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State of Israel
Ministry of Industry, Trade & Labor
Foreign Trade Administration
Investment Promotion Center
Produce, Research & Develop
The Israeli Advantage
Main Indicators 2000-2004
2000
2001
2002
2003
2004F
Inflation (%)
0.0
1.4
6.5
-1.9
1.1
Unemployment
(%)
8.8
9.3
10.3
10.7
10.2
Imports ($
billion)
35.2
30.9
32.6
33.7
40.5
Exports ($
billion)
28.3
27.4
25.8
27.9
33.7
110.1
109.5
102.7
109.1
113.7
17,581
17,180
15,468
16,312
17,200
GDP ($ billions)
GDP/Cap ($)
Investment climate in Israel
Foreign Direct Investment
in Israel
6,000
millions USD
5,000
4,000
3,000
2,000
1,000
91' 92' 93' 94' 95' 96' 97' 98' 99' 00' 01' 02' 03'
Not including traded securities
Source:Bank of Israel
Investment climate in Israel
Sources of Foreign
Investment -2003
Asia
6%
Europe
27%
Other
18%
North America
49%
Source: Israel Venture Association ,
March 2003
Investment climate in Israel
Foreign Companies Invested in
Israel- Some Examples
US
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Microsoft
Pratt & Whitney
AOL Time Warner
Intel
IBM
Boeing Enterprises
Cisco Systems
GE
Lucent
3Com
Hewlett Packard
Merrill Lynch
Motorola
Sun Microsystems
Europe
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Siemens
DaimlerChrysler
Volvo
Cable & Wireless
Baan
Volkswagen
Deutsche Telecom
L’Oreal
British Telecom
Danone
Ares Sereno
Unilever
Asia
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Samsung Electronics
Daewoo
Nomura
Hutchison Telecomm.
LG Group
Sony
Toyo Ink
Hyundai
Acer Computers
Sumitomo Trading
Fuji
Honda
Investment climate in Israel
Supportive Business
Environment
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Worldwide taxation and customs treaties
Protection of trademarks, patents and
intellectual property of all kinds
Comprehensive legal protection of foreign
companies
State of the art telecommunications
A highly advanced banking and financial
sector
“The World's Rising
Innovation Hot Spots"
R&D
Spending
INDIA
CHINA
RUSSIA
ISRAEL
SINGAPORE
TAIWAN
S. KOREA
1%
1.2%
1.2%
4.7%
2.2%
2.3%
2.9%
OF GDP
OF GDP
OF GDP
OF GDP
OF GDP
OF GDP
OF GDP
U.S
Patents
5,300
30 354
60 366
1993 2003
1993 2003
62 268
1993 2003
306
1,188
1993 2003
39
438
1993 2003
62
1993 2003
3,952
764
1993 2003
“Israel's strengths: Optical and wireless communications, chips, software, sensors”
BusinessWeek, October 11, 2004
Innovation climate in Israel
Scientists & Technicians per
10,000 Workers
140
140
120
100
83
80
80
60
60
55
55
45
43
33
40
33
32
25
20
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Is
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Innovation climate in Israel
Entrepreneurship
10
9
8
7
6
5
4
3
2
1
0
an xico ance any ore
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Ja Me
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Source: IMD World
Competitiveness Yearbook, 2002
Innovation climate in Israel
IMD World Report 2002
Country Rank 
1st
2nd
3rd
Quality of basic research
United
States
Finland
Israel
Legal environment for technology
development and application
Finland
Israel
Singapore
Quality of university education
Israel
Finland
Ireland
India
Slovakia
Israel
University-industry collaboration
Finland
Israel
United
States
Technological tie-ups between companies
Finland
Sweden
Israel
Number of outstanding engineers
Source: IMD World Competitiveness Yearbook- 2002 Edition, White Paper on International Trade 2002
Innovation climate in Israel
Wall Street Journal - 2004
Technology Innovation Awards
GOLD WINNER
Sun Microsystems
Laboratories
U.S.
New method for chips to transmit data inside a computer
up to 100 times faster than today's top speed.
SILVER
WINNER
Given Imaging Ltd.
Israel
Pill-shaped video camera screens the esophagus for
disorders.
BRONZE
WINNER
InSightec Image
Guided Treatment
Ltd.
