Israel Economy The Israel Export & International

Cooperation Institute

Israel’s Economy

Rapid Development of Technology &

Hi-Tech Industries

Export Oriented Growth

Entrepreneurial Culture (Start Up Nation)

High Skilled Human Resources

Main Characteristics

1985 2012

GDP per capita (us=100) 6,171 $ 31,480$

Inflation Rate (Year End) 470% 1.6%

Current Account Balance

(% of GDP) -5.8% -1.1%

Budget Balance

(% of GDP) -14.4% 4- %

Government Debt (% of GDP) 159.5% 73.4%

Israel Economy – Past & Present

Source: EIU

Since 2003, government debt has been on a consistent downward trend, only interrupted by the extraordinary circumstances surrounding the

2009 global economic crisis

Gross Public Debt (as % of GDP)

40

50

60

70

80

90

100

110

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

United States*

Israel

United Kingdom

U.S

U.K

Israel

Macro Economic indicators

Source: EIU, CBS, Bank of Israel

2012 2011 2010 2009 2008 2007 Criteria

242 243 218 195 202 167 GDP (B$ -at current market prices)

3.2% 4.7% 4.8% 0.8% 4.0% 5.5% GDP Real Growth rate (%)

31,480 30,160 28,850 27,710 27,850 26,660 GDP per Capita (PPP, $)

91 91 80 68 81 71 Exports of Goods & Services (B$)

92 92 76 63 84 74 Imports of Goods & Services (B$)

6.9% 6.7% 6.6% 7.5% 6.1% 7.3% Unemployment Rate (%)

1.6% 2.2% 2.7% 3.9% 3.8% 3.4% Inflation Rate (Year End)

World GDP Growth

Forecast

1.3

-2.3

3.9

2.6 2.1 2.3

-0.3

-3.1

2.4 1.8

2.3 2.1

0.2

-4.3

1.9 1.5

-0.5 -0.2

0.1

-3.6

2.9

1.8 1.4 1.4

4

0.8

4.8 4.6

3.2 3.5

-6

-4

-2

0

2

4

6

2008 2009 2010 2011 2012 2013

world

US

Euro area

OECD

Israel

Real GDP Growth 4-year average, end of period

(2008-2011)

Source: Ministry of Finance

0.3

3.6

Israel’s 4-year average growth rate is higher then most OECD members.

Source: Ministry of Finance

Israel’s Credit Ratings

Overseas Bonds Forecast

Domestic Bonds Term Rating Firm

Rating Rating

A1 Stable

A1 Long Moody's

P1 - Short

A+ Stable

AA- Long Standard & Poor's

A-1 A-1+ Short

A Stable

A+ Long Fitch

F1 - Short

4.25%

2.33%

0%

1%

2%

3%

4%

5%

6%

Israel is 1st in the OECD in expenditure on R&D (research & development) as %

of GDP, demonstrating innovation, development and creativity.

Expenditure on R&D

as % of GDP ,2010

Increased Multinational Presence in Israel Seeking Technology Innovation and Development

Source: Giza Venture Capital

Acquisitions By Leading Global Companies 2002-2011, (M$)

Source: Giza Venture Capital

Multinationals - Success Stories

Source: Giza Venture Capital

Israel’s Start-ups

Source: Giza Venture Capital

1.7

5.4

2.7

3.7

9.3

454

606 622

477

0

100

200

300

400

500

600

700

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2002-2004 2005-2007 2008-2009 2010-2011 2012*

M&A's of Israeli High-Tech Companies (Year Av.)

New Startups Established

(B$)

Israel’s Start-ups

Source: Giza Venture Capital

2.1

1.1

1.9

2.8

10.1

3.3 2.7 2.6

2.2

5.1

9.3

0

2

4

6

8

10

12

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

M&A's of Israeli High-Tech Companies (Year Av.)

(B$)

Source: Giza Venture Capital

Source: Giza Venture Capital

* Forecast , including total exports of goods exports to the PA and ongoing projects

Exports of goods and services

(1980-2012, in billions of $)

6 13

20

31 28 28 30 37 40 44

51 58

46 56

64 61

3

5

8

16 13 12

13

15 17

18

20

24

21

24

27 30

1980 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Services

Exports of goods and services used as major growth

engine in the economy - 30 years

North America

26%

Africa

3%

Latin America

5%

Asia and the Far East

21%

Europe

39%

B9.5$ B12$

B2.2$

B17.6$

B1.4$

Rest of World

6%

B3$ Despite the increased share of Asia and Latin America in recent years export

are still mainly directed to the U.S. and the EU

Distribution of exports by regional trade (2012)

