from the January 2008 issue

The Economy is on a Roll!

In the aftermath of the war in Lebanon in 2006, Israel has experienced one of its best economic years.

Venture capital investments flowed in and could reach $1.7 billion. Foreign investments were strong. The Tel-Aviv Stock Exchange gained nearly 30%. The Israeli currency is now at its best value, not seen for more than 10 years. Merger and acquisition activity was at an all-time high as Internet companies were in vogue again and attracted American companies.

Predictions are that the Gross Nation Product will rise in 2008 by 4.2%.

However, there are some dark clouds on the horizon. Israel is still not a member of the European Union and its acceptance is not around the corner. The various trading tariffs available to EU members are not available to Israel.

The other concern is the prospective fallout from the sub-prime mortgage morass in the United States. So far, the international banking sector has been hurt. Last month UBS wrote off $10b. in mortgage related losses and was forced to accept an emergency injection of capital from a Far Eastern lender.

Israeli banks maintain that they are not affected, but it is too early to say whether they have been able to avoid any losses.

On the brighter side of things there are many startups that are beginning to bloom. They have been positively cited at the Davos Economic Forum, Red Herring and other handicappers.

Software and Internet companies should thrive but biotechnology companies, at best, are being sold for their science. Studies have indicated that scientists who are lacking managerial skills manage many of these companies. As a result most of them continue to be undercapitalized, as investors are loath to wait for the many years that it takes to do clinical tests and finally to obtain regulatory approval.

Impressed by the achievements of development units of Intel, IBM, Hew;ett Packard and others international companies are looking to set up such units.

2007 marked the year that Israel became the world's fourth largest defense supplier. In 967 after the Six Day War Charles DeGaulle stopped supplying arms to Israel. This resulted in the building of a defense industry that required a large percentage of exports.

JamAs we went to press Rafael Israel Arms Development carried out a successful trial of its Patriot anti-missile system.

Our Israel High-Tech and Investment Report continues to thrive. We have attended more conferences than ever and continue to be quoted by publications including the prestigious Israel Journal for medical sciences. As we welcome 2008, our twenty-third year of publication, we continue to view the future with tempered optimism. Best wishes to our readers for a Happy New Year.

Reprinted from the Israel High-Tech & Investment Report January 2008

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