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Optimistic state of Israel’s economy

Straight from the Jerusalem Boardroom #232
https://bit.ly/2ORgFaB
(previous issues: https://bit.ly/2NB51fk)

  1. The international credit rating agency, Standard & Poor (S&P), upgraded Israel’s credit rating to AA- with a stable outlook, the highest ever for Israel. S&P highlighted Israel’s fiscal discipline, higher than expected economic growth rate, the reduction of debt-to-GDP-ratio from 70% (ten years ago) to 60% in 2018, enhanced competitiveness and evolving from a global net-borrower into a global net-lender. Moody’s credit rating agency just updated its rating outlook for Israel from “stable” to “positive” (Globes, Aug. 5).
  2. According to Adam Reuter, chairman and founder of Financial Immunities, Israel’s largest financial risk-management firm and author of Israel – Island of Success, Israel’s demography – compared to other OECD countries – bodes well for its economic future. Israel’s median age – which is the key to economic innovations and growth when accompanied by sound educational infrastructure – is 30, significantly younger than the US (38), Europe (44) and Japan (48).  Moreover, while Israel’s labor participation rate is growing, the percentage of the public sector employees is declining: 18%, compared to the USA’s 16%, Norway’s 38%, Denmark’s 31%, Sweden’s 26%, France’s 25%, Britain’s 21%, etc. Unlike Europe, Israel does not require the importation of labor force, in order to sustain economic growth (Globes Business Daily, Sept. 17, 2018).
  3. Israel’s estimated 2018 economic growth is 3.3%, compared to the USA – 3%, China – 6.6%, Germany – 2.5%, Britain – 1.5% and Japan – 1.2%. Israel’s estimated 2018 inflation rate is 1%, compared to the USA – 2.5%, Germany – 1.6%, Britain – 4.4% and Japan – 1.1%. Israel’s estimated 2018 unemployment rate is 4.2%, compared to the US – 3.9%, Germany – 5.1%, Britain – 4.4% and Japan – 2.9% (Globes, Oct. 8).
  4. PepsiCo acquired the Israeli countertop carbonated water machine maker, SodaStream, for $3.2BN, adding healthier products to its portfolio and pushing a more environmentally friendly agenda. SodaStream will be run as an independent division, maintaining its current management team, in order to sustain its entrepreneurial culture (Fortune Magazine, Aug. 20).
  5. The US Dublin-based Medtronic acquired Israel’s Mazor Robotics for $1.6BN, the largest amount ever paid for an Israeli medical company, exceeding the July 2017 $1.1BN acquisition of Neuroderm by Mitsubishi Tanabe Pharma and the $1BN acquisition of Given Imaging by Covidien, which is owned by Medtronics (Globes, Sept. 26)).
  6. Previous major “exits” by Israeli companies (acquired by non-Israeli giants): Intel acquired Mobileye – $15.2BN (2017), Gilead Sciences acquired Kite Pharma – $11.9BN (2017), International Flavors and Fragrances (IFF) acquired Frutarom – $7.1BN (August, 2018), Cisco acquired NDS – $5BN (2012), Lucent acquired Chromatis – $4.75BN (2000), HP acquired Mercury – $4.5BN (2006), KLA-Tencor acquired Orbotech – $3.4BN (March, 2018), SanDisc acquired MSystems – $1.6BN (2006) and Google acquired Waze – $1.3BN (2013).
  7. Dozens of Intel’s top executives are holding Intel’s first ever annual management strategic deliberations in Israel. According to Intel’s interim CEO, Bob Swan, “the visit highlights our belief that Israel is a catalyst in promoting the technology, which will drive the coming era. Israel will become a global center for autonomous driving technology, Artificial Intelligence (AI) and quantum core computing.”  Intel’s plant in Kiryat Gat, Israel was named Intel’s most outstanding fab.  Intel – which employs 12,000 persons in Israel – has enhanced ties with Israel’s leading technological institute, the Haifa Technion, highlighting the inauguration of a joint Intel-Technion venture in the area of Artificial Intelligence (Globes, Oct. 8).
  8. China’s Sanan Optoelectronics negotiates a $300MN acquisition of Israel’s ColorChip (Globes, Aug. 28). The Minneapolis-based Perforce Software acquired Israel’s Perfecto for $200MN (Globes, Oct. 8). The US BlackRock acquired 7% of Israel’s Plus500 – an international online trading service company – for $160MN (Globes, Sept. 27).  China’s Venus Medtech, a heart valve-maker, acquired Israel’s Keystone Heart, a cerebral embolic protection device maker for $100MN (Globes, Sept. 27).  The Austin-based Vista Equity Partners acquired Israel’s Starhome Mach, a fraud prevention technology company, for $100MN (Globes, Oct. 3). The leading email and data security Lexington, MA-based Mimecast acquired Israel’s security software developer, Solebit, for $100MN (Globes, Aug. 1).
  9. Israel’s eToro – one of Israel’s 480 fin-tech companies – raised $100MN from investors led by China’s Minsheng Financial Holding, joined by Japan’s SBI Group and the (South) Korea Investment Partners. Israeli fin-tech companies raised a record-breaking $422MN during the first half of 2018 – a record breaking total, 33% more than the previous six months. 16 additional multinational financial firms have invested – and concluded strategic partnership agreements – in Israel. The newcomers include MasterCard, AmTrust Financial Services, TDBank, Bank of Montreal, China’s Fosun Investment Group and France’s insurance giant, AXA (Calcalist’s CTech, Sept. 5).
  10. Israeli innovations are changing the lives of billions: https://bit.ly/2y5t9ll

