Israel Economy - Jan 2013 -
Confidential
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Israel – General Overview
Population: Jews: 75%
7.7M Arabs: 21%
Others: 4%
Annual Growth % (2009-2010)
1.8
Annual Growth % (1948-2010)
3.7
GDP per capita, ppp:
$31,005
Sources: Israel Central Bureau of Statistics; Bank Israel Confidential
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Israel Economy Growth Rate Exceed the Average Rate of Advanced Economies Israel Compared to Advanced Economies, Annual Rate of Change, Constant Prices Israel 5.6%
Advanced Economies
5.5%
4.9%
4.8%
4.8%
4.7%
4.0%
3.1%
2.7%
3.1%
3.1%
2.8%
1.6% 0.8% 0.1%
-3.7%
2004
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2005
2006
2007
2008
2009
2010
2011
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Growth is Based on Investments in Fixed Assets and Export Annual Rate of Change, Constant Prices, 2005 Private Consumption
Public Consumption
Investment in Fixed Assests
Exports of Goods and Services 16.3%
Global Economic Crisis
14.5%
13.7%
9.2% 6.6%
6.3% 3.3%
4.4% 2.8% 2.1%
1.4%
2.2%
1.4%
2.2%
4.8%
3.6% 1.4%
2.2%
-5.8%
-12.5%
2007
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2008
2009
2010
2011
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Gross Public Debt is Deceasing As % of GDP
97.4%
Global Economic Crisis
93.8% 84.3%
2004
2005
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2006
77.8%
77.1%
79.3%
76.3%
74.7%
2007
2008
2009
2010
2011
5
Low Budget Deficit As % of GDP
5.2%
3.7%
3.5%
2.2% 1.8% 0.9% 0% 2004
2005
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2006
2007
0% 2008
2009
2010
2011
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Average Inflation Rate of 2-3% Rate of Change in Consumer Price Index, Yearly Average
5%
3.5%
3.3% 2.7% 2.1% 1.3%
0.5% 2005
2006
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2007
2008
2009
2010
2011
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Unemployment Decrease while Participation Rate Grows As % of Total Labor Force 59.0%
Participation in Labor Force
9.0%
Unemployment Rate
58.5%
7.9%
58.0%
57.7%
7.5%
57.0%
57.5%
7.6%
57.5%
7.2% 6.9%
8.0%
57.7% 57.5%
57.4%
57.2%
57.4% 7.0%
57.1% 56.8%
56.5%
56.8%
56.8%
56.7%
6.6%
6.6%
6.4%
56.0%
6.0%
6.0% 55.5%
5.6%
5.6% 5.4%
55.0%
5.0%
54.5%
54.0%
4.0%
Q1
Q2
Q3
2009 Confidential
Q4
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
Q4
2011 8
USA is the Major Trading Partner Followed by China US $B, Constant Prices, 2005 Exports
Imports
18.5
Italy
1.8
1.8
1.8 Japan
France
2.1
Turkey
Turkey
2.2
India
Germany
2.4
Netherlands
1.3
UK
1.3
3.2
Italy
1.3
Germany
1.7
China*
1.8
USA
2.3
Netherlands
3.7
UK
India
2.9
Belgium & Luxemburg
China*
USA
3.1
6.1
Switzerland
6.7
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*Since July 1997 the data on trade with Hong-Kong is added to the data on China Sources: Central Bureau of Statistics Confidential
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Israel Growth Is Based on High-Technology Industries Total Industrial Exports Excluding Diamonds: In 2000 - $21,005M In 2010 - $40,678M Hi-Tech. Exports By Branches, 2010 Low-Technology Industries Medium-Low Technology Undustries
Office & Computing Equipment $918 5%
Medium-High Technology Industries High - Technoloy Industries
Aircraft $1,733 9%
2,101 Pharmaceutical Products $6,612 33%
Electronical Components $3,295 16% Electronic Communication Equipment Equipment for Control & Supervision $3,338 $4,237 17% 21%
6,739
11,710 1,812 3,171 4,833 20,128 11,188 2010
2000
Sources: Israel C.B.S Confidential
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Innovation and Entrepreneurship Oriented Economy IMD World Competitiveness Yearbook 2011 Total Expenditure on R&D (as % of GDP)
Scientific Research
8.63 8.61
7.46 7.39 7.35
8.24 8 7.88
7.6 7.52 7.3 7.24 7.21 7.04 7
Japan
Korea
Denmark
Austria
Taiwan
Sweden
Germany
Switzerland
Israel
USA
Taiwan
Finland
Singapore
Japan
Denmark
Sweden
Germany
USA
Switzerland
Israel
USA
Germany
Taiwan
Switzerland
3.02 3 2.94 2.82 2.77
Denmark
Korea
Japan
3.62 3.45 3.36
Sweden
3.96
Finland
Israel
4.27
8.19 8.11 7.89 7.81 7.79
Innovation Capacity
Sources: IMD World Competiveness Yearbook 2011 Confidential
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Innovation and Entrepreneurship Oriented Economy IMD World Competitiveness Yearbook 2011 Venture Capital
Entrepreneurship
8.25 8.24 8.14 8.08 7.96 7.92 7.88 7.88 7.64 7.63
New Zealand
