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Business

Global kudos to Israel's long term viability
By Ambassador (ret.) Yoram Ettinger
Jun 7, 2015 - 3:15:13 AM

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Straight from the Jerusalem Boardroom #204, June 5, 2015

Irrespective of the anti-Israel BDS movements (boycott, divestment and sanctions), independent of UN condemnations, and in defiance of criticism and pressure by Western policy makers -- which should not be ignored nor hyperbolized -- burgeoning foreign investments in Israel, and the upgraded scope and diversity of Israel's global trade balance, constitute a most authentic measure of Israel's global integration/standing and global confidence in Israel's long-term viability. Once again, complex reality triumphs over superficial conventional "wisdom."

Some 280 global high tech giants (mostly from the US) have given kudos to Israel's economy, in general, and Israel's brain power, in particular, by establishing research and development (R&D) centers in the Startup Nation. Thus, Intel operates four R&D centers, Microsoft - 2, IBM - 3 R&D centers, etc..

A few scores of these high tech giants are major bio-med companies, such as Johnson & Johnson, Philips, General Electric, Abbott Laboratories, Merck Serono, Foson Pharmaceuticals and Samsung, reflecting global appreciation of Israel's unique capabilities and contribution in the areas of medical devices, pharmaceuticals and digital and mobile healthcare. In 2014, Israel's bio-med sector raised an all-time record of $2bn, while the acquisition of Israeli bio-med companies during 2013-14 peaked at $2.9bn. Novartis, the world's largest pharmaceutical company, plans to expand its investments in Israel, following its 2014 investments in three Israeli companies. Johnson & Johnson, Abbott Laboratories, Medtronic and Volcano (the world's largest intravascular imaging company) participate in the $70mn Israeli bio-med venture capital fund, Tri Ventures, and Israel's Shavit Capital raised $75mn from US investors, mostly from the bio-med sector.

The growing global interest in Israel's cutting edge technologies was underlined during the first quarter of 2015, when $1bn was raised by Israeli startups from - mostly - overseas investors. This was an extension of the all-time record of $1.1bn during the fourth quarter of 2014, significantly higher than the $673mn during the first quarter of 2014, $439mn -- 1Q 2013 and $456mn -- 1Q 2012.

Other sectors of Israel's high tech have attracted leading investors such as Warren Buffett's Berkshire Hathaway, which led a $22.5mn round by Israel's eVolution Networks. Li Ka Shing (Horizon Ventures), the wealthiest person in Asia and a veteran investor in Israel, invested $11mn in Israel's Windward. In 2013 he contributed $130mn to Israel's Technion Institute of Technology. Swiss billionaire Gary Fegel invested $15mn in the Israeli biometric startup, FST.

Rather than isolate Israel, major global companies, venture capital funds and individual investors expand their investments in Israel, aiming to enhance their global competitiveness and stay ahead of the curve. For instance, Microsoft invested in a partnership with Israel's Akol, leveraging Akol's dairy technologies, which have catapulted the milk productivity of Israeli cows to a world record of 12,083 kg per cow in 2014, compared to 10,097 in the US. France's AllFlex, the global animal identification giant, acquired Israel's milking technology company, SCR, for $250mn. The $10bn Francisco Partners -- which in 2014 acquired Israel's NSO for $120mn -- recently acquired Israel's ClickSoftware for $438mn. Canada's Northleaf made a $175mn equity investment in Israel's Ormat, Google acquired Israel's Timeful, Japan's Dentsu Aegis acquired Israel's AbaGada for $75mn, and Intel announced a contract with Israel's Tower Semiconductor for a few hundred million dollars.

The Israel-China trade balance and the scope of Chinese investments in Israel are galloping. Chinese tech giants -- Alibaba, Baidu, Foson, Lenovo and Xiaomi -- signed agreements to establish R&D centers in Israel, and in 2015, Chinese investors are expected to invest about $500mn in Israeli venture capital. Since 2012, over 30 Chinese and Hong Kong entities have become first time investors in Israel. The following cornerstones shaped the surging scope of Chinese investments in Israel and Israel-China economic and financial cooperation: the 2010 acquisition ($60mn) of Israel's Pegasus Technologies by Yifang Digital; the 2011 acquisition of controlling interest in Israel's $2.4bn Adama by ChemChina; the acquisition ($160mn) of TravelFusion by Ctrip.com, along with scores of Chinese investments, joint ventures and cooperation agreements during 2014; the 2014 $850mn tender to construct the new port in Ashdod; and the 2015 completion of the acquisition of controlling interest in the $2bn Tnuva by China's BrightFood.

Bearing in mind the inherently tenuous and unpredictable nature of the Middle East, but in sharp contrast to the "Israel is isolated" theory, Israel has concluded substantial natural gas export agreements with Egypt and Jordan. And, in defiance of conventional "wisdom," Israel-Turkey trade balance surged to $5.44bn in 2014, an 11.5% rise over 2013, and more than a 100% vault over 2009, reflecting the demand for Israel's cutting edge commercial and defense technologies.

In 2014, notwithstanding the BDS movement in Britain, more Israeli companies are listed on the London Stock Exchange than from any other foreign country. Moreover, in 2014, Israel-Britain trade balance and Israel's exports to Britain grew by 28% and 38% respectively.

Attesting to the enhanced global confidence in the long-term viability of Israel's economy, and Israel's successful integration into the global market, the chief economist of Moody's (one of the top three global credit rating companies) said: "The performance of the Israeli economy in recent years makes Israel one of the world's best economies -- Israel's fiscal situation is better than ever, the debt-to-GDP ratio is low and continues to fall [66% compared to 92% in the Euro Bloc, 95% and 75% in France and Germany respectively and 101% in the US], Israel's economy has been growing for 15 straight years and there's almost no unemployment [4.9% in May, 2015, with a record number of employed persons -- 3.64mn -- compared with 5.5% in the USA, 7.8% - Sweden, 10.6% - France, 12.7% - Italy and 23.2% - Spain]." According to a May 26, 2015 Bloomberg report, "Confidence in the ability of Israel to keep fiscal discipline in check has led to the biggest cut in credit risk, this quarter, among developed nations."

Ambassador (ret.) Yoram Ettinger
The Ettinger Report
"Second Thought: A US-Israel Initiative"
First published in "Israel Hayom" newsletter, June 5, 2015


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