Israel’s Brain Power (Hightech) Features a Grand Decade

Straight from the Jerusalem Boardroom #244
Prior issues of the Boardroom: https://bit.ly/2EV9Td2

According to PriceWaterouseCoopers, the 2019 volume of Israeli hightech exits (companies that were sold or held stock exchange offerings), totaled $9.9BN, compared to $4.9BN in 2018, $7.4BN in 2017, $14.9 in 2014, $7.6BN in 2016 and $1.2BN in 2010. If 10 follow-on deals are included (companies acquired more than once, or acquired after public offering), then the 2019 volume surges to $22BN. $4.5BN of the 2019 exits were in computing services and corporate software, $2.3BN in the chips sector, $1.7BN in life sciences, and $1BN in the Internet sector.

The past decade featured 587 exits, totaling $71BN. If follow-on deals are included, the total surges to $108BN.

Major US corporations persist in leading the acquisition of Israeli hightech companies – $8.9BN in 2019 (Globes Business Daily, December 24, 2019).

The substantial flow of private US investment – establishing, in Israel, multitude of research and development centers – reflects Israel’s unique contribution to the US economy in terms of research and development, enhanced US competitiveness in the global market, increased exports of US products and expanded base of US employment.

Intel invested $2BN in the acquisition of Israel’s 3-year-old Habana Laboratories, which develops chips for Artificial Intelligence applications. It is Intel’s 13^th acquisition of an Israeli company (Bloomberg, December 16). Intel has operated in Israel since 1974, employing 12,000 people in one manufacturing plant and four research and development centers.
Texas-based Noble Energy, which operates Israel’s largest offshore natural gas field, Leviathan, will start supplying the local Israeli market by the end of December. In January, 2020, Noble Energy and Israel’s Delek Drilling will start exporting natural gas to Egypt, as prescribed by a $20BN deal – of 85 billion cubic meters (3 trillion cubic feet) – concluded with Egypt. Egypt will be able to export the imported natural gas following its liquefaction (Al-Monitor, Dec. 13) in Egyptian installations.
Key Israeli economic factors in 2020:

*Interest rate is expected to remain low (around zero);
*Inflation is expected to remain low (around 2%);
*The ratio of national debt to gross domestic product is expected to remain low (around 60%, compared to the US – 60% and Japan – almost 250%);
*Expanding employment and all time low unemployment (4% and below);
*Expanded employment of ultra-orthodox Jews and Arabs;
*Annual economic growth is expected to be sustained at 3%-3.5%;
*Israel’s Shekel is expected to remain strong (around 3.4 per dollar);
*Overseas investment in Israel’s hightech will persist at high levels;
*Export of high added-value commercial and military products will keep growing, irrespective of the strong Shekel;
*Offshore natural gas export (to Egypt and in the long run to Europe) will alleviate the burden of the 2019 growing budget deficit, which will require across-the-board budget cuts;
*Israel’s demography will remain robust (high Jewish fertility rate and growing net-immigration/Aliyah);
*Israel’s solid economy provides for a friendly debt-financing environment.
(Globes, December 17).

Some 140 airliners land in Israel, reflecting the sizeable number of Israelis flying abroad (8.5MN in 2019) and tourists (4.5MN in 2019). Israel’s population is 9 million. The volume of passengers to/from Israel grew by 9% in 2019, compared with a 5% global growth. It contributed $16BN and 184,000 jobs to Israel’s economy. Direct flights were initiated from Israel to Las Vegas, Chicago, Brazil and Chile, and additional direct flights are expected, in 2020, to Dallas, Tokyo and Australia (Globes, Dec. 24, 2020).

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

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

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.
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.
Israel is ranked 12^th from the bottom among the 37 OECD countries in the number of deaths per million inhabitants: 645 compared to 1,145 OECD average.
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.
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%.
In 2020, Israel was ranked 20^th 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).
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.
Israel’s foreign exchange reserves-to-GDP ratio of 41% (3^rd 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.
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.
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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