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J U LY
2009




                       E C O N O M I C           A N D       F I N A N C I A L         T R E N D S        I N    I S R A E L



Published by the       Overview
Government of Israel
Economic Mission
Ministry of Finance    • Amid the economic turbulence, the Government of Israel returned to the Global Bond
                         market in what the IFR called “spectacular fashion.” The originally planned $0.5 billion
                         grew to $1.5 billion with orders from more than 300 different investors. This was the
                         largest and most diverse Israeli deal.
EDI TORS:
Tamar Roth-Drach       • Israel was reclassified as a developed market by MSCI Barra. The change means that
(212) 499-5727           Israel will now be included in some of the most important global equity indices. It is also
tamard@emus.gov.il       an acknowledgement of the achievements of Israel’s economy.
Beth Belkin
                       • The IMF and the Central Bank of Israel expect that Israel’s economy will shrink
                         approximately 1.5 percent by the end of 2009 and return to positive economic growth
                         of approximately 0.5 percent in 2010.

                       • The pace of the monthly slowdown in the Economic Composite Index is declining, which
                         could mean that the economic downturn may be approaching its bottom.

                       • During the first quarter, total industrial production fell by 6.4 percent. In contrast, Israel’s
                         pure high technology industries were relatively strong, as they recorded a 5.7 percent
                         increase in revenues during the first quarter.

                       • Despite the recent downturn in the global economy, the drop in exports of goods and
                         services, and the slowdown in tourism, Israel’s current account balance had a surplus of
                         $2.7 billion in the first quarter of 2009 and is expected to remain positive by the end of the
                         year, according to the IMF.

                       • During the first quarter of 2009, the unemployment rate rose to 7.6 percent. This rate
                         increase is a result of cutbacks in jobs and an increase in the number of participants in the
                         labor force. The labor force participation rate increased from 56.5 percent in the fourth
                         quarter of 2008 to 56.8 percent in the first quarter of 2009.

                       • In an attempt to address the effects of the slowdown in the economy, the Bank of Israel
                         gradually cut the interest rate from 4 percent at the beginning of the last quarter of 2008
                         to 0.5 percent in June 2009.

                       • Following a 46 percent decline in 2008, the TA-25 Index has risen 25 percent in 2009.

                       • The government initiated several stimulus packages to address the tough economic
                         situation. The latest stimulus plan will expand guarantees for the banking system, create
                         new funds for mid-size businesses and exporters, further institute negative income tax,
                         reduce the number of foreign workers, implement structural reforms and increase invest-
                         ments in infrastructure.
Editor’s Review
    On the Road to Recovery                                                                                                                                                                                     1




    Amid the economic turbulence, the Government of Israel returned to
                                                                             State of the Economy Composite Index
    the Global Bond market in what the IFR called “spectacular fash-         (Monthly Percent of Change)
    ion.” The originally planned $0.5 billion offering grew to $1.5 bil-
    lion with orders from more than 300 institutional investors. This was    2.0%                                                                                                                               -


    the largest and most diverse Israeli deal. Judging at the economic                       1.38%
                                                                                                                                                                                                                -

                                                                              1.5%                                                                                                                              -
    data, it is easy to understand this success.                                     1.23%
                                                                                                     1.13%                                                                                                      -

                                                                                                                                                                                                                -
                                                                             1.0%
    It is true that according to the formal economic definitions and as                                      .76%                                                                                               -

    reflected in the national accounts data, the Israeli economy has                                                .35%                                                                                        -
                                                                             0.5%
    been in a recession during the past two quarters. But more recent                                                      .19%
                                                                                                                                                                                                                -

                                                                                                                                  .01%                                                                          -
    economic indicators portend the beginning of an economic recovery.       0.0%

                                                                                                                                         —.24%
    During the fourth quarter of 2008 and the first quarter of 2009,         -0.5%
                                                                                                                                                                                                        —.28%


    Israel’s export-led economy felt the brunt of the global recession,                                                                          —.60%
                                                                                                                                                         —.66%                                  —.72%
    as its GDP declined by 1.6 percent and 3.9 percent, respectively.        -1.0%                                                                               —.90%

    The business sector was similarly affected, declining 2.4 percent                                                                                                    —1.23%        —1.29%
                                                                             -1.5%
    and 5.4 percent in the last quarter of 2008 and the first quarter                                                                                                         —1.54%
                                                                                                                                                                                       Decrease in the
    of 2009.                                                                 -2.0%
                                                                                                                                                                                       Pace of Slowdown

                                                                                     Jan Feb Mar Apr May Jun Jul                         Aug Sep Oct Nov Dec Jan Feb Mar Apr
    As the world’s economy slowed and international demand                           2008                                                                                         2009
    dropped, Israel’s exports for 2009 fell 37 percent during the first
    quarter of 2009. The drop in the demand for Israeli exports and          Source: The Bank of Israel
    the contraction in the economy had a negative impact on internal
    domestic consumption. During that quarter, private consumption
                                                                            The tourism sector experienced a difficult first quarter in 2009,
    fell 3.4 percent and public consumption declined by 7.1 percent.
                                                                            especially when compared to 2008 when a record of more than
    At the same time, fixed capital formation (housing and industrial
                                                                            three million visitors came to Israel. Clearly, the global credit
    infrastructure projects) was also negatively affected, declining by
                                                                            crunch and the military operation in Gaza at the beginning of
    14.9 percent. This decline also shows up in Israelis' demand for
                                                                            the year kept tourists away. During the period of January
    foreign goods and services, as imports dropped by 41.3 percent
                                                                            through April, only 736 thousand visitors entered the country,
    in the first quarter.
                                                                            which is a decline of 22 percent when compared with the corre-
    The IMF and the Central Bank of Israel expect that Israel’s econ-       sponding period in 2008.
    omy will shrink (by 1.7 percent and 1.5 percent respectively) by
                                                                            Despite the recent downturn in the global economy Israel’s cur-
    the end of 2009. But the good news is that forecasters are expect-
                                                                            rent account balance had a $2.7 billion surplus in the first
    ing Israel to return to positive economic growth of about 0.5 per-
                                                                            quarter of 2009 and is still expected to remain positive. Indeed,
    cent in 2010.
                                                                            the IMF predicts that at the end of the year the current account
    The Economy Composite Index, which reflects the activity level          surplus will reach 1.14 percent of GDP.
    of various sectors of the Israeli economy, also showed weakness.
                                                                            In terms of the labor force, Israel ended 2008 with an unem-
    However, there is a silver lining in this statistic. Although it fell
                                                                            ployment rate of 6.1 percent compared with 7.3 percent at the
    3.83 percent during the January–April period, the pace of the
                                                                            end of 2007. During the first quarter of this year, the unem-
    monthly slowdown in the Economic Composite Index is declin-
                                                                            ployment rate rose to 7.6 percent. This rate increase is a result
    ing, which could mean that the economic downturn may be
                                                                            of both cutbacks in jobs and a positive increase in the number
    approaching its bottom.
                                                                            of participants in the labor force. The labor force participation
    During the first quarter, total industrial production fell by 6.4       rate increased from 56.5 percent in the fourth quarter of 2008
    percent. That decline was mostly a function of the 27.7 percent         to 56.8 percent in the first quarter of 2009.
    drop in semitraditional industries and semi high technology
                                                                            While economic activity was trending down, consumer prices
    industries. In contrast, Israel’s pure high technology industries
                                                                            turned slightly higher. Following a drop of 0.6 percent in the
    were relatively strong, as they recorded a 5.7 percent increase in
                                                                            CPI during the fourth quarter of 2008, 2009 began with another
    revenues during the first quarter.
                                                                            drop of 0.6 percent in January-February. Nevertheless, in



