Sunday, 19 June 2016

Ambassador ret. Yoram Ettinger: Israel bucks the global trend






Is Israel increasingly isolated? Is Israel experiencing a slowdown of foreign investments?                 Not according to the documentation of foreign investments in Israeli companies. 


For instance, Hewlett-Packard (HP), a personal computers and printers global giant, which operates eight research and development centers in Israel, just established the 
Silicon Valley-Israel HP Tech Ventures, an investment arm seeking path-breaking US and Israeli companies in the areas of 3D, virtual reality, hyper mobility, Internet-of-Things, artificial intelligence and sophisticated machinery.  Expressing confidence in the potential of Israel's healthcare cutting-edge innovations, Orbimed, the world's preeminent healthcare investment and asset management fund, just raised $300MN for its second Israel Fund, surpassing the $222MN first fund. In May, the German carmaker, Volkswagen, concluded a strategic partnership agreement
– involving a $300MN investment - with Israel's taxi-hailing, delivery and logistics applications start-up, Gett.  And, 
General Motors announced the tripling of the personnel - from 100 to 300 employees - of its research and development center, in Herzliya, Israel, which has developed a number of technologies, enhancing GM's competitive edge in the global market.  Since 2011, GM Ventures, GM's investment arm seeking growth-driven, innovative technologies, has invested in a number of Israeli start-ups. 

Furthermore, during the first ten days of June, 
$237MN were invested – mostly by foreign investors – compared with $28MN during the first ten days of May and $327MN during the entire month of May, approaching $2BN for the first half of 2016. 

Increasingly, foreign investors recognize Israel's competitive edge as a leading global hotbed of ground-breaking technologies – second only to Silicon Valley – and the most cost-effective and battle-tested laboratory of the US research and manufacturing establishments. This emerging Israeli reality has produced win-win, mutually-beneficial ties with the US commercial and defense industries, as well as the US defense establishment, which leverage Israel's unique response to lethal geo-strategic threats, as well as operational, maintenance and repair challenges, Israel's can-do and defiance of odds mentality and brain-power. 

For example, an annual Combatting Terrorism Technology Conference is held in Israel, 
co-sponsored by the US Pentagon's Combating Terrorism Technical Support Office, Israel's Ministry of Defense Directorate of Research and Development and the Israeli branch of the MIT Enterprise Forum, examining over 100 Israeli startups in the areas of cyber security, image matching, personnel tracking, computer vision, etc., which could enhance US national and homeland security.    

Is Israel growing isolated or integrated into the global market?  According to the British Economist Intelligence Unit (June 2, 2016), "Israel is bucking the global trend…. [Global] fundraising by start-ups was down by more than one third in the first quarter of 2016 from its peak in the third quarter of 2015…. However, fundraising in Israel increased in the final quarter of 2015…on track to meet, or exceed, its first-quarter-2016 total of $1BN, in the second quarter of 2016…. One reason is the unusually strong position in cyber-security [10%-15% of the global market], which is riding a wave of investment after a string of high-profile attacks globally…. Another factor is the recent flow of Chinese capital into Israel, most of which is aimed at longer-term investment as a means of gaining access to Israeli technology…."    

Moreover, a 
Bloomberg study documents that "examination of foreign capital flow into Israel shows a steep increase…a near tripling from 2005 when the so-called BDS was started…. Israel's economy is expected to grow 2.8% this year compared with 1.8% for the US and the EU.  In 2015, Israel's industrial high-tech exports rose 13%, from 2014, to $23.7BN…. Israeli startups raised $3.76BN last year from non-Israeli investors, the highest annual amount in a decade…. Foreign investors spent an additional $5.89BN acquiring Israeli start-ups. Chinese buyout firm XIO Group's $510MN purchase of Lumenis led high tech mergers and acquisitions followed by a US private equity firm's $438MN buyout of ClickSoftware Technologies…."

In fact, Israel's business daily, Globes, reported the $110MN acquisition of Israel's Medical Galilee by Britain's BTG (May 9), the acquisition of Israel's Implisit by US SalesForce.com (May 11) and the $60MN acquisition of Israel's MagnaCom by US Broadcom (May 18).

Attesting to Israel's bolstered integration into the global market, some 250 high-tech (mostly US) giants acquired research and development centers in Israel. They leverage Israel's unique human resource: the world's highest-per-capita concentration of startups and venture capital investment, constituting a hyper-active pipeline of sophisticated technologies and applications from Israel (with 46% of adults having completed tertiary education) to the US, Europe, China and South Korea. 

Is Israel increasingly isolated? Is Israel experiencing a slowdown of foreign investments?  The global investment community has provided a lucid response – reinforced by its investment portfolios - to those who question whether Israel is bucking the global trend, and whether Israel is becoming integrated or isolated.  In the words of Forbes Magazine: "Israel clearly has a disproportionate impact on global innovation."