Think of a country with more startups per capita than anywhere in the world outside Silicon Valley. It’s a tiny nation, smaller than most US states, yet it’s the benchmark for innovation against which all others are measured.
Why? Because it’s Israel.
It’s a country with an economy as creative as it is successful.
Why? Because it’s Israel. Because it could only be Israel.
Is it sustainable? Yes, absolutely. A Site Selection Q&A with Invest in Israel’s Ziva Eger explains why.
What is Israel’s formula for working with potential investors? What is the most effective hook for keeping their interest?
Israel itself is the hook. Let’s take foreign direct investment for example: In 2015, FDI in Israel totaled $11.6 billion — a 90 percent increase over 2014, when $6.7 billion was invested from overseas. This remarkable rise in investment represents an overwhelming vote of confidence in the Israeli economy. Here are just a few reasons why Israel is so attractive:
A. Innovation: 270 multinational companies have already set up shop here, establishing over 300 R&D centers — for many of these corporations, their only such center outside their home country. Global giants including Microsoft, Motorola, Google, Apple, Facebook, Intel, HP, EMC, Siemens, GE, IBM, GM, Deutsche Telekom, and Cisco all have such centers in Israel, viewing the country as an international hub for excellence and innovation.
These R&D centers were established here mainly because our country is renowned for its world-class talent, whose innovative spirit, and can-do, never-take-no-for-an-answer attitude have helped many of these multinationals develop breakthrough innovations and for some, even their flagship products. Israel’s extremely talented workforce — with the highest concentration of PhDs and engineers per capita in the world — is a foundation of our R&D success.
Israel’s reputation as a hub of innovation — the “Startup Nation” with more startups per capita anywhere in the world outside of Silicon Valley — is another key factor attracting such significant levels of investment from around the world. From 2005 to 2015, Israeli high-tech companies raised close to $24 billion dollars.
So innovation is a major hook. But it works in tandem with other significant factors, namely:
B. Robust economic performance: In spite of global economic volatility over the last decade, Israel’s economy saw consistent GDP growth. Additionally, Israel’s unemployment rate hovers around 5 percent — among the world’s lowest.
C. Government support and openness: The government of Israel is keen about attracting international investment, offering attractive tax breaks and incentives helping offset expenses in capital, R&D and wages.
What new programs or initiatives is Israel working on to remain the region’s most competitive IPA?
Invest in Israel, Israel’s IPA, has undergone a major restructuring during my term. In order that Israel continues its standing as an outstanding destination for FDI, we are evolving in two main directions:
1. Updated FDI Policy — realizing the potential of advanced manufacturing in Israel:
We have developed an up-to-date strategic program for Israel’s FDI policy, based on the country’s current capabilities and needs. It was driven by a comprehensive, in-depth analysis, which I will summarize: As I mentioned earlier, Israel is renowned as a world-leading hub of cutting-edge R&D, and indeed, this is an impressive achievement which my division will continue to support. What we found, however, is that Israel has a lot to offer beyond R&D. Specifically, we believe that Israel is also a great location for advanced manufacturing.
The concept of advanced manufacturing is a natural outgrowth of Israeli innovation because we are not competing with low-cost manufacturing in developing countries. We are aiming at high-end manufacturing: low-volume, high-mix, high-complexity manufacturing. Israel is already host to many such advanced manufacturing facilities established by leading multinationals in diverse sectors — Intel, Applied Materials, HP, Johnson & Johnson, Pratt & Whitney and many more.
But we still think that Israel’s potential in this regard is not fully realized. We also have many tech companies that have developed products that make the advanced manufacturing process more efficient, flexible and of higher quality. For example, Israeli companies are leaders in markets that promise to disrupt manufacturing as a whole. These include 3D printing, “Smart Factory” systems and advanced materials (nano and bio materials).
Another plus we enjoy for all of the 300-plus multinationals that have R&D centers here is that they could enjoy an R&D-manufacturing proximity advantage, making the production process much more dynamic, enabling a far more efficient “learning by making” process.
Finally, as for market access, Israel holds a strategic geographical position, as we are geographically situated at the meeting point of Europe, Asia and Africa. Our country is situated close to the European market and benefits from an EU-Israel trade agreement that facilitates open trade. Our proximity to Asian markets, which are enjoying spectacular growth, speaks for itself, and the emerging African market is also an option.
2. Invest in Israel as a one-stop shop, business division for foreign investors:
Another achievement of our strategic program is that Invest in Israel now offers end-to-end services for interested parties. We are now a one-stop shop for foreign investment in Israel. If you are an investor or international business, our department will supply information about the Israeli ecosystem, escort you during your visit, answer follow-up questions, help you navigate the Israeli government and regulations, and much more.
We will go the extra kilometer to make you feel that Israel is the best location for your investment. In addition, we will be here to assist you even after you have made your investment to ensure that you have the best Invest in Israel experience.