2   July 2009                                                                                                   SHEKEL: Economic and Financial Trends in Israel
Current Account Balance as Percentage of GDP (2009 Forecast for Advanced Economies)

  15%



  10%


    5%



    0%
                                                                                                                                                                                 France Iceland Finland   Israel   Austria   Japan   Germany Netherlands   Korea Sweden   Hong Switzerland Luxembourg Taiwan
                                                                                                                                                                                                                                                                          Kong
                                                                                                                                                                                                                                                                                                                 Norway Singapore
                                                                                                                                                                                                                                                                                                      Province
                                                                                                                                                                        Canada
                                                                                                                                                              Denmark                                                                                                     SAR                         of China
                                                                                                                                                     United
                                                                                                                                Czech     Belgium   Kingdom
                                                                                                    Italy   United   Ireland
                                                                                                            States             Republic
                                                                                         Slovenia

   -5%                                                        Slovak     Spain
                                                                                 Malta
                                                  Australia
                                                              Republic


                                         New
                                        Zealand
                             Portugal
  -10%              Cyprus



           Greece
  -15%

  Source: International Monetary Fund, World Economic Outlook Database, April 2009




March, April and May prices went up by 1.9 percent. As of                                                                                                                 Amid the economic turbulence, a new government has been
now, total inflation for the year is 1.2 percent and the inflation                                                                                                        established and a new economic plan has been introduced.
for the past twelve months is 2.8 percent. These changes are                                                                                                              The Ministry of Finance has chosen a two-pronged approach
in line with market expectations and are forecasted to contin-                                                                                                            for dealing with the tough economic situation. Its first step is
ue.                                                                                                                                                                       a proposed biennial budget, which will stabilize 2009- 2010
                                                                                                                                                                          fiscal years by fixing expenses for the two-year period and
The Central Bank expects inflation to end the year within the
                                                                                                                                                                          eliminate the need to present a new budget next year. The
1-3 percent target range set by the government. Some of the
                                                                                                                                                                          budget includes a 3.05 percent rise in expenses for the years
change in the CPI is attributed to actions taken by the Central
                                                                                                                                                                          2009-2010 and deficit ceilings of 6 percent and 5.5 percent
Bank. In an attempt to address the effects of the slowdown in
                                                                                                                                                                          of GDP in 2009 and 2010 respectively. Expenses will
the economy, the Bank of Israel gradually cut the interest rate
                                                                                                                                                                          increase by only 1.7 percent per year in 2011. The proposed
from 4 percent at the beginning of the last quarter of 2008 to
                                                                                                                                                                          budget will be handed to the Knesset for final approval in
0.5 percent in June 2009. The cuts were meant to increase
                                                                                                                                                                          July. The second step is the initiation of a multi folds stimu-
economic activity by reducing the cost of credit. In addition,
                                                                                                                                                                          lus package to support the market and arouse business
the Bank of Israel continued to purchase U.S. Dollars in an
                                                                                                                                                                          activity. The latest stimulus plan will expand guarantees for
attempt to increase its foreign currency reserve. That action
                                                                                                                                                                          the banking system, create new funds for mid-size business-
also served to stabilize foreign exchange markets. Last but not
                                                                                                                                                                          es and exporters, further institute negative income tax,
least, the Central Bank has recently started buying govern-
                                                                                                                                                                          reduce the number of foreign workers, implement structural
ment bonds in the open markets to preserve their value. Since
                                                                                                                                                                          reforms and increase investments in infrastructure. The gov-
this has begun to be implemented only recently, time will
                                                                                                                                                                          ernment declared that it is committed to returning to a low
show its true impact.
                                                                                                                                                                          level of expenditure and reducing the budget deficit after
Like the equities market in the United States, the Tel Aviv                                                                                                               the economic recovery.
Stock Exchange was driven in the last couple of months by
                                                                                                                                                                          Ben Gurion once said that “in Israel, you are not a realist if
winds of optimism blowing around the globe. Following a 46
                                                                                                                                                                          you don’t believe in miracles.” It seems that although we
percent decline in 2008, the TA-25 Index has risen approxi-
                                                                                                                                                                          have been hit by the global economic crisis, we will not
mately 33 percent in 2009. As investors grew more confident
                                                                                                                                                                          need miracles since we are already on the path to recovery.
in the performance of the economy, they returned to the stock
market.

SHEKEL: Economic and Financial Trends in Israel                                                                                                                                                                                                                                                                  July 2009 3
Public Private Partnership Projects in Israel
   An Efficient Way to Execute Infrastructure Projects
   Uzi Levin, Head of PPP Projects Division; Efrat Shriki, Coordinator, PPP Projects Division;
   Marc Hanhart and Adi Van Velsen, Project Managers, PPP Projects Division, Ministry of Finance


   The execution of governmental projects in Israel, in partner-        A key factor for successful execution of PPP projects is to
   ship with the private sector (PPP projects), started some 15         achieve an optimal risk allocation between the private and
   years ago. In the last seven years, the use of this method for       the public sectors. Each sector should be responsible for
   executing major infrastructure projects has developed                the risks it can better cope with. The public sector will
   significantly.                                                       typically be responsible for land acquisition, for discrimi-
                                                                        natory changes in laws and legislation, and for political
   The first projects executed were in the transportation and water     risks. Market-demand risks and force majeure risks are
   sectors. Additional projects in the construction and energy fields   shared risks.
   are also currently being executed.                                   Over the last few years the Government of Israel has intro-
   The table on the facing page illustrates the current list of major   duced changes in the tender policy in order to facilitate the
   PPP governmental projects by sectors.                                implementation of the projects and to shorten the time
                                                                        frame between the financial close and the start of construc-
   The Government of Israel envisions that investment in infra-         tion of the projects: unified accounting principles, easing
   structure will encourage economic growth, the private sector’s       of tax treatment, market interest rate change protection,
   involvement will improve the level of government supplied ser-       various indexation and protection options being granted to
   vices, and that optimizing the risks allocation between the pub-     concessionaires. An option to refinance after completion of
   lic and the private sectors will contribute to public wealth.        the construction phase is also granted in order to encour-
                                                                        age institutional investors to participate in the long- term
   The infrastructure projects executed in Israel have already          financing of the projects.
   reached a significant volume of $9 billion.
                                                                        The Government of Israel has also taken steps to encour-
   Out of this total figure, the transportation sector represents       age participation of foreign investors (bidders and lenders)
   about 70 percent; energy, 15 percent; water, 11 percent; and         in the execution of PPP projects: interest rate change pro-
   construction, 4 percent.                                             tection for foreign currency denominated loans (Dollars
   Some of the significant projects include:                            and Euros), foreign currency exchange rate protection, and
   • A project for water desalination located in the Sorek estuary;     payment to the concessionaire in foreign currency (Dollars
     this facility will produce 150 million m3 per year;                and Euros).
   • The construction of three solar power plants (thermo-solar and     In a number of projects, foreign entities are involved as
     photovoltaic) in Ashalim;                                          members of the bidding groups, as subcontractors, or as
   • A central and advanced police training center in the city of       part of the financing institutions. For instance, foreign
     Bet Shemesh;                                                       banks have taken the lead for the financing (in Euros) of
   • Metropolitan highways to Tel Aviv (431, 531);                      the Hadera desalination plant.
   • Cross Israel Highway that connects the south and north of
     Israel (Route 6);                                                  The following is a brief summary of PPP activity in the
   • The Carmel Tunnels;                                                energy field:
   • A private prison facility.
                                                                        The state of Israel is seeking to enlarge its diversity of
   The state of Israel also expects to launch additional infrastruc-    energy sources, especially in the field of renewable energy
   ture projects, focusing on renewable energy and environmental        for two main reasons: to reduce environmental damage and
   protection.                                                          energy independence.




4 July 2009                                                                                  SHEKEL: Economic and Financial Trends in Israel
Energy and Water                               Transport                                    Construction
   Solar Energy                                   Light Rail Trains                            Health
   • Negev Thermal Plants                         • Jerusalem LRT                              • Ashdod Hospital
   • Negev Photovoltaic Plant                     • Tel Aviv Metropolitan
   • Liquid Natural Gas                             LRT-Metro

   Water Desalination                             Roads                                        Security
   •   Ashkelon Plant                             •   Cross Israel Highway                     • Beer Sheva Prison
   •   Palmachim Plant                            •   Haifa Carmel Tunnels                     • National Training Center for
   •   Hadera Plant                               •   Highway 431                                Police Forces
   •   Sorek Plant                                •   Highway 531                              • Negev Army Training Bases City
   •   Ashdod Plant                               •   Tel Aviv Fast Lane
                                                  •   Rehabilitation, O&M of Existing
                                                      Roads Network




Therefore, the government instituted a policy, that would              In December 2008, 17 groups passed the pre-qualification
require the electricity producers to increase their use of             stage (ten groups in the photovoltaic tender and seven groups
alternative energy. By the year 2020, 10 percent of Israel’s           in the thermo solar tender). The tender documents were pub-
electricity will come from renewable energy.                           lished in the first quarter of 2009.

As part of this governmental policy, in September 2007, the            The Division for Public Private Partnership Projects acts on
Israel Government decided to construct three power plants              behalf of the Ministry of Finance in the execution of PPP pro-
near Ashalim in the Negev, for a total production capacity of          jects. It is responsible for managing, coordinating, planning
250 Mega Watts. The complex consists of two thermo-solar               and executing the tender process until the concessionaire is
power plants, capable of producing from 80 to 110 Mega                 selected supervising the activities vis a vis the concessionaire
Watts, and a photovoltaic power plant capable of producing             and its financing partners until the financial close is reached,
15 Mega Watts (the state shall be entitled, as per its option,         and coordinating the activities of the implementing authority
to instruct the wining bidder to extend the production up to           during the operation phase of the projects (supervision of the
30 Mega Watts).                                                        execution of the concession agreement).

This policy will be executed by three separate international           The main goals behind the creation of the PPP division were
BOT tenders, in which the concessionaire plans, constructs,            to build a professional entity for PPP activity in Israel aimed
operates and maintains each solar power plant. Upon termi-             at making the tender process as efficient and simple as possi-
nation of the operation term (25 years) the power plants will          ble, to have a leading force in the implementation of the con-
be transferred from the concessionaire to the state. Each of           cession agreement, and to set standards for PPP activity in
the concessionaires will be granted an electricity production          Israel in conjunction with governmental authorities, the pri-
license for the operation of the solar plant, in accordance            vate business sector and financial institutions.
with the Israeli Electricity Economy Law of 1996, with all
the considerations aside.                                              The direct link to PPP projects in the Accountant
                                                                       General’s office of the Ministry of Finance is
                                                                       http://ppp.mof.gov.il/Mof/PPP/MofPPPTopNav/MofPPPProjects/




SHEKEL: Economic and Financial Trends in Israel                                                                              July 2009 5
The Israeli Incubator Experience – Innovative Success
    Yifat Leibovich, Vice President Operations, Maayan Ventures Ltd.

    Technological incubators in Israel are support organizations that give                                       attracted private investment. Forty percent of the companies are
    fledgling entrepreneurs an opportunity to develop their innovative ideas                                     still in operation since leaving the incubators.
    with the goal to ultimately launch a new business. The program has
                                                                                                                 By the end of 2008, the total cumulative private investment in
    been underway since 1991 and is administered by the Office of the
                                                                                                                 “graduate” incubator companies was more than $2.5 billion
    Chief Scientist of Israel’s Ministry of Industry, Trade and Labor (OCS).
                                                                                                                 (see chart below).
    The incubators assist entrepreneurs at every level of development.
                                                                                                                 Last year, 57 startups graduated from the incubators,
    They nurture them at the earliest stage of technological innovation,
                                                                                                                 68 percent of which have attracted private investments.
    helping them to implement their ideas by turning them into
    exportable commercial products and forming productive business                                               In recent years, incubator projects have successfully been able to
    ventures in Israel.                                                                                          raise more than twice the initial investment made by the govern-
                                                                                                                 ment, within two years of their admittance into the incubators
    By absorbing a large portion of the risk in the early stage, when
                                                                                                                 (Round A Funds as shown in chart on facing page).
    commercial money plays a minor role, the technological incubators
    provide entrepreneurs with facilities, financial resources, tools, pro-                                      However, without the government’s initial investments in these
    fessional guidance and administrative assistance. During their stay                                          start-ups , the projects would never have gotten off the ground and
    in the incubator, the entrepreneurs may turn their abstract ideas into                                       the private investments that they have successfully attracted would
    products that are marketable in the international marketplace.                                               have been directed elsewhere, if at all.
    There are 24 technological incubators in Israel today. Out of these,                                         The technological incubators have become massive repositories of
    15 are located in peripheral areas. One incubator was established                                            ideas for the establishment of high technology venture companies.
    specifically to develop biotechnology.                                                                       It is well known that the incubator program is the number one
                                                                                                                 manufacturer of start-ups in Israel today, establishing more than
    Approximately 200 projects in various stages of research and devel-
                                                                                                                 70 new start-ups each year. The program has positioned itself as
    opment are being carried out in the technological incubators at any
                                                                                                                 an important source of deal flow for the venture capital industry
    given time. By the end of 2008, more than 1,200 projects had
                                                                                                                 that is constantly searching for new technologies in which to
    matured and left the incubators. Of these, 59 percent successfully
                                                                                                                 invest.


     Accumulating Government Investment Vs. Private Funds Raised in Incubator Companies 1991-2008 ($ in Thousands)

     (Dollars in Thousands)                                                            State Grants                      Private Investments
     $3,000,000


     $2,500,000


     $2,000,000



     $1,500,000



     $1,000,000



        $500,000


                  $0
                         1991      1992 1993 1994                 1995 1996           1997       1998 1999 2000 2001 2002 2003 2004 2005                      2006 2007     2008
     Source: The Israeli Incubators Program, Office of the Chief Scientist of Israel's Ministry of Industry and Trade




6   July 2009                                                                                                                           SHEKEL: Economic and Financial Trends in Israel
MAAYAN VENTURES – INCUBATOR SUCCESS STORY


                                                                                                          As of March 2009, Maayan manages a portfolio of 55 companies in

T
       he Maayan Ventures incubator was established in 1990 and
       privatized in 2003. The incubator, located in Omer (Israel’s                                       various fields including medical devices, communications, IT,
       Negev region), at first managed only five portfolio compa-                                         materials, cleantech and homeland security solutions.
nies and was relatively unknown. In late 2005, Maayan Ventures                                            Maayan is not a VC fund and does not compete with VCs, but
became the first incubator to be traded on the Tel Aviv Stock                                             instead provides the missing “layer” between the technological
Exchange (TASE).                                                                                          ideas and the phase in which a start-up becomes interesting for
In July 2006, Maayan expanded its outreach by acquiring the ATC                                           VCs. Maayan’s willingness to remain with the companies in later
incubator in Dimona, now called Rotem Ventures, and in December                                           stages gives the entrepreneurs a feeling of security, knowing that
of that year, also purchased the Am-Shav Incubator in Sde-Boker,                                          someone is looking after them. This significantly impacts the com-
now known as Iris Ventures.                                                                               panies’ value and ability to raise funds.
The combination of the three incubators has made Maayan                                                   Maayan Ventures is proud of its best-of-breed portfolio companies.
Ventures into the largest incubator in Israel. It provides the portfo-                                    The combination of outstanding entrepreneurs with Maayan’s
lio companies with unparalleled financial strength and strategic                                          hands-on support makes its portfolio companies stand out. Early
connections.                                                                                              investments increase the chance of significant ROI.
By joining Maayan Ventures, technology start-ups benefit from                                             Maayan’s unique deal flow generates more than 400 opportunities
financial investment, business tools, and the support services                                            annually. These lead to an investment in 10-15 new companies
essential for their ventures’ success. Working in cooperation with                                        every year. Deal flow sources include: a referral, leading VCs, uni-
the Office of the Chief Scientist within Israel’s Ministry of Industry                                    versity technology transfer companies, patent attorneys, and
and Trade, Maayan Ventures invests during the entry stage, provid-                                        Maayan investors.
ing start-ups with the security that comes from knowing that the                                          The Israel government realized the potential of early stage invest-
support will be there when they need it the most. Maayan Ventures                                         ments and established the incubator program. The incubators, with
also has the financial resources to reinvest in its portfolio compa-                                      Maayan in the lead, were willing to take the early stage risk. They
nies during future rounds.                                                                                constantly plant seeds of innovation and nurture them as they grow
Maayan also aims to attract promising entrepreneurs and start-ups to                                      into promising new technologies. Today, there is ample proof as to
the Negev region. Maayan is located in the heart of the Negev desert,                                     the accuracy of this vision. It remains extremely valuable to the
helping to promote the area as an ideal financial environment. The                                        State of Israel, to the entrepreneurs, to the incubators and to all of
goal is that the Negev will become economically attractive for indus-                                     the investors involved.
try and investments, while drawing high-profile residents.



 Government Investments Vs. Private Funds Raised in Incubator Companies by Year 1991-2008 ($ in Thousands)

 (Dollars in Thousands)                                                State Grants                  First Round              Total Investment
 $500,000



 $400,000



 $300,000



 $200,000



 $100,000



            $0
                      1991      1992      1993      1994      1995      1996      1997      1998      1999      2000   2001    2002    2003      2004   2005   2006   2007   2008
   Source: The Israeli Incubators Program, Office of the Chief Scientist of Israel's Ministry of Industry and Trade




SHEKEL: Economic and Financial Trends in Israel                                                                                                                              July 2009 7
8    July 2009                                                                                               SHEKEL: Economic and Financial Trends in Israel


  National Account, 2006-2009 (Seasonally Adjusted)
  Rate of Change (Annual Terms, Percent), Compared with Preceding Period


                                                                                                                           2008                     2009
                                                                          2006        2007    2008             I          II         III      IV         I

  GDP                                                                           5.2    5.4       4.0        5.6         3.4        0.7      -1.6     -3.9

  GDP per Capita                                                                3.3    3.5       2.1        3.7         1.8        -1.1     -3.4     -5.6

  Business Sector Product                                                       6.4    6.2       4.4        6.5         3.7        0.3      -2.4     -5.4

