The country’s rich talent pool and technological know-how makes Israel a lucrative place to do business
If security fears due to Israel’s position on the world map is keeping Indian companies away from investing in the country, then they are most certainly losing out on a host of benefits tha it has to offer.
Some of the world’s top multinational giants have already invested in Israel and many others are queuing up to set up base there. IT major Microsoft’s R&D center in Israel is one of the company’s three international strategic regional development centers. Others MNCs that operate from Israel include Intel, HP and Motorola.
While Indian investment in the country is miniscule, the bilateral trade between the two has grown in a big way since full diplomatic relations were established between the two countries in 1992. It has grown 20 times to touch $4 billion at the end of 2008. India exports textiles, chemicals, rubber and plastic products, machinery, base metals, prepared foodstuffs and transport equipment to Israel. Major items exported by Israel include diamonds, machinery, telecom equipment, software products and services and chemical products.
Israel’s workforce is highly educated, thanks to the world-class educational institutes that dot the country. The Technion Israel Institute of Technology has over 12,000 students enrolled in its various programs. The R&D facilities are of global standards, as the country is estimated to invest 4.5% of its GDP on research and development facilities. Israel has always been a hotbed of entrepreneurship, backed by the booming venture capital industry. According to the Invest in Israel Agency, 483 Israeli hi-tech firms raised over $2.1 billion in 2008, the highest amount in the last seven years. This was up $1.8 billion over the 2007 and 28% over the 2006 figures.
|Mouneer Agbariya Economic Counsellor, Embassy of Israel in India|
|How have trade relations between India and Israel grown since full diplomatic relations were established between the two countries in 1992?|
Since establishing full diplomatic relations between the two countries, the volume of trade between the countries has been around $200 million. Within the last 17 years, it increased 20-fold. We have ended the year 2008 with bilateral trade of nearly $4 billion. The growth in Israel’s exports to India that varied between 7 and 12% per year; in the last three to four years it has been increasing at 18 to 25%. We don’t have similar figures with any other country worldwide.
Both Indian and Israeli markets have different capabilities. What India produces and exports to Israel is X, what Israel produces and exports to India is Y — which means both are exporting different things. So there is no competition between the two countries. In most cases, Israeli companies are not competing with local companies. This has helped trade to increase in big volumes. The same goes for Israel. If you look at the composition of exports from Israel to India, it would be mainly chemicals, equipment for the telecom sector, machinery etc. while India exports textiles and agriculture products etc.
What is it that makes Israel an attractive destination for foreign investors?
We have a unique program that encourages foreign investors to invest. The program states that the government will subsidize nearly 80% of the labor cost during the first year. During the next three years, the subsidy will reduce, but during the first few years there would be some share of the Government of Israel in the labor cost. This is because the cost of labor in Israel is relatively high. So, in order to make the cost affordable for investors, the government shares the cost to make it affordable. In addition to this, there are other incentives in taxes etc. which prospective investors could consider.
How are the business-to-business relations between the two countries growing?
How do you allay fears on security of investments of foreign investors?
Israel is one of the biggest arms supplier to India. Due to the offset clause in defense sector, are the Indian companies benefiting from this?
Which are some of the sectors that you think are lucrative?
Are there talks on FTA between the two countries?
What is the scope of joint venture agreements between Israeli and Indian companies?
There are a number of sectors where Indian investors can benefit from Israel’s expertise. Take the case of water technologies. Israel has worked wonders for itself despite the scarcity of this resource. With a 75% water recycling rate, Israel has the world’s largest desalination plant. The renewable energy sector is also lucrative. Israel has devised plans that promote the use of solar power for household consumption. Israel’s pharmaceuticals and life sciences industry is also one of the world’s most advanced. There are over 900 life sciences companies, with around 50 to 60 formed every year, according to the Invest in Israel Agency.
|Ease of||2009 Rank||2008 Rank||Change in Rank||India|
|Starting a Business||24||18||-6||121|
|Dealing in Construction Permits||120||111||-9||136|
|Trading Across Borders||9||8||-1||90|
|Closing a Business||39||43||4||140|
Source: World Bank Doing Business 2009 Report
|Sun Pharma is chewing a bitter pill in Taro acquisition|
It all started in May 2007 when Sun Pharma, one of India’s leading pharaceutical firms, penned a $454 million merger pact with Taro Pharma of Israel. But the Israeli firm soon withdrew from the agreement citing undervaluation. The two companies then moved the court even as the Indian firm made an open offer to grab all shares of Taro Pharma.
The issue of the open offer that was launched at $7.75 a share last year was dragged to court again by Taro. The court stopped Sun Pharma from closing the offer till the verdict comes out.
The two are still awaiting the judgement of Israel’s Supreme Court on the issue.
Starting a business in Israel is relatively easy vis-à-vis other economies in the region. The World Bank’s Doing Business Report states that it requires five procedures, takes 34 days, and costs 4.40% GNI per capita to start a business in that country. Israel ranks quite high on the parameters of credit availability to investors and investor protection.
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