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Optimistic state of Israel’s economy

Yoram Ettinger

Ambassador (ret.) Yoram Ettinger, “Second Thought: a US-Israel Initiative”
Straight from the Jerusalem Boardroom #232, October 11, 2018
https://bit.ly/2ORgFaB (previous issues: https://bit.ly/2NB51fk)

1.  The international credit rating agency, Standard & Poor (S&P), upgraded Israel’s credit rating to AA- with a stable outlook, the highest ever for Israel. S&P highlighted Israel’s fiscal discipline, higher than expected economic growth rate, the reduction of debt-to-GDP-ratio from 70% (ten years ago) to 60% in 2018, enhanced competitiveness and evolving from a global net-borrower into a global net-lender. Moody’s credit rating agency just updated its rating outlook for Israel from “stable” to “positive” (Globes, Aug. 5).

2.  According to Adam Reuter, chairman and founder of Financial Immunities, Israel’s largest financial risk-management firm and author of Israel – Island of Success, Israel’s demography – compared to other OECD countries – bodes well for its economic future.  Israel’s median age – which is the key to economic innovations and growth when accompanied by sound educational infrastructure – is 30, significantly younger than the US (38), Europe (44) and Japan (48).  Moreover, while Israel’s labor participation rate is growing, the percentage of the public sector employees is declining: 18%, compared to the USA’s 16%, Norway’s 38%, Denmark’s 31%, Sweden’s 26%, France’s 25%, Britain’s 21%, etc. Unlike Europe, Israel does not require the importation of labor force, in order to sustain economic growth (Globes Business Daily, Sept. 17, 2018).

3.  Israel’s estimated 2018 economic growth is 3.3%, compared to the USA – 3%, China – 6.6%, Germany – 2.5%, Britain – 1.5% and Japan – 1.2%. Israel’s estimated 2018 inflation rate is 1%, compared to the USA – 2.5%, Germany – 1.6%, Britain – 4.4% and Japan – 1.1%.  Israel’s estimated 2018 unemployment rate is 4.2%, compared to the US – 3.9%, Germany – 5.1%, Britain – 4.4% and Japan – 2.9% (Globes, Oct. 8).

4.  PepsiCo acquired the Israeli countertop carbonated water machine maker, SodaStream, for $3.2BN, adding healthier products to its portfolio and pushing a more environmentally friendly agenda. SodaStream will be run as an independent division, maintaining its current management team, in order to sustain its entrepreneurial culture (Fortune Magazine, Aug. 20).

5.  The US Dublin-based Medtronic acquired Israel’s Mazor Robotics for $1.6BN, the largest amount ever paid for an Israeli medical company, exceeding the July 2017 $1.1BN acquisition of Neuroderm by Mitsubishi Tanabe Pharma and the $1BN acquisition of Given Imaging by Covidien, which is owned by Medtronics (Globes, Sept. 26)).

6.  Previous major “exits” by Israeli companies (acquired by non-Israeli giants): Intel acquired Mobileye – $15.2BN (2017), Gilead Sciences acquired Kite Pharma – $11.9BN (2017), International Flavors and Fragrances (IFF) acquired Frutarom – $7.1BN (August, 2018), Cisco acquired NDS – $5BN (2012), Lucent acquired Chromatis – $4.75BN (2000), HP acquired Mercury – $4.5BN (2006), KLA-Tencor acquired Orbotech – $3.4BN (March, 2018), SanDisc acquired MSystems – $1.6BN (2006) and Google acquired Waze – $1.3BN (2013).

7.  Dozens of Intel’s top executives are holding Intel’s first ever annual management strategic deliberations in Israel.  According to Intel’s interim CEO, Bob Swan, “the visit highlights our belief that Israel is a catalyst in promoting the technology, which will drive the coming era. Israel will become a global center for autonomous driving technology, Artificial Intelligence (AI) and quantum core computing.”  Intel’s plant in Kiryat Gat, Israel was named Intel’s most outstanding fab.  Intel – which employs 12,000 persons in Israel – has enhanced ties with Israel’s leading technological institute, the Haifa Technion, highlighting the inauguration of a joint Intel-Technion venture in the area of Artificial Intelligence (Globes, Oct. 8).

8.  China’s Sanan Optoelectronics negotiates a $300MN acquisition of Israel’s ColorChip (Globes, Aug. 28).  The Minneapolis-based Perforce Software acquired Israel’s Perfecto for $200MN (Globes, Oct. 8). The US BlackRock acquired 7% of Israel’s Plus500 – an international online trading service company – for $160MN (Globes, Sept. 27).  China’s Venus Medtech, a heart valve-maker, acquired Israel’s Keystone Heart, a cerebral embolic protection device maker for $100MN (Globes, Sept. 27).  The Austin-based Vista Equity Partners acquired Israel’s Starhome Mach, a fraud prevention technology company, for $100MN (Globes, Oct. 3). The leading email and data security Lexington, MA-based Mimecast acquired Israel’s security software developer, Solebit, for $100MN (Globes, Aug. 1).

9. Israel’s eToro – one of Israel’s 480 fin-tech companies – raised $100MN from investors led by China’s Minsheng Financial Holding, joined by Japan’s SBI Group and the (South) Korea Investment Partners. Israeli fin-tech companies raised a record-breaking $422MN during the first half of 2018 – a record breaking total, 33% more than the previous six months. 16 additional multinational financial firms have invested – and concluded strategic partnership agreements – in Israel.  The newcomers include MasterCard, AmTrust Financial Services, TDBank, Bank of Montreal, China’s Fosun Investment Group and France’s insurance giant, AXA (Calcalist’s CTech, Sept. 5).

10. Israeli innovations are changing the lives of billions: https://bit.ly/2y5t9ll

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