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Business

Israel's economy defies common sense
By Ambassador (ret.) Yoram Ettinger
May 3, 2015 - 12:07:14 AM

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Irrespective of a cynical and gullible "elite" media, independent of diplomatic pressure, political correctness and conventional wisdom, in defiance of the global economic slowdown, in the face of war and terrorism, and despite ill-advised threats of boycott, divestment and sanctions -- but, due to principle-driven tenacity, inherent optimism, human capital/brain power, creativity, cutting edge ingenuity and breakthrough, game-changing innovations -- Israel's economy is expanding beyond expectations, reacting constructively to pressures/challenges, and developing unique commercial and security niches in response to local and global needs.

For example, the April 10 issue of Financial Times reported that "Israel's cyber security technologies claim 10% of the world's investments, and Israel's exports exceed $3bn.... Buy Swiss watches from Switzerland and information security from Israel.... Israel built its cyber-related offensive, defensive and snooping functions as a byproduct of its regional conflicts, 'turning lemons into lemonade' (Udi Mokady, CEO of CyberArk)...."

Leveraging Israel's cyber knowhow, Lockheed Martin -- which joined EMC in fathering Israel's CyberSPark Industry Initiative - collaborates with Israel's National Cyber Bureau, Israel's Technology and Information Administration and the University of Maryland, training Israeli students, reflecting its growing involvement in Israel's cyber research and development (R & D). PayPal acquired Israel's anti-virus cyber company, CyActive, for $60mn, its second R & D center in Israel. In 2008, PayPal acquired FraudScience for $169mn. BottomLine acquired the Israeli cyber company, Intellinx, for $67mn.

According to the April 20, 2015 issue of the London Economist Intelligence Unit: "Israel's high tech sector is in the midst of a boom stronger than anything seen since the late 1990s. [300] Startups raised a record $3.4bn in 2014.... Israel has gained a global reputation as a technology innovation leader in several areas, with several hundred new technology firms emerging annually.... Some 82 Israeli startups were sold last year [for $7bn], mostly to foreign multinationals, while another 17 conducted initial public offerings (IPO).... Foreign multinationals operate more than 200 R & D centers in Israel.... It is also significant in boosting Israel's relations with emerging economic powers hungry for innovation, such as India and China...."

Contrary to the misperception of Israel's supposed isolation, Renren ("China's Facebook") and Tencent invested $100mn in an Israeli venture capital fund. China's Internet giant, Alibaba, known for the highest-ever IPO ($25bn in 2014), invested about $50mn in Israel's JVP, which is currently focusing on cyber technology. Chinese contractors are increasingly involved in major Israeli infrastructure projects, winning bids for the Mt. Carmel Tunnel, the Acre-Carmiel railroad, the port of Ashdod, the new deep water Port of Haifa, the supply of electric locomotives, etc. PingAn, YongJin and ZTE, Chinese giants in the areas of insurance, financial management and cellular, respectively, invested $25mn in Israel's Rainbow, which invests in medical equipment.

Bloomberg reported on March 30, 2015 that India's mega-billionaire, Mukesh Ambani "is scouting for startups in Israel and the Silicon Valley.... Morgan Stanley predicts e-commerce sales will surge, in India, tenfold to $100bn by 2020." India's information technology giant, InfoSys, acquired Israel's Panaya for $230mn.

Israel's defense giant, Elbit, represents the rapidly expanding ties between Israel and the emerging markets of India, China and Latin America. According to an April 12, 2015 Bloomberg report: "While US defense spending is in a long term downward trend...demand from those regions helped push up Elibt's backlog orders to $6.3bn, an 8% jump from 2013.... While the US accounted for 28% of total sales in 2014 ($3bn) -- the biggest slice... Elbit's combined sales in Asia and Latin America in 2014 (35%) surpassed those in the US for the first time." Israel Aerospace Industries (IAI) has teamed up with Brazil's IACIT, establishing a radar maintenance center in Brazil, whose air force is using IAI-made airborne radars. Israel's Gilat Satellites won a $285mn bid to establish a regional telecommunications infrastructure in Peru.

Long-term confidence in Israel's economy was demonstrated by Microsoft, which inaugurated its second R & D center in Israel, which is the site of Microsoft's first R & D center outside the USA.

According to Bank of Israel, $1.6bn were invested, by foreign investors, in Israel's high-tech, traditional industries and real estate during January-February, 2015; $8.3bn were invested during 2014 and $30bn in 2012- 2014. Industrial exports (without diamonds) catapulted from $5mn in 1948 to $47bn in 2014.

How attractive are Israel's high tech companies? During January-March, 2015, eleven Israeli companies raised $1.5bn on Wall Street. Recently, Nielsen Global acquired Israel's eXelate (digital marketing) for $200mn, in addition to its Nielsen Innovative incubator with nine Israeli startups. Canada's NorthLeaf Capital acquired 40% of Israeli Ormat's US subsidiary for $175mn. Blackberry is buying Israel's WatchDog for $100mn. Avid Technology acquired Israel's OrAd for $70mn. Apple operates, in Israel, its largest R & D center (700 employees) outside the USA, consisting of three companies: LinX that was just bought for $20mn, Anobit Technologies and PrimeSense. TeraData acquired Israel's Appoxee for $20mn, and DocuSign purchased Israel's ARX for $30mn.

The long-term viability of Israel and its economy is also reflected by its economic indicators, which refute conventional "wisdom." For instance, Israel's growth rate (3%) is similar to the USA and above the OECD average, Canada, Britain and Germany, and Israel's unemployment is below the OECD average. Israel's declining debt-to-GDP ratio (67%) is lower than the USA, the Euro Bloc, Japan, France, Canada, Britain and Germany.

Judging by Israel's stellar economic performance, one would hardly guess that Israel experienced a six week war, against Hamas terrorists, in July-August, 2014.

Ambassador (ret.) Yoram Ettinger
The Ettinger Report
"Second Thought: A US-Israel Initiative"
First published in "Israel Hayom" newsletter, May 1, 2015


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