Israel attractive for overseas investors

Straight From The Jerusalem Boardroom #122, January 20, 2008

1.  A 60 year track record (1948-2008) – GDP increased 60 times, 7% annual average (current GDP annual growth rate per capita – 3.5%); the fastest population growth in the industrialized world; lowest inflation in 60 years; lowest rate of government expenditures; lowest level of defense expenditures; positive trade balance achieved recently; however, all time record of socio-economic gaps (Merav Arlozorov, The Marker, Jan. 8).


2.  $1.76BN raised by 462 Israeli high-tech companies, the highest since 2001 ($2BN), an 8.5% increase compared with 2006 - $1.6BN, 2005 – $1.3BN, 2004 - $1.1BN, 2003 - $1BN, 2002 - $1.1BN, 2001- $2BN, 2000 - $3BN, 1999 - $1BN.  The share of overseas investors increases systematically – 61% in 2007 (The Marker, Jan. 14, 2008, Globes, Jan. 14). 


3.  2007 acquisitions: 70 Israeli companies acquired for $5BN by overseas companies and 56 overseas companies acquired for $3.15BN by Israeli companies (The Marker, Jan. 8). The British Ecofin is acquiring 40% of Israel’s Solel Thermo-Solar Technologies for $150MN (Globes, Jan. 14).  $8.6BN Network Appliance acquired Israel’s Onaro for $120MN in cash.  Its 1st Israeli acquisition was Topio, in Dec. 2006 for $160MN in cash (The Marker, Jan. 4).  The US-based Rxelite acquired Israel’s FineTech for $10MN in cash ($6MN) and stock (Globes, Jan. 14).


4.  Yahoo is establishing – in the footsteps of Google, Microsoft and scores of additional global giants - an R&D center in Haifa (The Marker, Jan. 14).  Marvelle’s CEO is visiting Israel, examining its 3 Israeli acquisitions (initiated by Galileo’s acquisition for $2.7BN in 2001 and followed by the 2003 Redlan’s $50MN acquisition and the 2006 DSPC/Intel $600MN acquisition) and its Israeli R&D center and its 1,100 personnel, the 4th largest by an overseas investor following Intel, HP and Motorola. Marvell invests $200MN annually in its Israel operation.


5.  USVP has led a $12MN 2nd round of private placement, by Israel’s Dune Networks, joint by the British Alta Berkeley Ventures, the San Jose-based Cipio Partners and a few Israeli VC funds (Globes, Jan. 15). 


6.  Israel attractive for overseas investors (OI): OI are exempt from interest on (transferred) foreign exchange deposits and from capital gain tax on future transactions; overseas company qualifies for an OI status if Israelis do not own more than 25% equity and are not entitled to more than 25% income; OI benefit from 50 double-tax (avoidance) treaties; OI is exempt from capital gain tax on (non real estate) traded stock and bonds; OI are exempt from capital gain on all high tech stock; Israeli holding companies are exempt from capital gain tax on the sale of the stock of its overseas companies and on overseas dividends and interest, provided that at least $50MN are invested in the overseas companies (The Marker, Ofer Orlitzky, Jan. 4).