Investment Climate
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Transcript of Investment Climate
1
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
2
Presentation
I. Facts & Figures
II. Reasons for Success
III. Israeli Hi-tech – A Case Study
IV. Prospects for the Future
3
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
4
Net Foreign Outward Investment ($ Billion)
-1
0
1
2
3
4
5
6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
PortfolioFDI
5
Going Global
International Investors – Some examples:
6
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
7
European Companies Invested in Israel - Some
Examples
Siemens
DaimlerChrysler
Volvo
Cable & Wireless
Baan
Volkswagen
Deutsche Telekom
L’Oreal
British Telecom
Danone
Ares Sereno
Unilever
8
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
9
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 $1 Billion in first 6
months of 2000
10
Investments by Venture Capital Funds ($M)
0
500
1000
1500
2000
2500
3000
3500
1997 1998 1999 2000 2001
11
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
12
High-tech Capital Raised 1995-2001
0
500
1000
1500
2000
2500
3000
3500
$ Million
1995 1996 1997 1998 1999 2000 2001
13
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
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 $8.6 billion was raised through privatization.During this time around 80 companies have ceased to be state owned.
17
4. Monetary StabilityAnnual percentage change in CPI
0
2
46
8
10
12
14
1618
20
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
18
5. Government support
Regional Development – Investment Center
Industrial R&D – Office of Chief Scientist - Grants- Technological Incubators - Magnet
Investment Promotion Center – first stop for
Foreign Investors
19
Investment Center Approvals as % of GDP (1996-2000)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
20001999199819971996
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Other:
6. International Investors’ interest in Emerging Markets and Hi-Tech Sector
7. Liberal Foreign Trade Regime 8. Foreign Currency Liberalization9. Favorable Geo-political Climate
21
Jaffa Oranges vs Software
0
500
1000
1500
2000
2500
3000
3500
exports ($millions)
CitrusSoftware
22
III. Hi-tech sector- a case study
23
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
24
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
25
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
26
Formula For Success:
Investment
Ideas
Innovation
Ingenuity
27
#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)
28
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)
29
IV. Prospects for the Future
30
2001
2001 economic indicators were affected by:
Slowdown in US Economy starting with High Tech crisis
Worldwide downturn
Deterioration of the security situation
31
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.
32
2001: Some Growth Areas Continued
Despite the global tech downturn, during 2001, exports grew by:
Software +16%Pharmaceuticals +37%Security Products +19%
33
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.
34
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.
35
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.
36
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.
37
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.
38
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