* Exports of goods excluding diamonds

Low Tech Industries

5%

Hi-Tech Industries

48%

Med-Hi Tech Industries

32%

Med-Low Tech Industries

16%

Source: Central Bureau of Statistics

21 B$

2.1 B$

7.1 B$

14 B$

The Industrial Export by Sector

Export in 2012

In the past decade the industrial export was mainly affected by the rapid growth of the Hi-Tech industry

Industry Export Growth by sector

1995-2012

Source: Central Bureau of Statistics

B$

-

5,000

10,000

15,000

20,000

25,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

High - technology industries Medium - high technology industries

Medium - low technology industries Low - technology industries

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Office & computing equipment

Electronical components

Aircraft

Electronic communicationequipment

Equipment for control &supervision

Pharmaceutical products

In the past decade the industrial export was mainly affected by the rapid growth in equipment for control & supervision and

Pharmaceutical products

Growth of Main Hi-tech sectors

1995-2012

Source: Central Bureau of Statistics

M$

Main Hi-tech Services Sectors

2002-2012

Source: Central Bureau of Statistics, *IEICI 2012 Forecast

Bil

lio

ns

of

$

2.4 2.9 3.2 3.4 4.0 4.5 4.9 4.8 5.0

6.8 7.6

0.8 1.3

1.6 1.6

2.2 2.5

3.4 4.2 3.5

3.1

4.8

0

2

4

6

8

10

12

14

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

Computer Services R&D Services

Source: CBS & IEICI Calculations’

Main Hi-tech Sectors

2012

3% 11%

5%

9%

15%

20%

14%

23%

Office & computing equipment

Electronical components

Aircraft

Electronic communication equipment

Equipment for control & supervision

Pharmaceutical products

Research and development

Computer and related services

Total High-tech Export of 2012: 33.5 B$ Goods: 63% Services: 37%

Source: CIA World Factbook

44.6 44.3 43.7

41.5 40.7 40.5

39.7 38.5 37.9 37.5

36.8

35.2

29.3 28.9 28.4 28.1 27.9 27.4 26.7

25.9

World Population By median

QIZ Agreements

Egypt (2004)

Jordan (1998)

1985

1992

1997

1997

1999

2000

2007

USA

EFTA

Turkey

Canada

Mexico

European Union (Association Agreement)

MERCOSUR (Argentina not yet in force)

* Member states of the common market of the south, not yet in force

Israel’s Free Trade Agreements

Cooperation in Industrial R&D Agreements

Source: Ministry of Finance

Austria

Belgium

Canada

China

Finland

France

Germany

Hong Kong

Sweden

United kingdom

U.S.A

India

Ireland

Italy

Korea

Netherlands

Portugal

Singapore

Spain

Victoria (Australia)

Czech Republic

1

2

3

4

5

15

10

24

16

30

31

26

38

39

44

55

65

71

73

91

78

112

130

132

165

184

Singapore

Hong Kong

New Zealand

United States

Denmark

Ireland

Australia

Japan

Taiwan, China

Portugal

Netherlands

U.A.E

Israel

South Africa

Spain

Poland

Czech Republic

Turkey

Italy

China

Greece

Russia

Brazil

India

Iraq

Chad

Israel in Global Perspective

Doing Business Index 2013 (World Bank)/185

Israel in Global Perspective

The Global Competitiveness Index- WEF/144

The World Economic Forum ranked Israel 26th

out of 144 countries for 2012-2013

1

2

3

4

7

8

17

19

20

22

23

25

26

29

30

36

39

41

42

43

48

59

67

96

115

139

Switzerland

Singapore

Finland

Sweden

USA

UK

Belgium

Korea, Rep.

Australia

Luxembourg

New Zealand

Malaysia

Israel

China

Iceland

Spain

Czech Republic

Poland

Italy

Turkey

Brazil

India

Russia

Greece

Nigeria

Chad

The Global Competitiveness Index

Israel in Global Perspective

Quality of scientific research institutions Venture capital availability

Strength of investor protection PCT* patent applications

* PCT (Patent Cooperation Treaty)

Israel in Global Perspective

The Global Competitiveness Index

Government procurement of advanced technology products Capacity for innovation

University-industry collaboration in R&D Firm-level technology absorption

Small country,

great spirit!

Israel has an entrepreneurial spirit

Israel has the mentality of early adopters

Israel has a creative fusion between academy and

business

Israel has a defense technology

commercialization

Israel has highly skilled workforce

Israel has a powerful VC community

Israel has investment and R&D incentives

Israel's technology advantages: