Why Invest in Israel?
Top scores on global indexes of economic competitiveness, a striking concentration of innovative people, a culture that promotes experimentation and daring, and governmental eagerness to create supportive conditions for investors combine to make Israel a leading site of investment far beyond what its small size and short history might suggest. An entrepreneurial powerhouse, Israel is a hotbed of pioneering technologies, profitable business opportunities, and high investment returns. That’s why the world’s leading multinational companies have all made the choice for Israel. Microsoft, Motorola, Google, Apple, Facebook, Berkshire-Hathaway, Intel, HP, Siemens, GE, IBM, Philips, Lucent, AOL, Cisco, Applied Materials, IBM, J&J, EMC, and Toshiba spark the long list of over 200 MNCs who have realized that Israel is their ideal choice for investment. The reasons that Israel is the preferred spot of multinationals for business are endless. Here, we’ve sketched out the top ten.
1. The Innovation Capital
Ranked 1st in the world for innovative capacity by the IMD Global Competitiveness Yearbook 2013 and 3rd for innovation globally out of 148 economies by the WEF Global Competitiveness Yearbook 2013-2014, Israel’s modest size is clearly no barrier to its remarkable accomplishments. Leading on so many of the most critical parameters of competitiveness, it is no wonder that Israel has captured the protracted attention of the global investment community. The IMD Global Competitiveness Yearbook 2013 ranks it 1st for business expenditure on R&D, 1st for total expenditure on R&D, 1st for scientific research, 1st for public and private sector ventures, 1st for total expenditure on education, 1st for the development and application of technology, 1st for cyber security, 1st for information technology skills, and 1st for innovative capacity. Dominating on so many of the critical indicators of competitiveness, Israel has clearly earned its growing reputation as the global innovation capital.
2. The Thriving Entrepreneurial Spirit
Ranked 1st in the world for innovative capacity and 2nd in the world for entrepreneurship (IMD Global Competitiveness Yearbook, 2013) Israel is highly regarded across the globe for its thriving entrepreneurial spirit, which enables it to swiftly transform burgeoning start-ups into profitable and competitive companies. In fact, apart from Silicon Valley, the highest concentration of high-tech companies in the world is found in Israel. The number two startup ecosystem — ahead of NYC, LA, Seattle, Boston, and London — Israel’s 4,000 start-up companies produce innovations and offer solutions to some of the most pressing global challenges. In fact, in 2009, 63 Israeli companies were listed on the tech-orientated NASDAQ, more than from Europe, Japan, Korea, India, and China combined. Of Israel’s 230,000 hi-tech workers, 39% work in the R&D departments of multinational companies, no surprise given that so many leading companies have chosen Israel as the site for investment and development. (Source: The Startup Ecosystem Report 2012).
3. The Exceptional Workforce
Israel’s creative, skilled, and ambitious workforce is one of the most obvious reasons leading executives turn to Israel to do business. In fact, Israel boasts one of the most highly educated, entrepreneurial, and multi-cultural workforces in the world, producing technologies, innovations, and research adopted around the globe and across sectors.
Israel’s resourceful, motivated and independent workforce is particularly competitive because of its informal but effective get-down-to-business culture, exceptional ingenuity and entrepreneurial spirit. The combination of culture, skill, and initiative creates a flexible working system that allows for maximal adaptability while producing breakthrough technologies and quick time-to-market solutions. In an overarching organizational climate of boldness, experimentation and independent thinking are naturally rewarded, resulting in the types of breakthroughs for which Israel is famous.
Israel’s minority communities, including its Arab and ultra-Orthodox populations, are emerging today as one of its valuable — and still largely untapped — resources. Special government programs are nurturing the high levels of creative and technical talent evident within these groups and investors are finding in them rewarding solutions to their outsourcing and staffing needs.
4. Scientific Excellence, Industrial Profit
The quality of Israel’s workforce is naturally reflected in the quality of its scientific institutions, ranked 1st in the world for their quality (WEF Global Competitiveness Yearbook, 2013-2014). Although it is a young country, comprised largely of immigrants and descendents of immigrants, Israel’s scientific and technological infrastructure outperforms almost every other country. In fact, it ranks 3rd for its scientific infrastructure, and 4th for its technological infrastructure (IMD 2013). Complimented by an unusually high availability of scientists and engineers (Ranked 8th in the 2013-2014 WEF Global Competitiveness Yearbook), Israel’s scientific excellence makes it a preferred spot for leading multinationals to establish R&D centers.
Given the quality of its institutions and infrastructure, Israel’s citizens are naturally found at the fore of cutting edge research, both within Israel’s own institutions of excellence and at some of the top universities globally. Ranked 5th in the world for patent filings per capita (2013-2014 WEF Global Competitiveness Yearbook), Israelis are behind a string of innovations across sectors and industries, including in medical equipment patenting, where Israel leads the world in patent registrations.
Furthermore, over the past decade, Israel, with a population of just 7.9 million, has produced eight Nobel laureates, including six in chemistry. Daniel Shechtman received the honor in 2010 for his discovery of quasicrystals, Ada Yonath in 2009, for her demonstration of ribosome functions, while mathematician Robert J. Aumann received the 2005 Nobel Prize in Economics for explaining conflict and cooperation by means of game theory.
5. A Global Technological Leader
But Israeli innovations extend far beyond academia. In fact, Israel is a world leader in research collaboration between university and industry, ranked 1stin the world for knowledge transfer by IMD Global Competitiveness Yearbook 2013 and in the top 10 for collaboration between university and industry by WEF Global Competitiveness Yearbook 2013-2014. The close ties between academia, industry, and government enable scientific innovation to be swiftly translated into marketable products and profitable business initiatives, explaining how Israel reaches $25 billion in technological exports annually (Source: MIT Technological Review).
Israel invests heavily in education and research, expending 4.38% of its GDP into R&D, the highest percentage in the world (OECD Science, Technology and Industry Scoreboard 2013). Furthermore, through government agencies such as the Office of the Chief Scientist of the Ministry of Economy, a network of incubators for very-early-stage technology start-ups, as well as an active and alert private venture capital system, Israel provides extensive support for new ideas and technologies and assists the further development of more traditional industries. By maintaining strong scientific and technological infrastructure and leveraging the close links between academia, industry, and government, Israel produces innovation and technology that offers no trace of its tiny size.
6. A Flexible, Creative Economy
Flexibility and adaptability to change are widely considered primary factors affecting business performance. IMD’s world competitiveness index in fact places this parameter among the leading indexes of economic competitiveness. Creativity and flexibility are the fuel of innovation, and a high degree of responsiveness to changing business environments is crucial to thriving enterprises in today’s dynamic global market. Ranked 3rd for flexibility and adaptability by IMD 2013, Israel’s ability to swiftly translate market demands into organizational action, explains why Israel has consistently performed so strongly in the flexibility index and is broadly recognized as a capital of innovation.
7. A Flourishing Venture Capital Market
Israel’s thriving start-up industry is complimented by a flourishing venture capital market, which totals $1 billion (MIT Tech Review). The Word Economic Forum Global Competitiveness Yearbook 2013-2014 ranked Israel 8th for venture capital availability out of 148 economies, and the IMD 2013, 7th, remarkable given its small size. By far outperforming any other country in VC volume per capita (Wall Street Journal, 2013), Israel’s venture capital availability is a symbol of the breath of its innovative industries and of the highly efficient financial sector underpinning them. The thriving VC market further points to Israel’s highly developed local venture capital sector and significant annual foreign investment, and reflects its sound banking system and well-regulated securities exchange.
8. A Resilient Economy, Secure for Investors
A string of indexes suggesting Israeli economic resilience help ensure global investors feel secure about their investments in Israel. IMD 2013 ranks Israel 1st in the world for its central bank policy — the fourth year in a row that it leads in the top five — and 4th for the resilience of its economy, while WEF 2013-2014 ranks it 1st for annual percentage change of inflation and 6th for investor protection out of 148 economies.
The Israeli policy of removing barriers to trade and encouraging the movement of capital has served the economy extremely well. Israel is committed to openness as a strategic approach, while recognizing the importance of financial sector regulation, a strategy that has contributed to Israel’s impressive economic growth and its increased economic efficiency in recent years.
Sound macroeconomic strategy, coupled with the relatively conservative approach driving the Israeli banking sector’s strategic decisions, has fueled Israel’s strong economic performance, even as the global economy has contended with crippling economic slowdown. In fact, since 2004, Israel’s growth rate has exceeded the average growth rate of all advanced economies. In 2009, as most of the world experienced a decline in GDP, Israel experienced a 1.1% growth in it’s GDP. Its real GDP growth rate in the third quarter of 2013 had already leaped to 4.9% (source: Israeli Ministry of Finance).
9. The Richness of Diversity
Israel’s diversity and multi-culturalism extend naturally from the fact that its population consists of individuals with origins in over 100 different countries spanning five continents. In addition to Hebrew and Arabic, Israel’s two official languages, many Israelis are fluent in English, as well as a host of other languages, including French, German, Italian, Russian, Chinese, and Spanish. The richness of the tapestry of Israel’s different cultures not only makes Israel a fascinating place to visit and to do business, but also highlights one of the main attractive features of its workforce. A risk-taking and optimistic collective, it is only natural that it is the source of so much innovation.
10. The Support
Enshrined into its legislation through laws for the encouragement of capital and industrial R&D, the State of Israel seeks to offer maximally supportive conditions for companies seeking to invest in Israel.
Part of a slew of incentives and benefits, the State of Israel encourages international and local investment by offering conditional grants of up to 24% of tangible fixed assets, reduced tax rates, tax exemptions and other tax related benefits through the Law for the Encouragement of Capital Investments. In addition, Israel offers one of the world’s most advanced technological infrastructures along with the services required to conduct business efficiently and effectively. Israel boasts a sophisticated communications system, a reliable energy infrastructure, a well-developed transportation system with modern international gateways, protection of trademarks, patents, and other intellectual property, as well as a highly developed and transparent financial system and a legal system based on common and corporate law.