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Innovation drives Israel’s economy

Straight from the Jerusalem Boardroom #239

  1. Pratt & Whitney – one of the three largest helicopter and airplane jet engine manufacturers in the world, accounting for a substantial portion of United Technologies’ activity – concluded a long term contract with Israel’s Bet Shemesh Engines. The contract will extend Bet Shemesh’s manufacturing jet engine parts for Pratt & Whitney until, at least, 2039, yielding an $800MN revenue for Bet Shemesh, which brings its total revenues during the 35 year association with Pratt & Whitney to $2.6BN (Globes Business Daily, June24, 2019).
  2. Intel’s Senior Vice President and President of Intel Capital, Wendell Brooks: “Innovation drives economies, and the two best places of this are Israel and the US.” He added that Israel was one of three tech hubs that Intel Capital (Intel’s investment arm) is intently focused on (alongside China’s Beijing/Shanghai and the Silicon Valley). Moreover, often Israeli entrepreneurs have “better ideas than in the Silicon Valley.” Intel Capital capped 2018 with $120MN invested in 14 Israeli startups and companies – a record year of investments in Israeli startups. Intel is building a new plant in Israel (Kiryat Gat) involving an $11BN investment. (Israel Today, April 25).
  3. Israel’s Kornit Digital, which manufactures digital systems for printing on textiles, is raising $146MN on NASDAQ, which is five times more than its initial expectation. The underwriters are Citigroup, Goldman Sachs, Berkleys, William Blair, Stifel, Needham and Craig-Hallum Capital Group (Globes, June 12). Israel’s SentinelOne Cybersecurity raised $120MN in a round of private placement led by the $23BN NYC-based Insight Partners, with the participation of the South Korean giant Samsung Venture Investment, NYC-based Third Point Ventures, Menlo Park-based Redpoint Ventures and NextEquity, Palo Alto-based Data Collective, etc. (Globes, June 6). Israel’s BrightWay raised $25MN in a round of private placement led by Japan’s Koito Manufacturing and the Japanese-Israeli venture capital fund, Magenta Venture Partners (Globes, June 26).
  4. According to Adam Reuter, Chairman of “Financial Immunities” and the author of Israel – Island of Success: the flow of foreign investments to Israel, and the robust state of Israel’s economy, have produced a stronger-than-ever New Israeli Shekel (3.575 per dollar and 4.034 per Euro) against the index of the 26 major currencies of the countries trading with Israel. Bank of Israel foreign exchange reserves have risen to $118BN – 31.9% of Israel’s GDP (Globes, July 4).
  5. Integrating the Ultra-Orthodox sector into Israel’s hightech, and responding to the growing Israeli demand for hightech engineers/workers, KamaTech supports 40 Haredi startups, and employs over 500 persons since its establishment in 2013. KamaTech was founded as a coalition of 30 leading hightech companies and venture capital funds, such as Cisco, Intel, IBM, Google, Microsoft, Amdocs, Checkpoint, CitiBank, Innovation Center, Pitango VC, Canaan Partners, etc. The Israeli government and KamaTech have launched a national program – together with the Hebrew University, the Technion and Lev Institute – to recruit more Ultra-Orthodox into the hightech sector. At this stage, the Ultra-Orthodox sector makes up 12% of the Israeli population, but just 1% of Israel’s hightech workers.



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Israel’s Covid-19 Economic Trends

Straight from the Jerusalem Boardroom #248
https://bit.ly/3u29k9g

Foreign investment in Israel’s high-tech companies surged to new heights in the 1st quarter of 2021 – $5.7bn in 172 deals – which is up 89% over the impressive 4th quarter of 2020 and double the volume of the 1st quarter of 2020.

2020 was the first year of surpassing $10bn in capital raised by the Israeli high-tech sector from investors in the US, Asia and Europe, who trust the maturity of Israel’s brain power. Investments in Israeli companies more than tripled in six years, reflecting the effective response by Israeli startups to the technological, medical, pharmaceutical, educational, social and digital challenges posed by Covid-19.

Israel’s economic performance in defiance of Covid-19 is 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:

  1. Israel has led the globe in the rapid administration of Covid-19 vaccinations due to effective negotiations with Pfizer and an efficient, country-wide medical infrastructure.
  2. Israel is the second lowest among OECD countries in the number of Covid-19 deaths per number of Covid-19 cases: 0.7% compared to the 2.3% OECD average. Israel features a young population (median age of 30 compared to the OECD’s 42) and an effective country-wide medical infrastructure, including top level HMOs and hospitals.
  3. Israel is ranked 12th from the bottom among the 37 OECD countries in the number of deaths per million inhabitants: 645 compared to 1,145 OECD average.
  4. The International Monetary Fund’s 2025 GDP growth forecast for OECD countries: Israel – 4%, OECD average – 2.2%, US – 1.8%, Australia – 2.5%, Ireland – 2.6%, France and Canada – 1.7%, the UK – 1.6%, Germany – 1.2%, etc.
  5. Israel’s 2020 GDP was reduced by 2.5%, compared to the OECD average reduction of 4.1%, South Korea – 1%, Norway – 0.8%, Australia – 2.6%, US – 3.5%, Japan – 4.8%, Germany – 5%, France – 8%, the UK – 10% reduction, etc. GDP growth was recorded in New Zealand – 2.4% and Ireland – 3.5%.
  6. In 2020, Israel was ranked 20th among the 37 members of the OECD in terms of GDP per capita, featuring $43,000 (GDP – $408bn), ahead of Japan, Italy and Spain, and very close behind the UK ($44,000) and France ($45,000).
  7. Israel’s debt-to-GDP ratio increased from 60% in 2019 to 72% in 2020, compared to the OECD’s average increase from 66% to 82%. The 2020’s debt-to-GDP ratio was 266% in Japan, Italy – 161%, the US – 131%, Germany – 73%, etc.
  8. Israel’s foreign exchange reserves-to-GDP ratio of 41% (3rd among the OECD countries) attests to its financial stability, and Israel’s capability to raise foreign credit promptly in a cost-effective manner. Israel’s foreign exchange reserves in March 2021 – $186bn.
  9. During the past decade, Standard and Poor (S&P) accorded Israel a positive credit rating trend, unlike the negative trend for the G-7 countries. In 2020, notwithstanding Covid-19, Israel’s credit rating (S&P) remained at AA.
  10. Some 380 global high-tech giants operate in Israel, including Microsoft, Amazon, IBM, Intel, Cisco, Apple, Verizon, Applied Materials, Dell, HP, Kodak, Oracle, Philips, SAP, Medtronics, GM, eBay, GE, etc. Israel leads the world in the ratio of research and development investment to GDP: 4.9%. 85% of this investment comes from the business sector.

 




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