No other country in the world is affected more positively by
globalization than Israel. It is difficult to pinpoint the reasons
for this but the facts, speak for themselves.
In 2004 the Israeli high tech sector raised more than $1.4 billion.
In spite of the existence of its own high developed venture capital
industry, with more than 70 companies active in the field, foreign
investors accounted 55% of the total. Over the past five years the
local companies averaged 42% of the total.
The financial newspaper "Globes" writes: Daily turnovers in Tel-Aviv
on the stock and bond markets were in the NIS 1 billion region in
recent weeks, an unprecedented figure indicative of one thing: the
Tel Aviv Stock Exchange has become a hit.
The TASE has caught the eye of foreign investors. After four years
of neglect, when it was considered by the world as dangerous and
unattractive, Israel is back on the global investment map and
foreigners are injecting hundreds of millions of dollars a month into
the local Stock Exchange. The foreigners are leading prices
northward, setting new high levels on the financial markets: in
bonds, stocks, currency and the luxury real estate market, as well as
in other nonfinancial markets.
A player from one of the foreign banks notes that foreigners
currently account for about 30 percent of daily activity on the stock
exchange".
Foreign investment banking houses lead by American firms have offices
in Tel-Aviv and have stock analysts following the local scene.
Recently Citigroup raised its recommendation on the Israeli market to
"outperform." This follows positive recommendations from Standard and
Poor's, Merrill Lynch, UBS and Deutsche Bank.
In trying to understand this phenomenon we note the numerous
appearances by the Finance Minister Benjamin Netanyahu on American
financial shows. He has proved to be the country's best booster. At a
recent conference he turned to the foreign visitors and admonished
them that they lost money by not investing in Israel over the past
six months.
Mr. Netanyahu is fluent in English and has a winning presentation
about Israel's achievements. "I said that we would privatize and we
did. We privatized El-Al, the country's air line, we privatized the
petroleum industry and are well on the way to do the same with the
banks," he tells anyone who would listen.
Israel has more than 100 companies listed for trading on the NASDAQ
Exchange and news about Israel is continuously appearing on American
and European financial pages.
Israeli macroeconomics have also played a role in the positive
atmosphere. Unemployment continues to drop, and the 4.2 per cent
growth in the economy in 2004 encourages investors to participate in
the booming economy.
The election of Mahmoud Abbas as the new PA President and the
establishment of a unity government have contributed to the feeling
that Israel may be embarking on a new period of political stability.
At the recent Sharm Conference a ceasefire was announced. The
subsequent shelling of Jewish settlements were an indication that the
militias are not prepared to line up behind Mr. Abbas.
An additional bit of positive economic news sounded when Prime
Minister Sharon and Finance Netanyahu chose Bank of Israel
Governor-designate Stanley Fischer, one of America's most senior
economists. Fischer has a global reputation in economics and finance,
is familiar with the Israeli economy and aware of the importance of
growth targets.
With all of these pluses going for Israel it should prove to be a
banner economic year. The only thing that could spoil it would be a
breaking down of the peace process.