Israel
Device destroys tumors using ultrasound waves together
with magnetic resonance imaging.
HONORABLE
MENTION
Flarion Technologies
Inc.
U.S.
New approach to mobile broadband networks, based on
Internet protocol.
HONORABLE
MENTION
Witten Technologies
Inc.
U.S.
Technology that creates detailed images of conditions
underground.
* The Wall Street Journal received 585 applications from around the world for the 2004
Technology Innovation Awards.
Innovation climate in Israel
Patents
2.98
2.96
2.04
1.92
1.74
1.5
Israel - An annual increase of 20%
Fr
an
ce
y
er
m
an
0.68
G
Fi
nl
an
d
Sw
ed
en
Sw
itz
er
la
nd
isr
ae
l
Ta
iw
a
n
0.7
Br
ita
in
2.02
Ja
pa
n
3.5
3
2.5
2
1.5
1
0.5
0
Number of patents (per 10,000) registered in
the U.S. during 2003
Source: BDI - Business Data Israel
Recent trends and developments
Recent M&A
Israeli Company
Technology
Acquirer
Sum
Time
Agis
Pharmaceutical
Perrigo
$900 million
November
2004
November
2004
August
2004
ART Technologies &
Phonetic Systems
P-CUBE
Speech Applications
Scansoft
$100 million
Traffic Management
CISCO
$200 million
ENVARA
Wireless infrastructure
INTEL
$40 million
March 2004
EMBLAZE
Chips for Mobile-device
applications
ZORAN
$54 million
June 2004
ACTONA
TECHNOLOGIES
Enterprise software
CISCO
$100 million
June 2004
A2I
Content management
software
SAP
$10 million
July 2004
SANCTUME
Web security
WATCHFIRE
$45 million
July 2004
Investment in Technologies
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N
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Y
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or
584
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G
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636
502
551
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High Tech
Investments Q1-Q3
2004
W
According to foreign
investors, following
the Silicon Valley
and Boston, Israel is
the main center to
search for new
technologies
861
1,804
7,170
1
Ernst and Young, October 2004
10
100
1000
10000
VC Investments
(by quarter)
600
500
400
$ USD
300
millions
200
100
0
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2002
2003
2004
Source: IVC Online
Major R&D Efforts
Stretching Boundaries of Imagination & Ingenuity
• Innovative synergistic industry-academy cooperation,
supported by the Chief Scientist, Ministry of Industry &
Trade.
• Over 100 industrial & academic participants.
• Focused on establishment of the technological
infrastructure for the next generation.
• Key telecommunications R&D activities:
 Digital wireless
 Satellite systems
 Broadband & optical technology
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Internet & Multimedia
Telemedicine
Microelectronics
Network management
Recently Established R&D
Centers
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18-December-2004 - Telynx (USA) - Data-processing,
software and services: Opening of a research and
development center in northern Israel
18-December-2004 - BrainStorm (Canada) Biotechnologies : Announced a new research center in
Kiryat Ha'Mada Ve Ha'Technologia
15-November-2004 - Huawei Technologies (China) Data-processing, software and services : Establishing
$2m Israeli R&D center
25-October-2004 - 3M (USA) - Drugs: Minnesotabased giant, 3M, o invest in R&D operations in Israel
Source: ANIMA
Technology Start-ups
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Israel is one of the largest world centers for
start-up enterprises, with ~800 (year 2003)
active start-ups.
Innovative, technology-intensive activity,
representing several technology
breakthroughs.
Major international activity:
– Strategic alliances and joint ventures.
– Raising capital - venture, seed & risk
investments.
Venture Capital
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Investments by venture capital funds constitute an
added value above financial contributions - in
management, world market familiarity, strategic
guidance and economic credibility.
During 2003, 371 Israeli companies raised $1.01 billion
(compared to 352 companies & $1.14 billion during
2002).
43% ($421 million) was invested by Israeli venture
capital funds.
The active sectors are communications (33%),
software (19%), life sciences
(18%),
semiconductors
Source:
IVC Research
Center (2004)
(12%) & Internet (4%).