Iceland
Philippines
Ireland
Turkey
Taiwan
Brazil
Australia
Hong Kong
Israel
USA
Ireland
Brazil
Poland
Korea
Hong Kong
Taiwan
Colombia
7.06 7 6.98 6.98 6.87 6.82 6.7 6.69 6.64
Malaysia
Israel
Singapore
Canada
Netherlands
Norway
Finland
Sweden
Taiwan
Hong Kong
Israel
USA
7.01 6.77 6.55 6.55 6.44 6.26 6.24 6.22 6.12 6.03
7.5
Flexible and Adaptability
Sources: IMD World Competiveness Yearbook 2011 Confidential
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Israel has a Rich Legacy Leading World Innovations Some of the world’s cutting edge technology has been developed in Israel Instant messaging
USB flash drive
Israel is a world leading high tech cluster Non-US companies in NASDAQ, 2009 63
Israel
By Mirabilis
First instant messaging services
Firewall/VPN
By M-Systems
First USB-Flash drives technology Life science
By Check Point
Internet security pioneer
By Given Imaging
Pill-Camera Capsule Endoscopy
Confidential
SOURCE: NASDAQ, May 2009; Israel’s investment promotion center; Factiva
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Canada Japan
6
Ireland
5
UK
5
Singapore
4
India
3
Korea
3
France
2
Germany
2
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Multinational Giants have Recognized Israel's Innovative Environment and Established their R&D Centers 1990-1995
1995-2000
2000-2010
1 In some cases by M&A of Israeli companies SOURCE: Press search; Israel Venture Association Confidential
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Very Intensive Venture Capital Industry with Strong International Presence … Some of World Largest VC Companies Are Active in Israel Description
Activity in Israel
First investor and business Present in Israel since 2001 partner in companies that Israel is the only place
make up 10% of the Nasdaq's value
Early-stage venture firm
investing in technologydriven companies (e.g., eBay) Capital under management: $2.5bn in committed VC
Venture Capital Investments per Capita, 2008 Israel
265 90
outside the Silicon Valley in which Sequoia invests Managed Capital: $380mn in three VC funds Portfolio includes 27 companies Nine exits
USA
Present in Israel since 2001 Managed capital: $490mn
France
20
in two VC funds Portfolio includes 28 companies Six exits
UAE
20
Global private equity group Present in Israel since 2000 with $4bn in funds advised Portfolio includes 5 Israeli
by the group worldwide
Venture Capital Investment in Israel is Very High
60
Ireland
55
Denmark 40
UK
Singapore
12
Korea
10
India
10
China
8
companies Two exits
SOURCE: Company web site; IVC; Dow Jones; VentureSource; Thomson Reuters; U.S. Central Intelligence Agency; World fact book, 2007, 2008 Confidential
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Strong Support from the Israeli Government Tax incentive program
R&D incentive programs Program
Description
Program
Designed to encourage and support
Pre Seed
individual entrepreneurs Grants are up to 85% of the approved expenses for building prototypes, registering patents, designing business plans
Description Foreign investor investing more than 140mn
Grants Programs
NIS will enjoy a grant of 20% of the investment and a reduced tax rate for an eight-year period
Supports the formation of consortia
Generic R&D
comprised of industrial firms and academic institutions, to jointly develop generic, precompetitive technologies Grants are up to 66% of the approved budget No royalty payments Overall budget: ~ $60mn/yr
For a foreign investor, the dividend tax rate
is 4% and a total corporate tax rate is 11.5%
Priority Area Time: If at least 25% of the company is Programs foreign owned, then the benefit period is 10 years
Grants are on a sliding scale from 20% to
Competitive R&D
50% of R&D budget Royalty payment is 3% to 5% of future product sales Supports more than 1,000 projects/yr from more than 500 companies Overall budget: ~ $300mn/yr
Intended for large multinational companies
Strategic Program
meeting the following criteria – Annual turnover > $3bn – Project investment >$130mn Full corporate tax and dividend tax exemptions for 10 years
SOURCE: Team analysis Confidential
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Venture Capital Investment Split Total Investment By Sector
Other 13%
Communications & Networking 21%
Semmiconductor s 13% Software 13% Internet 22%
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Life Sciences 18%
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