Gaza Flotillas: Bumps on the Path of Israel’s Economic Growth

Straight from the Jerusalem Boardroom #143, June 11, 2010

1.  The 1948/9 War of Independence, the 1956 Sinai Campaign, the 1967 War, the 1969/70 War of Attrition, the 1973 Yom Kippur War, the 1981 US Military Embargo and global condemnation following the bombing of Iraq’s nuclear reactor, the 1982 war against the PLO in Lebanon, the 1987-92 1st Intifadah, the 1994-2000 Palestinian Suicide Bombers, the 2000-2002 2nd Intifadah, the pre-1948 and the 1948-2010 systematic Palestinian terrorism, etc. have been bumps on the path of unprecedented Israeli economic, technological, medical, agricultural and cultural growth!

 

2.  Israel’s June, 2010 Omnibus High Tech Encouragement Plan (Currently, R&D amounts to 4.9% of GDP and high tech accounts to 15% of Israel’s GDP, 41% of Israel’s exports, employing 270,000 persons):

*Tax benefits to private-investors, “Angels,” who are critical at the seed stage.

*Tax benefits to institutional investors (US institutional investors invest 2% in high tech, while Israeli institutional investors invest 0.2% in high tech).

*Intellectual Property reforms, which would facilitate sale of start ups, while encouraging start ups to reach “mezzanine” and “mature” state before “Exit.”

*Benefits to Transaction Processing and Payment Technologies.

*Enhancement of High Tech dialogue with the Academia.  For example, benefits to the commercialization of academic R&D.

*Enhancement of High Tech dialogue with the Military R&S, bolstering the commercialization of Israel’s cutting-edge military R&D.

*Expanding High Tech-oriented subjects in high school curriculum.

*Encouraging Ultra-Orthodox youngsters to join high tech industries.

*Benefits to Israeli expatriates who return to Israel.

(“Calcalist”, “The Marker” and “Globes”, June 9, 2010).

 

3.  The global Swiss cancer drugs giant, Roche, acquired Israel’s Medingo for $200MN (Globes, May 31).  Intel acquired Israel’s Comsys for $30MN (Globes, May 25). India’s Connectiva acquired Israel’s Olista for $20MN (Globes, May 11). 

 

4.  Taiwan’s Inventech and the US-based Matrix Partners and OVP Venture Partners co-led a $10MN 2nd round of private placement by Israel’s Tigo (Globes, June 10). Greylock Capital led a $9MN round by Israel’s Zend (Globes, May 18).  Battery Ventures and Benchmark Capital co-led a $7MN 3rd round of private placement by Israel’s Panaya (Globes, June 11, 2010). Battery Ventures and Greylock Capital invested $6MN in Israel’s Zerto (Globes, May 27). Britain’s Pond Venture and Singapore’s Plan B Ventures co-led a $5MN 2nd round by Israel’s EmEfCy (Globes, May 10). Benchmark Capital, Accel Partners and DAG Ventures invested $5MN in Israel’s MetaCafe (Globes, (June 9).  Trilogy Equity Partners and Ignition Partners invested $3MN – in addition to $8MN invested in 2008 – in Israel’s InstallFree (Globes, May 11).

 

5.  While Russia’s membership was rejected, Israel has joined the OECD, in defiance of Palestinian/Arab political pressure. Israel was admitted due to Israel’s sustained impressive economic growth, controlled-inflation, restrained budget deficit, stable unemployment, reformed/clear and transparent (declining rates) tax structure, current accounts and trade balance surplus, all of which have attracted significant international investors, who present steep business/legal demands and high expectations.

In 2009, Israel’s economy grew by 0.9%, compared with a 3.5% average decline by OECD members. For example, the USA – 2.5%, Canada – 2.7%, Japan – 5.3%, Germany – 4.9%, Britain – 4.7%, France – 2.3%, Spain – 3.6%, etc.. (Globes, May 11). 

Institutional investors in developed markets, who were barred from investing in Israel, while it was classified as an emerging market, may bolster the flow of overseas investments into Israel.