Com• Hewlett Packard• Merrill Lynch• Motorola• Sun Microsystems
Europe
• Siemens• DaimlerChrysler• Volvo• Cable & Wireless• Baan• Volkswagen• Deutsche Telecom• L’Oreal• British Telecom• Danone• Ares Sereno• Unilever
Asia
• Samsung Electronics• Daewoo• Nomura• Hutchison Telecomm.• LG Group• Sony• Toyo Ink• Hyundai• Acer Computers• Sumitomo Trading• Fuji• Honda
Doing Business In Israel
IMD World Report 2004 (Examples)
Country Rank1st2nd3rd4th
Total Expenditure on R&D as Percentage of GDP
ISRAELSWEDENFINLANDILE-DE
FRANCE
Number of Mobile Telephone Subscribers per 1000 Inhabitants
ISRAELLUXEMBURGHONG KONGITALY
Total Public Expenditure on Education as Percentage of GDP
DENMARKISRAELCANADAMALAYSIA
University Education Meets the Needs Economy
FINLANDISRAELSINGAPORESWITZERLAND
Consumer Price Inflation –Average Annual Rate
HONGKONG
ISRAELTAIWANJAPAN
Source:Institute for management development World Competitiveness Yearbook- 2004
Doing Business In Israel
Entrepreneurship Index
Source: IMD - Institute for Management Development, World Competitiveness Yearbook- 2004/5
4.2
4.9 4.9 5.0 5.3 5.45.9
6.3 6.46.6
7.07.3
7.67.9
Doing Business In Israel
Technology Leadership
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
”
“
Doing Business In Israel
Technology Leadership (cont.)
“Israel’s market is relatively large
and sophisticated, it boasts the world’s
greatest per capita number of engineers ,
scientists and doctors .
The Israeli economy is simply a reflection
of the country’s greatest natural resource -
which is the brainpower and ingenuity
of its citizens Mike Zafirovski ,COO,Motorola 2003 ”
Benefits and Investments
Benefits and Investments
Main Economic Structural Reforms Launched and Planned by the Government
Next Stage:
Public sector reduction
Deep reform of the tax system- in process
Government expenditures reduction
Privatization policy: energy, transport
and communication sector
Further steps to reduce the public sector
Structural reform of the capital market
Structural reform of the education system
Further steps in the privatization policy
Benefits and Investments
Government R&D Incentives
Source: Ministry of Industry Trade and Labor
The Law for the Encouragement of Industrial R&D supports R&D projects of Israeli Companies
by offering conditional grants
from 20%-50% of the approved
R&D proposal
Israel is a participant in the Sixth
Framework Program for R&D
of the European Union, the only
non-European Associated State,
fully participating in the program.
Benefits and Investments
Government R&D Incentives (cont.)
Source: Ministry of Industry Trade and Labor
The Global Enterprise R&D Cooperation
Framework encourages cooperation
in industrial R&D between Israel
and multi-national companies (MNCs).
Benefits and Investments
Benefits for Foreign Investors
To qualify for these programs
the company must be
internationally competitive
The Law for the Encouragement
of Capital Investments offers
investors both investment
grants and tax benefits
Benefits and Investments
Benefits for Foreign Investors (cont.)Grants program- Investment Grants of 24%
of the approved program in Priority Area A
and 10% in Priority Area B + corporate tax
benefits for foreign investors
at a rate of 10%.
Automatic Tax Benefits Programs –
offering foreign investors a complete
tax exemption when investing
in Priority area A for a 10 year period
or alternatively a 10% corporate tax rate
when not located in a Priority area.
Benefits and Investments
Benefits for Foreign Investors – Investment Grants (%)
)Grants as a percentage of investments in fixed assets included in the Approved Enterprise Plan(
10%24%Industrial Projects
(Up to 140 Million NIS)
---15%Other Tourist Enterprises
10%
10%
Priority Area
“B”
24%
20%
Priority Area
“A”
Industrial Projects
(Above 140 Million NIS)
Investment in Hotels
Source: Investment Promotion Center
Benefits and Investments
Investment in Technologies (M$)
Source: Earnest and Young, October 2004
According to foreign investors, the Silicone Valley, Boston, Texas and Israel are the main centers to search for new high technology investments Q1-Q3 2004
7,170
1,804
861
832
636
584
551
502
1 10 100 1,000 10,000
California
Massachusetts
Texas
Israel
Washington
New York
Georgia
New Jersey
Israel’s Free Trade Agreements
Benefits and Investments
USA (1985)
EFTA (1992)
Jordan (1995): Bilateral Trade Agreement
Canada (1997)
Turkey (1997)
Mexico (1999)
Romania (2000)
European Union – Association Agreement 2000
Bulgaria (2002)
Avoidance of Double Taxation Agreements
Belarus
Belgium
Brazil
Bulgaria
Canada
China
Czech republic
Denmark
Finland
France
Germany
Greece
Hungary
India
Jamaica
Japan
Luxembourg
Mexico
Norway
Philippines
Poland
Romania
Russia
Singapore
Slovakia
South Africa
South Korea
Spain
Sweden
Thailand
The Netherlands
Turkey
USA
Benefits and Investments
Cooperation in Industrial R&D Agreements
Belgium
CanadaChina
France
Hong Kong
Italy
Netherlands
Portugal
Spain
UK USA
Benefits and Investments
Singapore
Ireland
Sweden
Finland
Germany
India
Austria
Korea
Protection of Investment Agreements Benefits and Investments
Albania
Argentina
Armenia
Belarus
Bulgaria
Croatia
Cyprus
Czech Republic
El-Salvador
Estonia
Georgia
Germany
Hungary
India
Kazakhstan
Korea
Protection of Investment Agreements Benefits and Investments
Turkmenistan
Ukraine
Uruguay
Uzbekistan
QIZ Agreement
Egypt
Jordan
Latvia
Lithuania
Moldova
Poland
Romania
Slovakia
Slovenia
Thailand
Turkey
International Organization* Membership:
BIS | BSEC (observer) | CE (observer)
CERN (observer) | EBRD | FAO | IADB | IAEA
IBRD | ICAO | ICC | ICCt (signatory) | ICFTU
IDA | IFAD | IFC | IFRCS (observer) | ILO | IMF
IMO | Interpol | IOC | IOM | ISO | ITU | OAS (observer)
OPCW (signatory) | OSCE (partner) | PCA | UN
UNCTAD | UNECE | UNEP | UNESCO | UNHCR
UNIDO | UPU | WB | WCO | WFP | WHO | WIPO | WMO
WToO | WTrO | WTO
* Economic Organizations
Benefits and Investments
Business Contacts – Links Business Contacts With Israeli Exporters
List of Israeli Trading Companies
Israeli Government Portal
Technology Directory
The Israel Export & International Cooperation Institute
Efrat CohenEconomist
Tel: +972-3-5142820/961
Fax: +972-3-5142852E-mail: efrat@export.gov.il
www.export.gov.il
Adrian FilutEconomist
Tel: +972-3-5142994
Fax: +972-3-5142852E-mail: filut@export.gov.il
www.export.gov.il
Editing: Alona Ron-Snir, Director Economic Department, IEICIProduction: Hani Erez, Executive Media & Productions Unit, IEICIPublished by: The Israel Export & International Cooperation Institute, 2005
For Further Information Please Contact:
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