 




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Israel’s economic surge

Straight from the Jerusalem Boardroom #240

  1. The valid concern about Israel’s growing budget deficit, in 2019, should be assessed against the backdrop of Israel’s overall economic track record, as presented by Dr. Adam Reuter, the Chairman and Founder of Financial Immunities, Israel’s largest financial-risk management firm and the co-author of Israel – Island of Success:
  1988 2018 Change
Population size 4.4 MN 8.95 MN 103%
Gross Domestic Product (GDP) $37 BN $365 BN 886%
US aid as a percentage of GDP 7% 1% -86%
Gross Domestic Product per capita $8,000 $41,000 413%
Government debt as percent of GDP 155% 61% -61%
Defense expenditures as percent of GDP 17% 5% -71%
Foreign  currency reserves $6 BN $115 BN 1816%
Annual exports $10 BN $110 BN 1000%
Energy from own independent sources 4% 73% 1725%
Water from desalinated sources 3% 52% 1633%
Employment of women 36% 60% 67%
Number of students 70,000 316,000 351%
Life expectancy 75 years 82 years 9%
Tax burden 45% 30% -33%
Number of vehicles per thousand residents 175 398 127%
Average rooms per capita 0.95 1.26 33%

Inflation has been another indicator of Israel’s enhanced economic performance: 445% annual inflation in 1984, 16.4% in 1988 and 1.2% in 2018.

  1. According to a July 18, 2019 Forbes Magazine article (Amir Mizroch): “Israel rises as an industrial technology power…. For a country that doesn’t make cars, Israel has one of the world’s hottest automotive technology industries, with globally recognized names like Mobileye (bought by Intel for $15.3BN), WAZE (acquired by Google for $966MN), Moovit (with over 480 million users), as well as up-and-coming companies like Argus and Innoviz. Almost every single global carmaker has an innovation center and research and development facility in Israel to engage with the sector’s +400 Israeli companies….

“Now entrepreneurs from another tech sector in Israel, that isn’t based on any meaningful physical manufacturing – Industrial IoT [the 4th Industrial Revolution enabled by cybersecurity, cloud computing, edge computing, mobile technologies, 3D printing, advance robotics, cognitive computing, etc.] – are hoping to replicate the success of their auto-tech compatriots….

“Venture-backed financing into Israel’s I4 industry [the 4th industrial revolution] grew 223% in four years, from $113MN in 2014 to $365MN in 2018. The 2018 financing figure accounts for 5% of global VC-backed financing into the I4 industry, according to Pitchbook. This might be a small percentage, but only the US and China are ahead of Israel, a nation of just 9 million people….

  1. “Israel’s on course of further growth” was the title of a September, 2018 report on Israel by Pitchbook, a Seattle-based global leader of financial and marketing assessment: “The private market ecosystem in Israel has been maturing rapidly over the past few years, underscored by several big deals and the emergence of a technology cluster known as the Silicon Wadi. Despite its relatively small size and a population of around 8.9 million, Israel has become one of the most technologically influential hubs in the world due, in part, to a young and well-educated workforce and a favorable entrepreneurial environment….

“Israel has developed into a real draw for foreign investors. Its expertise in IT and cybersecurity, combined with its focus of healthcare-related trends, has been an integral part of building and maturing its evolving ecosystem.  While there are undoubtedly headwinds ahead – be they geopolitical or stemming from a slowdown of the global economy – it is no stretch to see Israel’s private markets overall growth trajectory continuing.”

 

 

 

 

 

 

 

 

 

 




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