The race for Israeli know-how: Many large global companies are looking for innovation, a partner in whom they can invest and with whom they can cooperate. Israel is one of the global centers that attract large companies and investors, and Invest in Israel is the agency that makes these connections.
Among other factors, thanks to the agency’s work, Israel reached $11 billion in international direct investments in 2011. Last week, on the backdrop of Operation Pillar of Defense and hundreds of missiles on Israel's south, Swiss bank Pictet, one of the top private banks in the world, announced it was expanding its activities in Israel. This decision displays Israel’s investment potential, even during such times.
The investment promotion center at the Ministry of Industry Trade and Labor, led by Oded Distel, is the government agency responsible for attracting new international investors and providing them with support. The agency locates potential investors, facilitates their visits to Israel and provides them with assistance and direction in any way needed.
The staff of the center works closely with the Ministry's economic attaches in order to identify international companies that are looking for a specific technology, an investment opportunity or a place to open an R&D center. At the same time, Invest in Israel identifies what Israel can offer to the world, and in this way, international investors are approached. This is how many doors are opened for Israeli industry.
Quite a bit of work is done in order to present Israeli innovation to the world. “We brand the State of Israel in a business sense as an origin of innovation and an investment destination,” says Distel in an interview with Ynet.
Distel described the process of bringing an international investor to Israel and marketing Israeli industry around the world.
"The process is long and demands a lot of concentration and daring from the international investor. As opposed to selling a product, investments demand higher levels of risk and dedication. We deal with some people who have never been to Israel and have outdated and irrelevant ideas about Israel."
Google, Intel and Microsoft
Today, at least 260 R&D centers of international companies are located in Israel including multinationals such as IBM, Microsoft, Google, Intel and others. Thanks to foreign investments in the Israeli market, many jobs have been created along with a better managerial and business culture.
"Investments add a new dimension to Israel's employment opportunities and bring the global market closer to Israel," says the center's director.
In the contemporary world, which makes greater use of the digital space, there is growing probability that a young company could be successful on a global scale. Such tools are of great use to Israeli industry, which is known for high levels of innovation and creativity, on the one hand, and by a certain distance from the global market, on the other.
According to Invest in Israel, most of the companies active in Israel are from the US and a few are from Europe. It is likely that in the near future we will see many European and Asian companies opening subsidiaries in Israel and providing jobs for Israelis.
"More and more global companies recognize the fact that Israel is a source of innovation and technological breakthroughs," explains Distel.
The Ministry of Industry, Trade and Labor's message to international companies investing or acquiring companies is to continue to operate here. Distel points out that as opposed to in the past when there was a feeling that Israeli companies were looking for the quickest possible exit route, the trend has shifted in the direction of cooperative ventures and investments with a view to the future and a search for true connection that will provide mutual benefit to both parties.
The inclination is to create joint ventures that will take full advantage of the abilities and advantages of each of the partners and will serve the needs of both sides, including the national interest of the State of Israel.
Opportunities in China
"In the last two years, we have seen greater levels of interest from Chinese investors," says Distel. "This is also true for European companies currently under pressure because their usual local markets are having trouble, and their main competitors are from Asia. Major players in the international market agree that in order to survive and move forward, innovation is necessary – and it can be found here, with us.”
Rona Kotler Ben Aroya, deputy director of the investment promotion center, adds that "most Israeli companies are small or medium-sized, definitely when compared on an international scale. It is very difficult for them to break into the global market and even when they make it, they have a hard time surviving and expanding their activities.
"One of the ways of surviving in the market abroad is to do so through a merger with an international company that is looking for technological innovation, an effective and targeted solution that the Israeli company can provide. The international company affords the Israeli company accessibility and a chance to break into the market. Such investments are strategic and they create mutual benefit."
Until recently, Kotler Ben Aroya was the director of the India-China desk in the Foreign Trade department of the Ministry. Commenting on the major cooperative opportunities with Chinese investors, she says that mutual benefit created by such relationships is especially positive for Israeli companies.
"The connection of Israeli companies with these investors opens a door to the huge Chinese market, a market that is often complex for them to enter. This is a win-win situation for both sides."
One of the most successful matches generated by Invest in Israel in the last few years is the connection between an Israeli thermo-solar energy company and Chinese investors.
Kotler Ben Aroya explains, "We are talking about a major Chinese company with a good foundation that was looking for innovative technology in the field of renewable energy and found it in Israel."
But Israel is not only active in the field of green energy; it is also active in new media, life sciences, other areas within cleantech and many more.
According to Kotler Ben Aroya, "Through the West Coast Economic Mission (of the Ministry of Industry, Trade and Labor) we received a request from a major American bank that wanted to open an R&D center in Israel. They wanted to learn about other financial institutions that had already done this in Israel successfully, and there are such.
"Several years ago, the government created a program targeted for the financial sector, which was named an area of focus; through this program, international financial companies were given incentives to create R&D centers in Israel. There are already two R&D centers of two major banks, as part of the framework of this project."
In order to bring international investors to Israel, the center holds conferences for investors usually in conjunction with international conferences in Israel or abroad.
On November 26, the EnergyVest summit took place in Eilat, where several international and Israeli investors gathered with the goal of open conversation about the topic and of publicizing Israeli breakthroughs in the field of renewable energy, fuel alternatives, green transportation, wind technologies and smart energy. Sixteen Israeli companies presented their innovations at the summit.
“We should expect much more investment in high technology in Israel, and many more startups as the next generation of the Internet unfolds,” said Eric Schmidt of Google during a recent visit to Israel.
“Many countries leaders want to replicate the phenomenal success of Silicon Valley. Israel is one example of what it takes.”