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Israel bucks the global trend

Is Israel increasingly isolated? Is Israel experiencing a slowdown of foreign investments?  Not according to the documentation of foreign investments in Israeli companies.

For instance, Hewlett-Packard (HP), a personal computers and printers global giant, which operates eight research and development centers in Israel, just established the
Silicon Valley-Israel HP Tech Ventures, an investment arm seeking path-breaking US and Israeli companies in the areas of 3D, virtual reality, hyper mobility, Internet-of-Things, artificial intelligence and sophisticated machinery.  Expressing confidence in the potential of Israel’s healthcare cutting-edge innovations, Orbimed, the world’s preeminent healthcare investment and asset management fund, just raised $300MN for its second Israel Fund, surpassing the $222MN first fund. In May, the German carmaker, Volkswagen, concluded a strategic partnership agreement – involving a $300MN investment – with Israel’s taxi-hailing, delivery and logistics applications start-up, Gett.  And, General Motors announced the tripling of the personnel – from 100 to 300 employees – of its research and development center, in Herzliya, Israel, which has developed a number of technologies, enhancing GM’s competitive edge in the global market.  Since 2011, GM Ventures, GM’s investment arm seeking growth-driven, innovative technologies, has invested in a number of Israeli start-ups.

Furthermore, during the first ten days of June,
$237MN were invested – mostly by foreign investors – compared with $28MN during the first ten days of May and $327MN during the entire month of May, approaching $2BN for the first half of 2016.


Increasingly, foreign investors recognize Israel’s competitive edge as a leading global hotbed of ground-breaking technologies – second only to Silicon Valley – and the most cost-effective and battle-tested laboratory of the US research and manufacturing establishments. This emerging Israeli reality has produced win-win, mutually-beneficial ties with the US commercial and defense industries, as well as the US defense establishment, which leverage Israel’s unique response to lethal geo-strategic threats, as well as operational, maintenance and repair challenges, Israel’s can-do and defiance of odds mentality and brain-power.

For example, an annual Combatting Terrorism Technology Conference is held in Israel, co-sponsored by the US Pentagon’s Combating Terrorism Technical Support Office, Israel’s Ministry of Defense Directorate of Research and Development and the Israeli branch of the MIT Enterprise Forum, examining over 100 Israeli startups in the areas of cyber security, image matching, personnel tracking, computer vision, etc., which could enhance US national and homeland security.    


Is Israel growing isolated or integrated into the global market?  According to the British Economist Intelligence Unit (June 2, 2016), “Israel is bucking the global trend…. [Global] fundraising by start-ups was down by more than one third in the first quarter of 2016 from its peak in the third quarter of 2015…. However, fundraising in Israel increased in the final quarter of 2015…on track to meet, or exceed, its first-quarter-2016 total of $1BN, in the second quarter of 2016…. One reason is the unusually strong position in cyber-security [10%-15% of the global market], which is riding a wave of investment after a string of high-profile attacks globally…. Another factor is the recent flow of Chinese capital into Israel, most of which is aimed at longer-term investment as a means of gaining access to Israeli technology….”    

Moreover, a
Bloomberg study documents that “examination of foreign capital flow into Israel shows a steep increase…a near tripling from 2005 when the so-called BDS was started…. Israel’s economy is expected to grow 2.8% this year compared with 1.8% for the US and the EU.  In 2015, Israel’s industrial high-tech exports rose 13%, from 2014, to $23.7BN…. Israeli startups raised $3.76BN last year from non-Israeli investors, the highest annual amount in a decade…. Foreign investors spent an additional $5.89BN acquiring Israeli start-ups. Chinese buyout firm XIO Group’s $510MN purchase of Lumenis led high tech mergers and acquisitions followed by a US private equity firm’s $438MN buyout of ClickSoftware Technologies….”

In fact, Israel’s business daily, Globes, reported the $110MN acquisition of Israel’s Medical Galilee by Britain’s BTG (May 9), the acquisition of Israel’s Implisit by US SalesForce.com (May 11) and the $60MN acquisition of Israel’s MagnaCom by US Broadcom (May 18).

Attesting to Israel’s bolstered integration into the global market, some 250 high-tech (mostly US) giants acquired research and development centers in Israel. They leverage Israel’s unique human resource: the world’s highest-per-capita concentration of startups and venture capital investment, constituting a hyper-active pipeline of sophisticated technologies and applications from Israel (with 46% of adults having completed tertiary education) to the US, Europe, China and South Korea.

Is Israel increasingly isolated? Is Israel experiencing a slowdown of foreign investments?  The global investment community has provided a lucid response – reinforced by its investment portfolios – to those who question whether Israel is bucking the global trend, and whether Israel is becoming integrated or isolated.  In the words of Forbes Magazine: “Israel clearly has a disproportionate impact on global innovation.” 



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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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