Israeli Revenue-driving
Innovations
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The cellular phone, Motorola Israel
The Pentium MMX Chip technology, the Pentium4 microprocessor and the Centrino processor,
Intel Israel
Medinol’s minimally-invasive cardiovascular stent
technology
AOL Instant Messenger technology, ICQ
Israeli Revenue-driving
Innovations
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Most of the Windows NT and XP operating
systems, Microsoft-Israel
VocalTec’s award-winning voice and audio
compression technology
Given Imaging’s ingestible video camera
AND MANY MORE…
You quest we quote!
Source for Technologies
“There are few places like Israel where
one can find leading technologies in
almost every field.”
Y. Hasson – Senior Vice President
Nokia Venture Partners (London)
September 2003
You quest we quote!
The promised land
“Land of Tech Promise - Again”
“After years of a long slump, Israel is seeing a
slew of IPO’s, mergers and new startups”
BusinessWeek, September 20, 2004
You quest we quote!
Be Part of the Future
“Outside the US, we invest in
only one other country. That’s
Israel.”
September 2003
Julien Nguyen, Managing Partner,
Applied Materials Ventures
You quest we quote!
Happy Investors
“If you liked investing in Israel in
the late 1990’s, you’ve got to
love it today –Same talent.
Same opportunity. Better
prices.”
2002
Stanley Gold, CEO Shamrock Holdings
Director of Walt Disney Company, July
You quest we quote!
Innovation
“Israel is important to our goal
because it has historically
been a hotbed of new raw
technology and scientific
developments.”
Ventures
Matthew I. Growney, Managing
Director Motorola
September 2003
You quest we quote!
Good Things –
Small Packages
“Israel is a small country with a
tiny population, and yet it has
many significant high-tech
success stories.”
Partner
Sven Lingjaerarde – Co-Founder & General
Vision Capital – September 2003
You quest we quote!
Touched For The Very First Time
“I would like to emphasize the fact that
I feel very safe and very welcome.”
“Israel as safe as NYC”
Madonna, a visit to Israel, Sep. 2004
Incentives for R&D
Centers
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Tax relief program: “Cost +”
Three priority areas: A, B, C
Area C
Area B
Area A
Center of Israel
preferred regions
of Israel
most preferred
regions of
Israel
2 years - tax
exemption
6 years - tax
exemption
10 years - tax
exemption
8 years – only
10% taxes
4 years – only
10% taxes
National Priority Zone A
National Priority Zone B
Central Israel
Grant Benefit Path
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Fixed asset benefit level pending zone
Grant Rates for Fixed
Priority Zone A Priority Zone B
Asset
Industrial Projects
24%
10%
(Up to 140M NIS)
Industrial Projects
20%
10%
(Above 140M NIS)
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Central
Central
Israel
Israel
10%
10%
Tax Benefit
Grant Program
Tax Exemption
Central
Priority Zone A Priority Zone B Priority Zone C
Israel
2 Years
Not Applicable
Not Applicable
Israeli Investors
5 Years
7 Years
Not Applicable
Foreign Inventors
8 Years
10 Years
Not Applicable
Reduced Company Tax
Tax Exemption Path
Tax Program
Tax Exemption
Central
Priority Zone A Priority Zone B Priority Zone C
Israel
10 Years
6 Years
2 Years
Israeli Investors
Not Applicable
1 Year
5 Years
Foreign Inventors
Not Applicable
4 Years
8 Years
Reduced Company Tax
An example of the Tax
Benefit
Tax Benefit Example
Not
Approved
Enterprise
Approved Enterprise
Percent of Enterprise owned by Foreign Investors
0-49%
49-73%
74-89%
90-100%
Taxable Income
100
100
100
100
100
Company Tax
36%
25%
20%
15%
10%
64
75
80
85
90
25%
15%
15%
15%
15%
16
11
12
13
14
52%
36%
32%
28%
24%
Balance
Dividend Tax Percentage
Dividend Tax
Total Tax on Distributed income
Government Support of
R&D Expenses
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Lower risk: The chief scientist of the
Ministry of Industry Trade and Labor can
share up to 50% of R&D expenses, in
exchange to future royalties.
International Centers for
R&D
About 60 foreign R&D centers are located in Israel
State of Israel
Ministry of Industry, Trade & Labor
Foreign Trade Administration
Investment Promotion Center
5 Bank Israel St., Kiryat Ben-Gurion
Jerusalem, Israel
www.moital.gov.il
[email protected]
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