  Private Consumption                                                           2.1    4.8       2.0      10.0          -0.7       0.1      -4.3     -3.4

  Public Consumption                                                            2.7    2.9       2.8      14.5          -6.6       3.7      3.4      -7.1

  Fixed Capital Formation                                                       9.9   15.5       5.1      13.0          -0.7      -10.6     -0.3    -14.9

  Exports                                                                       6.1    8.5       3.0      22.5         -11.7       -5.0    -46.0    -37.0

  Imports                                                                       3.6   11.7       2.2      19.4         -11.6      -10.1    -28.3    -41.3

  Source: Central Bureau of Statistics



   Web Sites of Interest                                                                 Israel Ministry of Industry, Trade & Labor:
                                                                                         http://www.moit.gov.il
   Bank of Israel:
                                                                                         Israel Ministry of Tourism:
   http://www.bankisrael.gov.il/firsteng.htm
                                                                                         http://www.goisrael.com
   Central Bureau of Statistics:
                                                                                         Israel Science and Technology Home Page:
   http://www.cbs.gov.il/engindex.htm
                                                                                         http://www.science.co.il
   Dun & Bradstreet’s Israel:
                                                                                         Israel Venture Association:
   http://www.dundb.co.il/english/index.asp
                                                                                         http://www.iva.co.il
   Investment Promotion Center:
                                                                                         Israel Venture Capital Research Center:
   http://www.investinisrael.gov.il
                                                                                         http://www.ivc-online.com
   Israel Economic Mission:
                                                                                         MATIMOP: Israeli Industry Center for R&D:
   http://www.israeleconomicmission.com
                                                                                         http://www.matimop.org.il
   Israel Government Portal:
                                                                                         Standard & Poor’s Israel:
   http://www.israel.gov.il/firstgov/english
                                                                                         http://www.standardpoors.co.il
   Israel Ministry of Finance:
                                                                                         State of Israel Bonds Organization:
   http://www.mof.gov.il/mainpage_eng.asp
                                                                                         http://www.israelbonds.com
   Israel Ministry of Foreign Affairs:
                                                                                         Tel Aviv Stock Exchange:
   www.mfa.gov.il/mfa
                                                                                         http://www.tase.co.il/taseeng/homepage.htm



                                                                                         Published by the Government of Israel Economic Mission
                                                                                         Ministry of Finance
                                                                                         800 Second Avenue
                                                                                         New York, NY 10017
E C O N O M I C   A N D   F I N A N C I A L   T R E N D S   I N   I S R A E L




 This publication includes the opinions, estimates and projections of the various authors and not of the Government of Israel Economic Mission,
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Shekel July 2009

  • 1. J U LY 2009 E C O N O M I C A N D F I N A N C I A L T R E N D S I N I S R A E L Published by the Overview Government of Israel Economic Mission Ministry of Finance • Amid the economic turbulence, the Government of Israel returned to the Global Bond market in what the IFR called “spectacular fashion.” The originally planned $0.5 billion grew to $1.5 billion with orders from more than 300 different investors. This was the largest and most diverse Israeli deal. EDI TORS: Tamar Roth-Drach • Israel was reclassified as a developed market by MSCI Barra. The change means that (212) 499-5727 Israel will now be included in some of the most important global equity indices. It is also tamard@emus.gov.il an acknowledgement of the achievements of Israel’s economy. Beth Belkin • The IMF and the Central Bank of Israel expect that Israel’s economy will shrink approximately 1.5 percent by the end of 2009 and return to positive economic growth of approximately 0.5 percent in 2010. • The pace of the monthly slowdown in the Economic Composite Index is declining, which could mean that the economic downturn may be approaching its bottom. • During the first quarter, total industrial production fell by 6.4 percent. In contrast, Israel’s pure high technology industries were relatively strong, as they recorded a 5.7 percent increase in revenues during the first quarter. • Despite the recent downturn in the global economy, the drop in exports of goods and services, and the slowdown in tourism, Israel’s current account balance had a surplus of $2.7 billion in the first quarter of 2009 and is expected to remain positive by the end of the year, according to the IMF. • During the first quarter of 2009, the unemployment rate rose to 7.6 percent. This rate increase is a result of cutbacks in jobs and an increase in the number of participants in the labor force. The labor force participation rate increased from 56.5 percent in the fourth quarter of 2008 to 56.8 percent in the first quarter of 2009. • In an attempt to address the effects of the slowdown in the economy, the Bank of Israel gradually cut the interest rate from 4 percent at the beginning of the last quarter of 2008 to 0.5 percent in June 2009. • Following a 46 percent decline in 2008, the TA-25 Index has risen 25 percent in 2009. • The government initiated several stimulus packages to address the tough economic situation. The latest stimulus plan will expand guarantees for the banking system, create new funds for mid-size businesses and exporters, further institute negative income tax, reduce the number of foreign workers, implement structural reforms and increase invest- ments in infrastructure.
  • 2. Editor’s Review On the Road to Recovery 1 Amid the economic turbulence, the Government of Israel returned to State of the Economy Composite Index the Global Bond market in what the IFR called “spectacular fash- (Monthly Percent of Change) ion.” The originally planned $0.5 billion offering grew to $1.5 bil- lion with orders from more than 300 institutional investors. This was 2.0% - the largest and most diverse Israeli deal. Judging at the economic 1.38% - 1.5% - data, it is easy to understand this success. 1.23% 1.13% - - 1.0% It is true that according to the formal economic definitions and as .76% - reflected in the national accounts data, the Israeli economy has .35% - 0.5% been in a recession during the past two quarters. But more recent .19% - .01% - economic indicators portend the beginning of an economic recovery. 0.0% —.24% During the fourth quarter of 2008 and the first quarter of 2009, -0.5% —.28% Israel’s export-led economy felt the brunt of the global recession, —.60% —.66% —.72% as its GDP declined by 1.6 percent and 3.9 percent, respectively. -1.0% —.90% The business sector was similarly affected, declining 2.4 percent —1.23% —1.29% -1.5% and 5.4 percent in the last quarter of 2008 and the first quarter —1.54% Decrease in the of 2009. -2.0% Pace of Slowdown Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr As the world’s economy slowed and international demand 2008 2009 dropped, Israel’s exports for 2009 fell 37 percent during the first quarter of 2009. The drop in the demand for Israeli exports and Source: The Bank of Israel the contraction in the economy had a negative impact on internal domestic consumption. During that quarter, private consumption The tourism sector experienced a difficult first quarter in 2009, fell 3.4 percent and public consumption declined by 7.1 percent. especially when compared to 2008 when a record of more than At the same time, fixed capital formation (housing and industrial three million visitors came to Israel. Clearly, the global credit infrastructure projects) was also negatively affected, declining by crunch and the military operation in Gaza at the beginning of 14.9 percent. This decline also shows up in Israelis' demand for the year kept tourists away. During the period of January foreign goods and services, as imports dropped by 41.3 percent through April, only 736 thousand visitors entered the country, in the first quarter. which is a decline of 22 percent when compared with the corre- The IMF and the Central Bank of Israel expect that Israel’s econ- sponding period in 2008. omy will shrink (by 1.7 percent and 1.5 percent respectively) by Despite the recent downturn in the global economy Israel’s cur- the end of 2009. But the good news is that forecasters are expect- rent account balance had a $2.7 billion surplus in the first ing Israel to return to positive economic growth of about 0.5 per- quarter of 2009 and is still expected to remain positive. Indeed, cent in 2010. the IMF predicts that at the end of the year the current account The Economy Composite Index, which reflects the activity level surplus will reach 1.14 percent of GDP. of various sectors of the Israeli economy, also showed weakness. In terms of the labor force, Israel ended 2008 with an unem- However, there is a silver lining in this statistic. Although it fell ployment rate of 6.1 percent compared with 7.3 percent at the 3.83 percent during the January–April period, the pace of the end of 2007. During the first quarter of this year, the unem- monthly slowdown in the Economic Composite Index is declin- ployment rate rose to 7.6 percent. This rate increase is a result ing, which could mean that the economic downturn may be of both cutbacks in jobs and a positive increase in the number approaching its bottom. of participants in the labor force. The labor force participation During the first quarter, total industrial production fell by 6.4 rate increased from 56.5 percent in the fourth quarter of 2008 percent. That decline was mostly a function of the 27.7 percent to 56.8 percent in the first quarter of 2009. drop in semitraditional industries and semi high technology While economic activity was trending down, consumer prices industries. In contrast, Israel’s pure high technology industries turned slightly higher. Following a drop of 0.6 percent in the were relatively strong, as they recorded a 5.7 percent increase in CPI during the fourth quarter of 2008, 2009 began with another revenues during the first quarter. drop of 0.6 percent in January-February. Nevertheless, in 2 July 2009 SHEKEL: Economic and Financial Trends in Israel
  • 3. Current Account Balance as Percentage of GDP (2009 Forecast for Advanced Economies) 15% 10% 5% 0% France Iceland Finland Israel Austria Japan Germany Netherlands Korea Sweden Hong Switzerland Luxembourg Taiwan Kong Norway Singapore Province Canada Denmark SAR of China United Czech Belgium Kingdom Italy United Ireland States Republic Slovenia -5% Slovak Spain Malta Australia Republic New Zealand Portugal -10% Cyprus Greece -15% Source: International Monetary Fund, World Economic Outlook Database, April 2009 March, April and May prices went up by 1.9 percent. As of Amid the economic turbulence, a new government has been now, total inflation for the year is 1.2 percent and the inflation established and a new economic plan has been introduced. for the past twelve months is 2.8 percent. These changes are The Ministry of Finance has chosen a two-pronged approach in line with market expectations and are forecasted to contin- for dealing with the tough economic situation. Its first step is ue. a proposed biennial budget, which will stabilize 2009- 2010 fiscal years by fixing expenses for the two-year period and The Central Bank expects inflation to end the year within the eliminate the need to present a new budget next year. The 1-3 percent target range set by the government. Some of the budget includes a 3.05 percent rise in expenses for the years change in the CPI is attributed to actions taken by the Central 2009-2010 and deficit ceilings of 6 percent and 5.5 percent Bank. In an attempt to address the effects of the slowdown in of GDP in 2009 and 2010 respectively. Expenses will the economy, the Bank of Israel gradually cut the interest rate increase by only 1.7 percent per year in 2011. The proposed from 4 percent at the beginning of the last quarter of 2008 to budget will be handed to the Knesset for final approval in 0.5 percent in June 2009. The cuts were meant to increase