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Israel’s credit rating, natural gas and automotive tech

Straight from the Jerusalem Boardroom #243

  1. According to Standard & Poor, Fitch and Moody’s – the world’s top credit rating companies – Israel and Australia are the only two Western countries whose 2019 credit rating (reflecting economic growth) is higher than it was before the global economic meltdown of 2007/2008. Currently, Israel is rated AA- by Standard & Poor, A+ by Fitch and A1 by Moody’s.
  2. According to the London Economist (November 5, 2019), despite short-term political uncertainty, Israel’s economic growth is sustained by a strong domestic consumption, an expansion of natural gas explorations, findings and export, and the continued dynamism of the hightech sector, which has attracted substantial foreign investment. For example, Intel announced its plan to invest $11BN in a new export-oriented semiconductor manufacturing facility in Israel [as a follow up to the 2016 acquisition of Israel’s Mobileye for $15.3BN and investment in scores of Israeli startups].
    Israel’s economy features low unemployment (3.7%) and rising real wages. Exports are expected to rise despite the relative global economic slowdown, and independent of the continued appreciation of the Shekel (the strongest currency against the US dollar), but due to the initiation of natural gas exports.
    GDP growth is expected to slow to 2.9% in 2020, before recovering to 3.8% in 2021 and 4% in 2022.
  3. The NYC-based Centerbridge Partners and Greenwich, CT-based Gallatin Point Capital acquired 32.5% of Phoenix (Israel’s 2nd largest insurance group) for $450MN (Globes Business Daily, Nov. 5, 2019). Germany’s insurance giant, Munich Re, invested $250MN in Israel’s Next Digital Insurance startup, which was founded in 2016 by entrepreneurs who in 2014 sold their previous startup, Check, to the Silicon Valley-based Intuit for $360MN (Globes, October 8). The Greenwich, CT-based General Atlantic led a $165MN investment in Israel’s Riskified, which develops software preventing fraud and verifying consumer identities (Wall Street Journal, Nov. 5). Israel has become Europe’s Silicon Valley. During the first half of 2019, German investors accounted to 30% of the number of European deals in Israel’s ecosystem, including a branch of Merck, the global pharmaceutical giant. While German investment profile is dwarfed by the USA, 60% of the leading Frankfurt Stock Exchange companies have Israeli branches, seeking Israeli technologies, surging since 2016. In 2018, German investors were 4th in the number of Israeli deals – 5% of total deals foreign investment – between the UK’s 7% and China’s 4% (Globes, August 12).
  4. Egypt’s Middle East News Agency reported on November 11, 2019 that Noble Energy and Israel’s Delek Drilling, the operators of Israel’s largest natural gas fields, established a $518MN joint venture with Egypt’s Dolphinus Holdings, which will pave the way for Israeli natural gas exports to Egypt (85.3BN cubic meters over 15 years), starting on January 1, 2020.
  5. The Greece-based Energean Oil & Gas (jointly with Israel’s Opportunity Energy Resources) published the results of its appraisal drilling in Israel’s Karish North Discovery, estimating recoverable resources of 0.9 trillion cubic feet (25 billion cubic meters) of natural gas plus 34MN barrels of light oil/condensate (natural gas liquids), in addition to 2.4 Tcf (68 BCM) and 33MN barrels of light oil/condensate discovered previously. Energean recently obtained licenses for four additional marine exploration sites. 12 more offshore drilling licenses issued to overseas operators, including Britain’s Cairn Energy and Pharos Energy.
  6. 600 of Israel’s 8,000 startups are focused on transportation-related solutions. Israel has become a leading global hub for smart mobility, according to David Liniado, Vice President of the Atlanta-based Cox Automotive Mobility. Cox is expanding partnership with Israeli startups, including a joint research & development center with Drive TLV, which involves Volvo, Honda and Hertz. The Paris-based Faurecia (114,000 employees in 35 countries), a world leader in automotive technology invested in Israel’s Guardknox, a cybersecurity company, reinforcing passengers’ safety and data security.
    Ford is setting up an Israeli research & development center, as a follow up to the 2016 acquisition of Israel’s SAIPS, which specializes in computer vision and self-driving car learning. Intel and Nvidia established research & development centers in Israel, which develop chips for autonomous vehicles. GM founded its research & development center in Israel in 2008. BMW is about to introduce its own Israeli research & development center, as did Volkswagen in 2018. Over 20 global carmakers and suppliers are involved with Israeli research & development centers, leveraging Israel’s brain power.



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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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