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Israel – a global innovation powerhouse

Straight from the Jerusalem Boardroom #238

  1. Arab integration in Israel. During 2017-2018, 18.3% of Israeli students studied engineering, compared to 17.9% studying social sciences. 25% of Israel’s undergraduates study engineering and computer sciences. During 2012-2018, the number of Israeli students studying tech subjects (electronics, engineering, software, optical, math, computers) grew 30%, compared to a 100% surge in the number of Arab students. In 2018, the number of Arab students in the hightech subjects accounted to 12% of the total, compared to 8% in 2012 (Israel Council for Higher Education).
  2. Economist Intelligence Unit, May 15, 2019: Israel’s GDP of $356BN and $40,230 per capita in 2018 is expected to surge to $667BN and $62,070 in 2030, reflecting Israel’s advantage – over developed and developing countries – in the areas of technology and demography.

Israel spends the highest GDP proportion, in the world, on civilian research & development. Its high investment in military research & development has had positive impact on civilian technology. For example, Israel has overcome low rainfall through desalination and water/sewage recycling, evolving into a major exporter of water technologies. More than 50% of Israel’s workforce has gone through tertiary education, and is expected to grow due to a relatively high fertility rate and positive net-immigration. Population growth is faster than any high-income country. Israel’s dynamic hightech sector will continue driving export growth, together with a strong contribution by business services. Exports of natural gas will make an increasing contribution in the 2020s. Israel’s isolation in the region will diminish gradually, as relations with Egypt and Persian Gulf Arab countries are improved. Israel will maintain the free-trade agreements with the US and EU and will expand trade ties with Japan, China and India and mid-size Asian economies. Israeli exports will rise from $111BN in 2018 to $283BN in 2030, as imports rise from $108BN to $233BN.

  1. According Forbes, May 27, 2019, Amir Mizroch, (Start-Up Nation Central), ”Israel is emerging as a leading innovation destination for a growing number of multinational corporations looking to Israel’s 6,000+ startups for new ideas, quick prototyping ability and infectious entrepreneurial culture…. Merck, the 350-year-old German pharmaceutical and chemicals [giant] firm, says almost half of its healthcare revenue is based on innovation stemming from Israel…. A PricewaterHouseCoopers report maps for the first time the activities of some 539 multinational companies, representing 35 countries, which are currently active in Israel [55% – USA, 27% – Europe, 15% – Asia-Pacific; 38% – technology, pharmaceuticals and healthcare – 11%, financial services – 10%, industry products – 10%, telecommunications and media – 8%]…. Mitsubishi is the latest multinational corp. to open an innovation center in Tel Aviv….

“It is no longer just technology companies expanding innovation footprint, but multinational companies from a wider blend of industries.  Deutsche Telekom, for example, regularly hosts management teams in Israel to absorb startup thinking.  Pfizer, Genpact, Flex and Johnson Controls all have senior executives located in Israel, who manage their companies’ global scope of technology scouting, product development, or open collaboration activities.  Siemens’ Dynamo and Innogy’s Innovation Hub are unique innovation vehicles, not replicated anywhere in those groups’ global innovation portfolios…. A shift, starting in 2014, from a traditionally research & development-led focus on engineering talent or IP assets, to more investment-led and partnership-led open innovation operating models. This shift has been accelerating…. 80% of the multinational companies cite incremental innovation on existing products and services as a key benefit of their Israeli activities.  Mercedes Benz is working with local Israeli enablers….

  1. The Silicon Valley-based cybersecurity multinational, Palo Alto Networks, is making another acquisition of an Israeli company – Twistlock which develops security solutions for virtual containers – for $410MN, in addition to acquiring Israel-based PureSec for $60MN-$70MN. Prior acquisitions of Israeli companies by Palo Alto: Demisto – $560MN (2.2019), Secdo – $100MN (4.2018), Lightcyber – $130MN (2.2017), Cyvera – $22MN (3.2014), as reported by Globes Business daily, May 30, 2019.
  2. The San Francisco-based San Francisco Partners Investment Fund acquired Israel’s Live U for $200MN (Globes, May 30). The $7BN Silicon Valley-based Proofpoint acquired 2.5 year old Israel’s Meta Networks cloud security for $120MN. In 2016, Proofpoint acquired Israel’s Firelayers for $55MN, which became Proofpoint’s research & development center (Globes, May 7).
  3. France’s Solabia, a global leader in the production of ingredients for cosmetics and skincare, acquired 80% of Israel’s Algatechnologies, which develops, cultivates and markets ingredients produced from microalgae (Globes, May 23).
  4. Decline in the financial risk of doing business in Israel. Dr. Adam Reuter, Chairman and Founder of Israel’s Financial Immunities, Israel’s largest risk-management firm (Globes, May 7): Israel’s private debt is 42% of GDP, compared to 63% of GDP in the OECD. The dramatic growth of Israel’s hightech sector – which is based on capital rather than debt – has reduced the financial risk of doing business in Israel. The latter is declining in correspondence to the decline of the scope of business-credit relative to GDP, since its growth does not require increasing debt. Similarly, the debt of Israel’s business sector to banks and investors declines relative to GDP.



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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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