July. The second step is the initiation of a multi folds stimu- economic activity by reducing the cost of credit. In addition, lus package to support the market and arouse business the Bank of Israel continued to purchase U.S. Dollars in an activity. The latest stimulus plan will expand guarantees for attempt to increase its foreign currency reserve. That action the banking system, create new funds for mid-size business- also served to stabilize foreign exchange markets. Last but not es and exporters, further institute negative income tax, least, the Central Bank has recently started buying govern- reduce the number of foreign workers, implement structural ment bonds in the open markets to preserve their value. Since reforms and increase investments in infrastructure. The gov- this has begun to be implemented only recently, time will ernment declared that it is committed to returning to a low show its true impact. level of expenditure and reducing the budget deficit after Like the equities market in the United States, the Tel Aviv the economic recovery. Stock Exchange was driven in the last couple of months by Ben Gurion once said that “in Israel, you are not a realist if winds of optimism blowing around the globe. Following a 46 you don’t believe in miracles.” It seems that although we percent decline in 2008, the TA-25 Index has risen approxi- have been hit by the global economic crisis, we will not mately 33 percent in 2009. As investors grew more confident need miracles since we are already on the path to recovery. in the performance of the economy, they returned to the stock market. SHEKEL: Economic and Financial Trends in Israel July 2009 3
  • 4. Public Private Partnership Projects in Israel An Efficient Way to Execute Infrastructure Projects Uzi Levin, Head of PPP Projects Division; Efrat Shriki, Coordinator, PPP Projects Division; Marc Hanhart and Adi Van Velsen, Project Managers, PPP Projects Division, Ministry of Finance The execution of governmental projects in Israel, in partner- A key factor for successful execution of PPP projects is to ship with the private sector (PPP projects), started some 15 achieve an optimal risk allocation between the private and years ago. In the last seven years, the use of this method for the public sectors. Each sector should be responsible for executing major infrastructure projects has developed the risks it can better cope with. The public sector will significantly. typically be responsible for land acquisition, for discrimi- natory changes in laws and legislation, and for political The first projects executed were in the transportation and water risks. Market-demand risks and force majeure risks are sectors. Additional projects in the construction and energy fields shared risks. are also currently being executed. Over the last few years the Government of Israel has intro- The table on the facing page illustrates the current list of major duced changes in the tender policy in order to facilitate the PPP governmental projects by sectors. implementation of the projects and to shorten the time frame between the financial close and the start of construc- The Government of Israel envisions that investment in infra- tion of the projects: unified accounting principles, easing structure will encourage economic growth, the private sector’s of tax treatment, market interest rate change protection, involvement will improve the level of government supplied ser- various indexation and protection options being granted to vices, and that optimizing the risks allocation between the pub- concessionaires. An option to refinance after completion of lic and the private sectors will contribute to public wealth. the construction phase is also granted in order to encour- age institutional investors to participate in the long- term The infrastructure projects executed in Israel have already financing of the projects. reached a significant volume of $9 billion. The Government of Israel has also taken steps to encour- Out of this total figure, the transportation sector represents age participation of foreign investors (bidders and lenders) about 70 percent; energy, 15 percent; water, 11 percent; and in the execution of PPP projects: interest rate change pro- construction, 4 percent. tection for foreign currency denominated loans (Dollars Some of the significant projects include: and Euros), foreign currency exchange rate protection, and • A project for water desalination located in the Sorek estuary; payment to the concessionaire in foreign currency (Dollars this facility will produce 150 million m3 per year; and Euros). • The construction of three solar power plants (thermo-solar and In a number of projects, foreign entities are involved as photovoltaic) in Ashalim; members of the bidding groups, as subcontractors, or as • A central and advanced police training center in the city of part of the financing institutions. For instance, foreign Bet Shemesh; banks have taken the lead for the financing (in Euros) of • Metropolitan highways to Tel Aviv (431, 531); the Hadera desalination plant. • Cross Israel Highway that connects the south and north of Israel (Route 6); The following is a brief summary of PPP activity in the • The Carmel Tunnels; energy field: • A private prison facility. The state of Israel is seeking to enlarge its diversity of The state of Israel also expects to launch additional infrastruc- energy sources, especially in the field of renewable energy ture projects, focusing on renewable energy and environmental for two main reasons: to reduce environmental damage and protection. energy independence. 4 July 2009 SHEKEL: Economic and Financial Trends in Israel
  • 5. Energy and Water Transport Construction Solar Energy Light Rail Trains Health • Negev Thermal Plants • Jerusalem LRT • Ashdod Hospital • Negev Photovoltaic Plant • Tel Aviv Metropolitan • Liquid Natural Gas LRT-Metro Water Desalination Roads Security • Ashkelon Plant • Cross Israel Highway • Beer Sheva Prison • Palmachim Plant • Haifa Carmel Tunnels • National Training Center for • Hadera Plant • Highway 431 Police Forces • Sorek Plant • Highway 531 • Negev Army Training Bases City • Ashdod Plant • Tel Aviv Fast Lane • Rehabilitation, O&M of Existing Roads Network Therefore, the government instituted a policy, that would In December 2008, 17 groups passed the pre-qualification require the electricity producers to increase their use of stage (ten groups in the photovoltaic tender and seven groups alternative energy. By the year 2020, 10 percent of Israel’s in the thermo solar tender). The tender documents were pub- electricity will come from renewable energy. lished in the first quarter of 2009. As part of this governmental policy, in September 2007, the The Division for Public Private Partnership Projects acts on Israel Government decided to construct three power plants behalf of the Ministry of Finance in the execution of PPP pro- near Ashalim in the Negev, for a total production capacity of jects. It is responsible for managing, coordinating, planning 250 Mega Watts. The complex consists of two thermo-solar and executing the tender process until the concessionaire is power plants, capable of producing from 80 to 110 Mega selected supervising the activities vis a vis the concessionaire Watts, and a photovoltaic power plant capable of producing and its financing partners until the financial close is reached, 15 Mega Watts (the state shall be entitled, as per its option, and coordinating the activities of the implementing authority to instruct the wining bidder to extend the production up to during the operation phase of the projects (supervision of the 30 Mega Watts). execution of the concession agreement). This policy will be executed by three separate international The main goals behind the creation of the PPP division were BOT tenders, in which the concessionaire plans, constructs, to build a professional entity for PPP activity in Israel aimed operates and maintains each solar power plant. Upon termi- at making the tender process as efficient and simple as possi- nation of the operation term (25 years) the power plants will ble, to have a leading force in the implementation of the con- be transferred from the concessionaire to the state. Each of cession agreement, and to set standards for PPP activity in the concessionaires will be granted an electricity production Israel in conjunction with governmental authorities, the pri- license for the operation of the solar plant, in accordance vate business sector and financial institutions. with the Israeli Electricity Economy Law of 1996, with all the considerations aside. The direct link to PPP projects in the Accountant General’s office of the Ministry of Finance is http://ppp.mof.gov.il/Mof/PPP/MofPPPTopNav/MofPPPProjects/ SHEKEL: Economic and Financial Trends in Israel July 2009 5
