Global confidence in Israel’s economy

Straight from the Jerusalem Boardroom # 210, January 29, 2016

1.  In 2015, Israel’s high tech raised $4.43 BN, 30% over 2014. According to KPMG-Israel, Israel’s 2015 4th quarter economic performance ran contrary to – and was more positive than – the rest of the world. The value of exits through mergers and acquisitions and IPOs climbed to over $9 BN in 2015. The number of investment rounds of over $20 MN grew by 2/3 in 2015.  During the first three weeks of January 2016, twenty Israeli high tech startups raised almost $500 MN, mostly from institutional and private investors from the US, as well as from Asia, Europe and Israel (Economist Intelligence Unit, January 27, 2016).

2.  Israeli high tech companies “were sucking up a growing share of the world’s venture capital funding in the cyber area”: about 20% of global investment in cyber security, a 100% increase over 2014 and second only to the USA.  NY-based PrivoCo contends that Israel’s share (about $500 MN) was 12% of global cyber investments, but still up 100% over 2014 (Financial Times, January 26). Israel’s cyber technology startup, TowerSec, was sold to the Stamford, CT-based US giant, Harman, for $70 MN (Globes, January 7).

3. Unprecedented Chinese investments in Israel reflect China’s aim to shift from a highly manufacturing – to a high-tech – economy, and China’s assessment that Israel is indeed “The Startup Nation” (a best seller among Chinese movers & shakers; The Marker, January 1). Chinese investments in Israel surged from $70 MN in 2010 to $2.7 BN in 2015.  The China-Israel trade balance grew from $6 BN in 2009 to $11 BN in 2015.  During the first week of January, 2,000 Chinese and Israeli venture capital funds, businessmen, bureaucrats and political leaders participated in the largest-ever Chinese-Israeli conference held in Beijing. It highlighted Israel’s high tech cutting-edge technologies in the areas of biomed, biotech, health, cellular, clean-tech and computers at-large.

4.  According to the Economist Intelligence Unit, January 15, “Israel’s goods trade deficit shrank for the third successive year in 2015, declining by 43%.... Most of Israel’s exports are high technology and other goods that have not so far been adversely affected overall by the general decline in global trade and in commodity prices.”

5. Israel’s public debt-to-GDP ratio persists in its trend of reduction (Bloomberg, January 13): 64.9% in 2015, compared to 98.3% in 1995.  Israel’s government debt-to-GDP ratio was reduced to 63.4%. The budget deficit was 2.1%.  Between 2008 and 2015, Israel’s public debt-to-GDP ratio was reduced by 8%, compared with an increased ratio by the US (32%), Britain (37%), Japan (54%), South Korea (10%%), the Euro Bloc (25%) and the average advanced economies (26%).

6.  Dr. Adam Reuter, founder and CEO of Israel’s Financial Immunities Consulting and the Chairman of Reuter-Maydan Investment House, highlighted (January 12) Israel’s competitive edge in the global market:

*Unlike Israel, other advanced economies have exhausted their engines of growth, experience the crisis of the commodities and the burden of rapidly aging societies, which requires larger immigration of (mostly uneducated) populations which may pose a threat to homeland security and – in the long run - further burden social welfare services.

*Israel, a high tech powerhouse, has been sought by the emerging markets, which possess a high potential of growth and seek modern technologies.

*Israel stands to benefit from the high potential of growth – game changing innovations - in the areas of genetics, biotech, biomed, robotics, and nanotech, which has enabled Israel to defy the classic economic law of diminishing returns.

*Israel leads the advanced economies in the most critical area of growth projection: the size/trend/education of the 20-34 year old population, the prime innovator, risk taker, hard working, consumer, producer and defender (militarily). This age group, which is responsible for 40% of the economic growth, is shrinking in Europe and other advanced economies, but expanding in Israel. The fertility rate of those advanced economies – other than Israel – is less than 2.1 babies per woman, required to sustain the number of people, while the Jewish fertility rate in Israel is in excess of 3, trending toward 3.5 babies per woman.

*Israel’s exports have survived the recent global slowdown, by developing unique niches, which are essential to most countries in the areas of security, medicine, health, clean-tech, cyber, agriculture, irrigation, etc.