  • 6. The Israeli Incubator Experience – Innovative Success Yifat Leibovich, Vice President Operations, Maayan Ventures Ltd. Technological incubators in Israel are support organizations that give attracted private investment. Forty percent of the companies are fledgling entrepreneurs an opportunity to develop their innovative ideas still in operation since leaving the incubators. with the goal to ultimately launch a new business. The program has By the end of 2008, the total cumulative private investment in been underway since 1991 and is administered by the Office of the “graduate” incubator companies was more than $2.5 billion Chief Scientist of Israel’s Ministry of Industry, Trade and Labor (OCS). (see chart below). The incubators assist entrepreneurs at every level of development. Last year, 57 startups graduated from the incubators, They nurture them at the earliest stage of technological innovation, 68 percent of which have attracted private investments. helping them to implement their ideas by turning them into exportable commercial products and forming productive business In recent years, incubator projects have successfully been able to ventures in Israel. raise more than twice the initial investment made by the govern- ment, within two years of their admittance into the incubators By absorbing a large portion of the risk in the early stage, when (Round A Funds as shown in chart on facing page). commercial money plays a minor role, the technological incubators provide entrepreneurs with facilities, financial resources, tools, pro- However, without the government’s initial investments in these fessional guidance and administrative assistance. During their stay start-ups , the projects would never have gotten off the ground and in the incubator, the entrepreneurs may turn their abstract ideas into the private investments that they have successfully attracted would products that are marketable in the international marketplace. have been directed elsewhere, if at all. There are 24 technological incubators in Israel today. Out of these, The technological incubators have become massive repositories of 15 are located in peripheral areas. One incubator was established ideas for the establishment of high technology venture companies. specifically to develop biotechnology. It is well known that the incubator program is the number one manufacturer of start-ups in Israel today, establishing more than Approximately 200 projects in various stages of research and devel- 70 new start-ups each year. The program has positioned itself as opment are being carried out in the technological incubators at any an important source of deal flow for the venture capital industry given time. By the end of 2008, more than 1,200 projects had that is constantly searching for new technologies in which to matured and left the incubators. Of these, 59 percent successfully invest. Accumulating Government Investment Vs. Private Funds Raised in Incubator Companies 1991-2008 ($ in Thousands) (Dollars in Thousands) State Grants Private Investments $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: The Israeli Incubators Program, Office of the Chief Scientist of Israel's Ministry of Industry and Trade 6 July 2009 SHEKEL: Economic and Financial Trends in Israel
  • 7. MAAYAN VENTURES – INCUBATOR SUCCESS STORY As of March 2009, Maayan manages a portfolio of 55 companies in T he Maayan Ventures incubator was established in 1990 and privatized in 2003. The incubator, located in Omer (Israel’s various fields including medical devices, communications, IT, Negev region), at first managed only five portfolio compa- materials, cleantech and homeland security solutions. nies and was relatively unknown. In late 2005, Maayan Ventures Maayan is not a VC fund and does not compete with VCs, but became the first incubator to be traded on the Tel Aviv Stock instead provides the missing “layer” between the technological Exchange (TASE). ideas and the phase in which a start-up becomes interesting for In July 2006, Maayan expanded its outreach by acquiring the ATC VCs. Maayan’s willingness to remain with the companies in later incubator in Dimona, now called Rotem Ventures, and in December stages gives the entrepreneurs a feeling of security, knowing that of that year, also purchased the Am-Shav Incubator in Sde-Boker, someone is looking after them. This significantly impacts the com- now known as Iris Ventures. panies’ value and ability to raise funds. The combination of the three incubators has made Maayan Maayan Ventures is proud of its best-of-breed portfolio companies. Ventures into the largest incubator in Israel. It provides the portfo- The combination of outstanding entrepreneurs with Maayan’s lio companies with unparalleled financial strength and strategic hands-on support makes its portfolio companies stand out. Early connections. investments increase the chance of significant ROI. By joining Maayan Ventures, technology start-ups benefit from Maayan’s unique deal flow generates more than 400 opportunities financial investment, business tools, and the support services annually. These lead to an investment in 10-15 new companies essential for their ventures’ success. Working in cooperation with every year. Deal flow sources include: a referral, leading VCs, uni- the Office of the Chief Scientist within Israel’s Ministry of Industry versity technology transfer companies, patent attorneys, and and Trade, Maayan Ventures invests during the entry stage, provid- Maayan investors. ing start-ups with the security that comes from knowing that the The Israel government realized the potential of early stage invest- support will be there when they need it the most. Maayan Ventures ments and established the incubator program. The incubators, with also has the financial resources to reinvest in its portfolio compa- Maayan in the lead, were willing to take the early stage risk. They nies during future rounds. constantly plant seeds of innovation and nurture them as they grow Maayan also aims to attract promising entrepreneurs and start-ups to into promising new technologies. Today, there is ample proof as to the Negev region. Maayan is located in the heart of the Negev desert, the accuracy of this vision. It remains extremely valuable to the helping to promote the area as an ideal financial environment. The State of Israel, to the entrepreneurs, to the incubators and to all of goal is that the Negev will become economically attractive for indus- the investors involved. try and investments, while drawing high-profile residents. Government Investments Vs. Private Funds Raised in Incubator Companies by Year 1991-2008 ($ in Thousands) (Dollars in Thousands) State Grants First Round Total Investment $500,000 $400,000 $300,000 $200,000 $100,000 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: The Israeli Incubators Program, Office of the Chief Scientist of Israel's Ministry of Industry and Trade SHEKEL: Economic and Financial Trends in Israel July 2009 7
  • 8. 8 July 2009 SHEKEL: Economic and Financial Trends in Israel National Account, 2006-2009 (Seasonally Adjusted) Rate of Change (Annual Terms, Percent), Compared with Preceding Period 2008 2009 2006 2007 2008 I II III IV I GDP 5.2 5.4 4.0 5.6 3.4 0.7 -1.6 -3.9 GDP per Capita 3.3 3.5 2.1 3.7 1.8 -1.1 -3.4 -5.6 Business Sector Product 6.4 6.2 4.4 6.5 3.7 0.3 -2.4 -5.4 Private Consumption 2.1 4.8 2.0 10.0 -0.7 0.1 -4.3 -3.4 Public Consumption 2.7 2.9 2.8 14.5 -6.6 3.7 3.4 -7.1 Fixed Capital Formation 9.9 15.5 5.1 13.0 -0.7 -10.6 -0.3 -14.9 Exports 6.1 8.5 3.0 22.5 -11.7 -5.0 -46.0 -37.0 Imports 3.6 11.7 2.2 19.4 -11.6 -10.1 -28.3 -41.3 Source: Central Bureau of Statistics Web Sites of Interest Israel Ministry of Industry, Trade & Labor: http://www.moit.gov.il Bank of Israel: Israel Ministry of Tourism: http://www.bankisrael.gov.il/firsteng.htm http://www.goisrael.com Central Bureau of Statistics: Israel Science and Technology Home Page: http://www.cbs.gov.il/engindex.htm http://www.science.co.il Dun & Bradstreet’s Israel: Israel Venture Association: http://www.dundb.co.il/english/index.asp http://www.iva.co.il Investment Promotion Center: Israel Venture Capital Research Center: http://www.investinisrael.gov.il http://www.ivc-online.com Israel Economic Mission: MATIMOP: Israeli Industry Center for R&D: http://www.israeleconomicmission.com http://www.matimop.org.il Israel Government Portal: Standard & Poor’s Israel: http://www.israel.gov.il/firstgov/english http://www.standardpoors.co.il Israel Ministry of Finance: State of Israel Bonds Organization: http://www.mof.gov.il/mainpage_eng.asp http://www.israelbonds.com Israel Ministry of Foreign Affairs: Tel Aviv Stock Exchange: www.mfa.gov.il/mfa http://www.tase.co.il/taseeng/homepage.htm Published by the Government of Israel Economic Mission Ministry of Finance 800 Second Avenue New York, NY 10017 E C O N O M I C A N D F I N A N C I A L T R E N D S I N I S R A E L This publication includes the opinions, estimates and projections of the various authors and not of the Government of Israel Economic Mission, Ministry of Finance. The reports are for information purposes only and are not intended as an offer, solicitation or recommendation with respect to the purchase or sale of any security. The publisher does not guarantee the accuracy or completeness of the provided information and shall not be liable for any errors or omissions therein. Readers should consult and rely on their own advisors for all pertinent investment, legal and accounting issues.